Hi All - Suppose a reply from the horse's mouth is in order.

It has been interesting to watch the work we¹ve produced in the Economic
Journal be hyped up in some quarters, played down in others and just be
generally mischaracterized inside and outside of academia.  I thought I¹d
simply attach the paper and encourage folks to read it. They may be
surprised that my co-authors and I have already addressed, in the paper,
almost all of the criticisms that have been raised.    The paper happens to
have a fairly clear-cut implication (fixed price hospital competition
improves quality), which, for better or worse, dovetails with the current
toxic political debate in England.  Much of the response to the paper has
been swept up with frustration of politics in the UK.  The fact that the
paper is fairly technical has not made this any easier.  Long term, it would
be a shame to ignore the evidence from this paper, dismiss the findings as
marginal etc when the results we find are non-trivial (a 7% relative
reduction in AMI over three years) and the results have been confirmed by
further work by Marty Gaynor and Carol Propper.
 
Alan Maynard wrote, ŒHopefully health policy wonks will recover from
Cooper-itus quite soon¹.  I¹m just glad that this very threatening condition
now has a name. 
 
I want to summarize what we did in the paper and answer some of the concerns
Adam emailed re: Evan Harris and others.  This might be more detailed than
folks want, but important to give a decent response to some of the concerns.
 
Per our work, the paper uses a difference-in-difference style estimator.
Difference-in-difference is as close as you can get in a policy setting to a
randomized control trial.  Is it perfect? No, but the timing of the reforms
in England were a real asset to our estimation strategy.  The general
diff-in-diff idea is to compare two groups, one exposed to a policy, another
not, before and after the policy was introduced.
 
In our paper, we compare patient outcomes in hospital markets with varying
levels of hospital concentration before and after patient choice and
provider competition was introduced in England by the Labour government in
2006.  Crucially, contrary to what Evan Harris and others have suggested,
this is not a ŒLondon market thing¹. I would encourage him to examine page
249 of the paper, where we write, ³Table 7 presents robustness checks to
illustrate that the effect we identify in our interactions between our
post-2006 time trend and our measure of market structure are not simply
spurious associations with urban density².  The paper uses approximately 20
measures of market structure.  Further, we go out of our way to show that
this is not an issue related to urban/rural splits or population density.
The effort we put in to show this has somehow gotten lost in the analysis of
our paper. 
 
First, we measure hospital market structure in the paper almost 20 different
ways, and then illustrate that our results are robust across each measure.
Further, we show that our preferred measure of market structure is only
correlated by 3% with population density, suggesting that this isn¹t an
urban thing.  Then, we test whether urban areas in England did better after
the reforms; they did not. What¹s more, we test whether London did better
after the 2006 reforms; it did not.  Finally, we run a placebo test to
determine whether school market structure was associated with improved
performance; it was not.  This collection of robustness checks is pretty
strong evidence that it was indeed the degree of hospital competition in
England that was associated with improvements in hospital performance.
 
There has also been criticism for our strategy of using AMI as a quality
indicator.  This was a deliberate choice, not an oversight. In the paper, we
used an emergency outcome as our quality indicator because there¹s a real
concern about endogeneity if you¹re examining the relationship between
elective competition and elective outcomes.  Our rationale for using AMI
mortality (which we discuss in detail of pg 237 of the paper) is that AMI
mortality is correlated with overall hospital performance (which we
demonstrate empirically).  However, it is unrelated to the market for
elective care, since AMI patients don¹t really have choice.  The explanation
then is that competition leads to improvements in hospital performance,
which we capture using AMI mortality. AMI mortality is appealing because
there¹s a substantial mortality rate and good care is generally associated
with good outcomes.
 
There¹s also been concern about whether there has been Œany meaningful
choices¹ being made. First, Anna Dixon¹s work at the King¹s Fund illustrates
that about fifty percent of patients in the NHS are aware of their ability
to choose.  Second, the work that just came out from the Cooperation and
Competition Panel finds that patients are readily making choices and going
non-local (when PCTs oblige).  Finally, Carol Propper is finishing up work
with Stephen Seiler and Marty Gaynor which has found that after the reforms,
there were changes in patient flows and that sicker patients tended to be
more sensitive to hospital quality. Given that during this period in the
NHS, hospitals were under substantial pressure to maintain surpluses, these
observable swings in market share are certainly enough to create incentives
(when the IO literature suggests that a 5-10% change in market share is
generally enough to do so).
 
For those interested, I attach the actually paper.  Feel free to email with
questions.  Finally, important to note that this paper is co-authored with
Ali McGuire, Stephen Gibbons and Simon Jones.  They all also put in a great
deal of work, and should be acknowledged too.


All the best, 

Zack
-- 
Zack Cooper
The Centre for Economic Performance
London School of Economics
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Mobile: 077 258 98597
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