Productivity Changes in the NHS Internal Market
Editor - In the conclusions of their paper Söderlund et al  note
that further analysis is required to determine the exact nature of
productivity gains in the NHS. We have undertaken such analysis 
looking at the relationship not between costs and activity, but the
efficient production of health care and changes in efficiency over time -
productivity. This is based on a robust economic technique, data
envelopment analysis, which is becoming widely used in the measurement of
health service efficiency as a means of establishing an accurate picture
of relative performance. 
Seventy five acute hospitals in Scotland are studied and performance
is measured over the first five years of the reforms, 1991-1996. We find
a slowdown in productivity in the first year following the reforms, but
productivity gains over subsequent years. Overall, there is a small net
gain in productivity of around seven per cent, broadly agreeing with
Söderlund et al.
Our results show that productivity over the five year period is
dominated by movements in the efficiency of the whole sample, rather than
changes in the relative efficiency of individual hospitals - acute
hospitals were already operating relatively efficiently at the
introduction of the reforms. This suggests changes were at an industry
level rather than the level of the individual hospital. In fact, in terms
of individual hospital efficiency, there was a small decrease over the
last four years in the period studied.
Quality of care adjusted results are similar overall for the period,
but smaller in magnitude at around two per cent. However, a different
trend is observed with productivity increasing initially then decreasing
over time. This may have been the price paid for disruption caused by
reform and subsequent pressure to increase productivity in terms of volume
Our findings support the argument that creating incentives for
increasing efficiency at hospital level have a ‘one-time’ effect, rather
than any steady impact over time and that changes in overall technology
rather than hospital efficiency drive health care expenditure. This is
important and timely given recent Government policy focus on efficiency in
Dr Bruce Hollingsworth, Health Economics Group, Dept. of Epidemiology
and Public Health, School of Health Sciences, Medical School, University
of Newcastle, Newcastle upon Tyne, NE2 4HH, UK.
Dr Nikos Maniadakis, Health Economics Research Centre, Oxford
Professor Emmanuel Thanassoulis, Business School, Aston University,
1. Söderlund N, Csaba I, Gray A, Milne R, Raftery J. Impact of the
NHS reforms on English hospital productivity: an analysis of the first
three years. BMJ 1997; 1126-9.
2. Maniadakis N, Hollingsworth B, Thanassoulis E. The impact of the
internal market on hospital efficiency, productivity and service quality.
Health Care Management Science 1999; 75-85.
3. Hollingsworth B, Dawson P, Maniadakis N. Efficiency measurement of
health care: a review of non-parametric methods and applications. Health
Care Management Science 1999; 161-172.
There are no conflicts of interest.
Competing interests: No competing interests