Market structure and prices: The responses of hospitals in the UK National Health Service to competition

The internal market reforms to the UK National Health Service (NHS) are a model adopted in many health care systems. They introduce competition in supply. Little is known about the impact of these reforms. This paper examines the pricing responses of NHS suppliers to competition. The incentives of the reformed system are analysed. These indicate that prices should differ between buyers and markets. These hypotheses are tested using data on spot market transactions between hospitals and health care buyers. The results indicate considerable price variability but offer broad support for the hypotheses.