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Giving greater financial independence to hospitals—does it make a difference? The case of English NHS Trusts

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  • Giorgia Marini
  • Marisa Miraldo
  • Rowena Jacobs
  • Maria Goddard

Abstract

In 2003 a new type of provider organisation, the Foundation Trust (FT), was introduced in England, and the best performing NHS hospitals were able to apply for ‘Foundation status’. FTs enjoy greater financial flexibility and are subject to less central monitoring and control. The phased introduction of FTs represents an opportunity to examine whether the new financial structures facing FTs have produced any differences in financial performance compared with non‐FTs. We use difference in difference methods to examine whether Foundation status had a significant effect on financial management. We find that Foundation status has had a limited impact in terms of acting as an instrument to signal strong financial management of FTs. This result may reflect the relatively early stage of the FT process or may be due to the fact that all types of Trusts are experiencing a challenging financial environment, including the introduction of a prospective payment system. However, we explore the nature of the trends emerging over time and discuss the implications of our findings for policy. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • Giorgia Marini & Marisa Miraldo & Rowena Jacobs & Maria Goddard, 2008. "Giving greater financial independence to hospitals—does it make a difference? The case of English NHS Trusts," Health Economics, John Wiley & Sons, Ltd., vol. 17(6), pages 751-775, June.
    • Handle: RePEc:wly:hlthec:v:17:y:2008:i:6:p:751-775
    DOI: 10.1002/hec.1292
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    1. Giuseppe Moscelli & Hugh Gravelle & Luigi Siciliani, 2016. "Market structure, patient choice and hospital quality for elective patients," Working Papers 139cherp, Centre for Health Economics, University of York.
    2. Gaughan, James & Gutacker, Nils & Grašič, Katja & Kreif, Noemi & Siciliani, Luigi & Street, Andrew, 2019. "Paying for efficiency: Incentivising same-day discharges in the English NHS," Journal of Health Economics, Elsevier, vol. 68(C).
    3. Rossella Verzulli & Rowena Jacobs & Maria Goddard, 2011. "Do hospitals respond to greater autonomy? Evidence from the English NHS," Working Papers 064cherp, Centre for Health Economics, University of York.
    4. Rossella Verzulli & Gianluca Fiorentini & Matteo Lippi Bruni & Cristina Ugolini, 2017. "Price Changes in Regulated Healthcare Markets: Do Public Hospitals Respond and How?," Health Economics, John Wiley & Sons, Ltd., vol. 26(11), pages 1429-1446, November.
    5. Cheng, Terence C. & Haisken-DeNew, John P. & Yong, Jongsay, 2015. "Cream skimming and hospital transfers in a mixed public-private system," Social Science & Medicine, Elsevier, vol. 132(C), pages 156-164.
    6. Giuseppe Moscelli & Hugh Gravelle & Luigi Siciliani, 2021. "Hospital competition and quality for non‐emergency patients in the English NHS," RAND Journal of Economics, RAND Corporation, vol. 52(2), pages 382-414, June.
    7. Luigi Siciliani & Peter Sivey & Andrew Street, 2011. "Differences in Length of Stay between Public Hospitals, Treatment Centres and Private Providers: Selection or Efficiency?," Melbourne Institute Working Paper Series wp2011n06, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    8. Gravelle, Hugh & Santos, Rita & Siciliani, Luigi, 2014. "Does a hospital's quality depend on the quality of other hospitals? A spatial econometrics approach," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 203-216.
    9. J. Buckell & A. Smith & R. Longo & D. Holland, 2015. "Efficiency, heterogeneity and cost function analysis: empirical evidence from pathology services in the National Health Service in England," Applied Economics, Taylor & Francis Journals, vol. 47(31), pages 3311-3331, July.
    10. Brekke, Kurt R. & Siciliani, Luigi & Straume, Odd Rune, 2012. "Quality competition with profit constraints," Journal of Economic Behavior & Organization, Elsevier, vol. 84(2), pages 642-659.
    11. Giuseppe Moscelli & Hugh Gravelle & Luigi Siciliani, 2018. "Effects of Market Structure and Patient Choice on Hospital Quality for Planned Patients," School of Economics Discussion Papers 1118, School of Economics, University of Surrey.
    12. Moscelli, Giuseppe & Gravelle, Hugh & Siciliani, Luigi, 2023. "The effect of hospital choice and competition on inequalities in waiting times," Journal of Economic Behavior & Organization, Elsevier, vol. 205(C), pages 169-201.
    13. Luigi Siciliani & Peter Sivey & Andrew Street, 2013. "Differences In Length Of Stay For Hip Replacement Between Public Hospitals, Specialised Treatment Centres And Private Providers: Selection Or Efficiency?," Health Economics, John Wiley & Sons, Ltd., vol. 22(2), pages 234-242, February.
    14. Rossella Verzulli & Rowena Jacobs & Maria Goddard, 2018. "Autonomy and performance in the public sector: the experience of English NHS hospitals," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(4), pages 607-626, May.

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