Buyer power and provider efficiency: the case of hospital provision in a national health service

IMPACT The authors show that public buyer power is associated with higher provider efficiency. This paper is of value to practitioners and policy-makers world wide, because it suggests that a model of governance based on a strong purchasing agency may lead to an efficient public provision, avoiding the waste of resources. The academic literature on the provider/purchaser split in the public sector has so far assumed that all gains in efficiency are due to competition among providers. This paper tests the hypothesis that buyer power improves efficiency. The results provide evidence that buyer power has a positive effect on hospitals' technical efficiency. The paper, additionally, contributes to the NPM literature, providing a more comprehensive picture of the provider/purchaser split within the public sector.

Automated summary

This paper finds that public buyer power is closely related to provider efficiency, providing important insights for policymakers.