Providers usually compete for patients, based on price or quality or both price and quality, but they may also compete for budgets — for example, in the case of auctions for public–private partnership contracts to provide a specific service or through choice of location (which may either help to attract or deter patients). Each of the three broad types of competition has its own set of requirements, as set out in Table 1. Which type is most suitable will depend on the characteristics (structure) of a given health care market.

Table 1 Types of provider competition Full size table

The conditions required for provider competition to improve health system performance vary across countries, health system sub-sectors and time. They include: adequate information about provider prices and quality and the ability of patients to interpret this information; standardised products and services; the existence of multiple providers and buyers; and easy entry and exit for providers. Information about quality is especially important if competition (and patient choice) are intended to improve access to high-quality care. At least in theory, medical goods, such as equipment and pharmaceuticals, tend to meet the conditions for effective competition. For clinical services the introduction or expansion of competition present considerable difficulties, in particular because of the presence of information asymmetries.

Policies to introduce or increase competition should be informed by analysis of the conditions in place and probable effects. They should also be accompanied by policies that allow the market to function in line with predefined objectives.