Incentives and Targets in Hospital Care: Evidence from a Natural Experiment

Performance targets are commonly used in the public sector, despite their well known problems when organisations have multiple objectives and performance is difficult to measure. It is possible that such targets may work where there is considerable consensus that performance needs to be improved. We investigate this possibility by examining the response of the English National Health Service (NHS) to waiting time targets. Long waiting times have been a key issue for the NHS for many years. Using a natural policy experiment exploiting differences between countries of the UK, supplemented with a panel of data on English hospitals, we examine whether high profile targets to reduce waiting times met their goals of reducing waiting times without diverting activity from other less well monitored aspects of health care. Using this robust design, we find that targets led to a fall in waiting times without apparent reductions in other aspects of patient care.