Improving performance in public hospitals: a role for comparative costs?

In order to encourage performance improvements, the English government has set targets for acute hospitals to reduce their unit costs. Targets are bas ed on analysis of costs across all acute hospitals. This policy has paralle ls with that of 'yardstick competition', advocated as a means to encourage efficiency in industries that lack competitive pressures. However, the pros pect of cost improvements may not be realised in England. Firstly, there ar e insufficient incentives to respond appropriately to the provision of comp arative cost information. Secondly, there is more than one index purporting to measure relative hospital costs. As comparison of unit costs is highly dependent on the measurement technique adopted, caution should be exercised when setting performance targets. (C) 2001 Elsevier Science Ireland Ltd. A ll rights reserved.