Performance signals in the public sector: the case of health care

Although there are no traditional markets and money prices in the public sector, consumers and providers may respond to signals of organisational performance. We present a simple dynamic model of the demand and supply for elective surgery in the UK National Health Service in which waiting time acts as the prime indicator of performance. The model is tested using a panel of quarterly data for 123 English health authorities over an eight-year period. We find that supply is increasing and demand is decreasing in measures of the previous period waiting time. The results imply that health care systems which are rationed by waiting do respond to indicators of waiting times. The paper adds to the small but consistent body of research which demonstrates that public sector systems respond to important aspects of reported performance.