Explaining differences in hospital performance: Does the answer lie in the labour market?

This paper examines the relationship between performance of English public sector hospitals (NHS trusts) and the quality of their nursing staff. Performance ratings of NHS trusts published in 2001 and 2002 indicate a clear regional divide. This divide is not explained by lower medical need. The gap between wages in the private and public sector (the private sector premium) has a regional divide similar to that of the performance ratings. Utilising cross sectional variation in the private sector premium, we find that performance against several of the individual targets that are aggregated into the NHS performance ratings is negatively associated with the private sector premium.