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The argument over NHS competition isn't settled yet

How strong is the evidence in support of increased competition in the NHS? The question was raised again last week, with the publication of a paper by the NHS Co-operation and Competition Panel.

The panel concluded that in each of the hospital mergers it had reviewed in the past year,

it found examples of trusts “responding to competitive incentives by innovating and investing to improve the quality of their services”. Examples cited included investments to cut waiting times, extra community clinics and improved integration with GPs.

The report was designed to plug an acknowledged gap in the research. The two most influential studies to date in support of NHS competition concluded that, where prices were fixed, hospitals facing more competition showed greater improvements in heart attack survival rates.

However, as an Office of Health Economics commission acknowledged, the way competition was supposed to influence clinicians or managers to boost quality remained “largely a ‘black box’” - the “mechanism” was “neither analysed nor described”. This was the source of some scepticism, not least from critics who noted that people having heart attacks rarely exercise consumer choice.

So if the Co-operation and Competition Panel can “illuminate this ‘black box’” - as it aims to - can it finally settle the argument in favour of more competition in the NHS?

Probably not. King’s Fund chief economist John Appleby highlights one problem. The real question in these cash-strapped times, he suggests, is not whether market forces can pressure trusts to improve services but whether they represent a cheaper, more effective form of pressure than, say, top-down targets and arm-twisting.

Like any stick available to government, competition has a price tag: you have to build and administer pricing systems, provide information to inform patient choice, and fund organisations like the Co-operation and Competition Panel to police anti-competitive behaviour.

However, there is another problem to address. The research in support of competition assumes fixed prices, to prevent price competition and the temptation to cut corners on quality. However, in the financial squeeze, commissioners in parts of the

NHS are moving away from fixed ‘tariff’ prices.

There are good reasons for doing this, including the need to incentivise hospitals and community services to work together to reduce admissions. Yet the question remains: how can this trend coexist with a policy of increased NHS competition, when the latter depends on the tariff as the backstop to protect care quality?

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