Squaring the price competition and efficiency circle
“Where would you like your vasectomy, sir?” is not a phrase you’re likely to hear in the NHS as many primary care trusts have ruled out paying for the procedure anywhere other than in GP practices.
The rationale for the ban is the substantially lower costs of GPs over hospitals. The number of procedures performed at practices have apparently risen substantially since Patricia Hewitt’s policy of promoting price competition between the primary and acute sectors.
According to the Department of Health, the policy does not fall foul of its “no price competition” rule, as GPs cannot charge tariff rates anyway, or, more plausibly, because: “The NHS tariff has never been a straitjacket - there have always been flexibilities within the rules.”
But the Cooperation and Competition Panel’s report on the workings of the any willing provider policy throws a spanner at such “flexibilities”. Its concern is that the NHS’s duty to offer choice of provider conflicts with the common PCT practice of cutting out those that cannot meet the cheapest price, even if they still charge under the tariff rate.
How then to square the circle of patient choice, the need to drive down costs and the “no price competition” rule?
The likely answer will see a resurgence of the much-mocked “sanctity of the tariff” principe. If costs cannot be suppressed through price variation, the tariff will need to become more granular and be regularly refreshed to reflect the price the NHS is prepared to pay, locking out inefficient providers, but with an air of transparency.
To date, attention has been on Monitor’s imminent new powers to promote competition and designate services, but the shift to any willing provider means its price setting role will make or break providers too.
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Readers' comments (2)
KEVIN PRITCHARD | 26-Feb-2011 7:20 pm
Every year PCTs cut deals with over-performing trusts, it happens everywhere.
Year end deals are the norm and much of the deal invariably means that the tariff was undercut.
So how does that particular square get circled under the competition rules? Is it OK to retrospectively undercut the tariff or will such deals be off the table.
The easy way around that would be to do the deal on non tariff activity...
Hmmph! Bottle glass, mirrors smoke.
KP
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chris adams | 2-Mar-2011 1:01 pm
It's worth remembering that the PbR system was developed to provide hospitals with an incentive to do more work and get waiting lists down. Now, in these financially constrained times, it's important that commissioners can drive down price, and one way to do that is through AWP. However, it needs to be applied fairly - all local providers who meet the price set (and who meet the quality and service spec) must be allowed to compete for referrals
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