Nestled in the Cooperation and Competition Panel’s recent report on the proposed merger of two Kent trusts, there is a new twist to the long-running debate about perverse incentives in the NHS.
Admittedly, the argument - that payment by results and competition drive hospitals to perform unnecessary interventions - is not novel. What is unusual is that, in this case, it is hospitals that are making the claim.
In their eagerness to persuade the competition watchdog that their merger would benefit patients, Dartford and Gravesham Trust and Medway Foundation Trust apparently had what you might call a “perverse incentive” to insist that some of their patients were undergoing unnecessary surgery.
The report explains: “The merger parties told us that patients presenting at Medway Trust accident and emergency department with kidney stones often undergo surgery for a temporary stent to relieve their pain, prior to being transferred to Dartford and Gravesham Trust for laser therapy to remove the kidney stones.
“They submitted that this results in the patient undergoing surgery twice as each trust has a financial incentive to provide treatment.
“They submitted that as a result of the merger any financial incentive to put in a stent will be removed and patients will be directly transferred to Darent Valley Hospital.”
The watchdog’s rationale for rejecting this claim is unlikely to offer much comfort for patients in North Kent who have kidney stones but don’t want two operations.
“In our view,” the panel’s response states, the merger “would not change the financial incentives facing the trusts” and the merged organisation would “remain equally keen to maximise its payments for treatments”.
What about changing the financial incentives themselves? Since the introduction of payment by results there has been endless tinkering to remove incentives to increase acute activity: fines for emergency admissions and readmissions; “capped” contracts; and the current enthusiasm for moving towards capitated budgets for care.
But acute activity has continued to rise. Some acute providers now argue that the fines and contract caps have created another set of perverse incentives, by removing the financial stimulus for commissioners to improve community services and take the strain off hospitals.
Then again, the real lesson may be that in a service as large and complex as the NHS, pricing and payment mechanisms are, at best, crude behavioural levers - and the real incentives to do the right thing may not have much to do with money at all.