Competition can work, but only with the right tactics

The Cambridge Health Network might be described as the opposition to Keep Our NHS Public campaign. It’s heavy on private sector people, but increasing numbers of public sector people turn up, including from Keep Our NHS Public.

Julian Le Grand, a professor at the London School of Economics, explained that there are essentially four ways to run a health service, all of them imperfect.

The first way is “trust” - the government trusts professionals and hospitals to do the right thing. Unfortunately this ultimately fails because the professionals put their own interests before those of the patients.

The second way is “mistrust”, a regimen of “targets and terror”. This worked in the NHS in the short term, bringing down waiting times, but eventually leads to distortion and gaming – and the professionals hate it.

So next comes “voice”, where patients make clear what they want. This fails because the middle classes and the articulate dominate.

The final way to run a health system is “choice”, a polite word for competition. Evidence is emerging, said Professor Le Grand, that hospitals in areas where competition is intense have improved faster than those where it is less intense. But the evidence is clear that competition on price drives down quality.

Penny Dash, a McKinsey consultant, said that competition is good in some parts of healthcare but not others. Generally it’s best when care is less specialised.

She has published a paper that argues: “For highly specialised services, competition should be limited or used only very judiciously to ensure quality and avoid over-delivery. In contrast, greater competition could be an effective mechanism for improving the quality and efficiency of less specialised services, particularly care delivered outside the hospital.”

Emphasising the importance of good information on cost and quality for underpinning competition and highlighting unacceptably poor care, Ms Dash deplored the reluctance of the professions to allow such information to be shared.  

King’s Fund chief executive Chris Ham, took the same line - that competition may be good for elective and primary care and not so good for urgent, specialist, and chronic care. He sees the case for GP commissioning but thinks that specialists should also have a role in commissioning, that it should be possible to commission integrated systems and that GPs should have a choice of “make or buy”.

There seemed to be general agreement that the government should not fret about GPs being providers and commissioners and that if services are going to be moved out of hospitals then GPs have to be able to develop new services. There was also scepticism about the capacity of the NHS Commissioning Board to commission primary care services.

Will the government’s plans for the English NHS deliver, one member of the audience asked. He thought them risky and lacking an evidence base. The people from Keep Our NHS Public agreed, saying that they were frightened by what was proposed, there was no need for a purchaser provider split, the NHS would become nothing but a brand, there was no case for change, people were more satisfied than ever with the NHS, and the idea that the NHS underperformed compared with European systems was based on flawed data.

Political Problems

The temperature of the meeting rose when Ms Dash responded by saying that she to was frightened by the poor quality of care delivered by the NHS to many people, particularly the poorest. Some primary care is dreadful, she said (and a senior GP later agreed), and data in her paper showed that while three quarters of patients receive optimal care for a heart attack in some areas, in others it is less than a fifth.

There are technical problems with competition in health care, said Professor Ham, but the biggest problem is political. Competition and a market are meaningful only if it’s possible for organisations to fail — and that has always been difficult for politicians. Will politicians let some hospitals go under?

Professor Ham’s answer to whether the government’s reforms would work was “Nobody knows”, but he observed that the Health Bill follows closely the seven principles of reforming the public sector laid out by Andrew Lansley in 2005:

• maximise competition;
• when transforming public sector functions to the private sector, it is vital also to transfer risk;
• appoint a strong, pro-competitive regulator;
• set out clearly the standards which have to be met and how operators will be held accountable;
• be clear about how and by whom universal service obligations are to be met;
• ensure high quality information for customers;
• more consumers rather than fewer.

Referring to his experience of reforming British Telecom, Lansley said: “The combination of the introduction of competition with a strong independent regulator delivered immense consumer value and economic benefits.” But, asked Professor Ham, will the principles work in health care?

So will the NHS in England have competition rammed down its throat for ideological reasons or will it be applied tactically? A member of the audience suggested that we were at the beginning of a ten year conversation on the role of competition in the NHS and pointed out that the Health Bill talks of competition “when it is appropriate”.