Competition could change the face of healthcare

In all the furore about the demise of primary care trusts and strategic health authorities there has been little comment about the future of the provider side of the health service.

The government’s patient choice agenda has the potential to make radical and far reaching changes to secondary care. If patients are able to choose from “any willing provider” and Monitor fulfils its role of promoting competition, then secondary care could change in ways that will make the abolition of PCTs look like a blip in the landscape.

The white paper puts great emphasis on patient choice: choice of any willing provider, choice of consultant-led team, choice of GP practice and choice of treatment. But patients don’t currently have the information they need to make a choice, or the options to choose from. The choice for many is between a local hospital and a more distant hospital that relatives and friends find difficult to get to. This is why most patients “choose” to go to their local hospital. The option of providers outside of NHS trusts and foundation trusts is either not available or very limited.

The government intends to improve patient choice through providing good comparable data and competition. Monitor will have a key role in delivering competition. It will have a duty to “promote competition” and wide-ranging powers, including setting conditions to licences to encourage competition, carrying out market studies, and advising changes to allow effective competition and using existing competition law.

The white paper says “all providers of NHS care should be able to compete on a level playing field” and “patients will be able to choose care from the provider they think to be the best”. It signals the current market will be opened to the private and voluntary sector and that patients will choose who treats them. The white paper is explicit in saying failing trusts will be put into administration.

The consultation paper on regulating healthcare providers describes how Monitor will create a level playing field as part of its new role. It will license all providers, but can set special conditions where “a provider enjoys a position of market power in a local area”, for example, a local trust. These could include requirements to provide services to competitors, accept diagnostic tests from other providers, and grant access to their facilities. This could force a trust to provide pathology services to competitors, accept tests and scans undertaken in private clinics and allow other providers to use their facilities.

Market forces

Recognising the scope for commissioners to act anti-competitively, Monitor will have powers to take action against commissioners.

Perhaps most telling is the comparison of Monitor with Ofcom and Ofgem. These indicate what is expected of Monitor. Ofcom regulates radio, television and phone services and was formed when Oftel merged with four other regulators. Oftel oversaw the move from a single monopoly provider of phone services, British Telecom, to the current market of multiple providers and real competition. BT’s share of the market fell from 100 per cent in the 1990s to less than 50 per cent in 2009.

Oftel’s challenge in the 1990s was that BT owned the telephone lines and exchanges, which limited the scope for competition. So they encouraged services delivered using existing BT infrastructure. A similar approach occurred in gas and electricity, where all providers use the same infrastructure.

Of course, healthcare and utilities are very different services and comparisons between them are inevitably crude. However, like the utilities, trusts have a virtual monopoly with high-cost infrastructure which limits the ability of competitors to enter the market.

The government wants to see a competitive market between providers in “most sectors of care”. There is likely to be no shortage of companies wanting to do business with the NHS, providing there is a level playing field and the price is right.

The greatest competition will be for elective surgery, but it is debatable whether there will be equal interest in other services, such as mental health.

Monitor’s role in promoting competition means we will see new providers of NHS healthcare, whether private, voluntary or social enterprises. Monitor’s powers are similar to Ofcom/Ofgem and the tactics used to promote competition are similar, too. If Monitor succeeds in promoting competition, we could see an extensive NHS market with many providers for patients to choose from.

There are lots of unanswered questions, but the biggest is how extensive the market change will be and how long it will take. Secondary care could look very different from today, with a greater proportion of NHS healthcare being provided by private or voluntary providers. We could even see whole wards in trusts being run by private or voluntary providers.

Of course, it will still be NHS care - free at the point of delivery, delivered to NHS standards, at NHS prices - but the healthcare sector will look very different and, like BT, the current provider’s dominance could be gone forever.