Published: 26/05/2005, Volume II5, No. 5957 Page 3

The government intends to use competition and markets to get the NHS to act smarter and deliver more timely and better-quality patient care. This means the role of information becomes important for those wishing to survive and thrive in the medical care marketplace.

Shortly after getting the job, new health secretary Patricia Hewitt announced plans to increase the amount of NHS capacity provided by the private sector. This will result in diagnostic, elective and primary care being increasingly privatised at the margin - even if it is managed by the NHS. The NHS is likely to continue to have sole responsibility for emergency care.

In so-called competitive healthcare markets like the US, managed-care organisations have high levels of expenditure on IT.

IT investment is needed to track the volume of activity and to ensure purchasers are charged for the care provided to patients. This type of investment is already increasing in the NHS because of the impact of payment by results.

Acute trusts in England have an incentive to track activity to identify finished consultant episodes that can be translated into 'spells' eligible for reimbursement at national tariff rates.

Increasingly, such spells may be challenged by primary care trusts, many of which may be strapped for cash and wish to delay reimbursement, not only to ensure the appropriateness and quality of treatment but also to protect their interests by impairing the cash flow of hospitals. PCTs will need not just to use routine data produced by the hospital episode statistics on readmission rates and mortality; they may also seek to augment this information to control expenditure and hospital behaviour.

For example, a PCT might not pay its provider merely on the basis of volume, readmission rates and mortality deficiencies, but also with regard to infection rates, the variability of consultant behaviour and outcomes.

It might refuse to pay payment by results tariffs if infection rates are high, if there is an absence of measures of success - for elective procedures in particular - and if some consultants appear to have low activity rates. These not only increase providers' costs but also mask volumes that do not enable the surgeon to remain proficient in their specialism.

These PCT challenges will have to be countered by trusts having timely and accurate data to refute purchaser challenges and maintain reimbursement and cash flow.

Providers will also have the challenge brought by competing providers in their locality. With prices fixed by payment by results, they will have to compete on the basis of facilities and a proven record of excellence, which requires an empirical base and a proficient IT system. Hospitals with backlogs of maintenance and high levels of use will have to compete with attractive, new private facilities that offer superior hotel facilities.

Such competition will have to be informed by careful marketing, an activity alien to the current NHS.

Managers will have to convince local consumers and their GPs that not only is the quality of care so good that it compensates for grotty environments, which must be upgraded as a soon as possible, but they can also offer choice of rooms, decor and staffing.

Competitive advertising is likely to develop as excess capacity emerges and choice is developed.

Without good IT to inform marketing, market share may fall.

NHS managers are moving from a world in which they tended the till and ensured financial balance to a world in which flexibility in service provision and entrepreneurship will be at a premium.

This transformation will have IT and data management at its heart.

Hopefully this experimental policy will not only change management roles but also improve patient care.

If it does not, the political likelihood of privatising all healthcare capacity will be increased. .

Professor Alan Maynard is director of the health policy group at York University.