Markets and Competition in the NHS

The issues around markets and competition in the NHS are bound up with those around Patient Choice, and about Private business and the NHS. This page is specifically about markets and competition in relation to health and social care. Of course there has always been competition between doctors and hospitals. The question is how can the beneficial effects of competition be enhanced and the damaging effects reduced?

The NHS operates inside a market economy and is affected by that fact in various ways, mostly outside the scope of this discussion. Our focus here is on competition in a clinical context, summarised by George Bernard Shaw in 1913:

“That any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking for you, should go on to give a surgeon a pecuniary interest in cutting off your leg is enough to make one despair of political humanity.”

The position of the Socialist Health Association may be summarised as follows:

  1. Market processes as the central mechanism for running the NHS can be dangerous, expensive and counterproductive.
  2. Planning in the NHS is essential and we need a mechanism for that which can be separated from the vested interests in the system. Those of, for instance, doctors.
  3. Commissioning is a way of planning that is separated from the vested interests in the system. Commissioning/planning for the NHS should be done by local authorities.
  4. The ability to bring in other providers from outside the NHS is essential in certain situations. The NHS is the preferred provider, but, for instance, if parts of the system fail and cannot improve, then competent outside organisations are needed. There are many examples of improvements from outside the NHS that have been brought in to huge patient benefit.
  5. Private providers are everywhere throughout the NHS and need to be accommodated, controlled and their benefits maximised for patients
  6. The NHS needs a robust financial system – we need to know what we spend.
  7. We need financial and other incentives in the NHS that drive good coordinated integrated public health and health care practice that is good for the public, patients and workers that flexes in response to evidence. Incentives are of all kinds, including patient and public accountability.
  8. The systems in NHS Wales and Scotland, where market mechanisms are hardly used at all are worth further study.

Those who argue that markets and competition will drive up quality and drive up cost in healthcare need to deal with a number of difficulties.

1. Most NHS money is spent on people who are in no position to exercise much choice, because they are too unwell. Choice exercised by someone else on behalf of the patient clearly has important differences from that exercised directly by the consumer of services. Those who are able to exercise choice are much less ill than the majority of inpatients.

2. Patients are generally in no position to assess the need for or quality of treatment or investigations, and can rarely learn from experience of previous treatment.

Evidence about Competition in Health

There is very little published evidence from the UK. There are two recent studies which are widely discussed (October 2011). Both are controversial and neither has yet been published in a peer-reviewed journal.

Zack Cooper at the LSE asserts: Hospitals located in competitive markets began to lower their mortality rates more quickly from 2006 onwards.

His paper was discussed at an LSE Seminar Tuesday 5.7.11. “Quality in Health and Social Care” attended by several of our members, who have produced a report on the discussions.

Why Zack Cooper is Wrong attacks Cooper’s work by considering other hospital mortality statistics at the same period which do not show the improvement he claims. It has also been criticised by Prof Allyson Pollock, among others, for failing to suggest any causative mechanism for the improvements in mortality for patients living in more competitive markets after the introduction of hospital competition.

Lucy Reynolds and Martin McKee offer their views on the provisions for competition in the Health and Social Care Bill

Does competition between hospitals improve clinical quality? A review of evidence from two eras of competition in the English NHS Gwyn Bevan, professor of policy analysis, Matthew Skellern, research student

Less controversial is the evidence from the Health Reform Evaluation Programme: New Labour’s reintroduction of competition in the English NHS which was presented at our seminar in January 2010

There are concerns about the differential effect of competition, addressed in the Centre for Health Economics paper Has competition in the NHS increased health care inequalities? which concludes that neither Conservative nor Labour attempts to introduce competition into the NHS appear to have had any measurable effect on socio-economic equity in health care.”