All the evidence points to market approaches working better than central planning, argues Stephen Black of PA Consulting Group
The forces of opposition seem united in their dislike of more competition in the NHS. The Royal College of GPs has warned that more competition could "unravel" the NHS, and Nick Clegg has stated that his party will not support the healthcare bill without further amendment.
But there are both good arguments and good evidence that more competition could benefit NHS patients. For example, recent evidence from groups at LSE, Imperial College and Bristol University suggests competition generates both quality improvement for patients and better control of costs.
The media debate has ignored the most obvious evidence: the fact that almost everywhere where they have been tried, market approaches work better than centrally planned government ways of running the same activity. Not all markets work well, but even the bad ones seem to do better than central planning.
Many arguments against competition in the NHS seem stuck in a 1930s time warp and ignore 80 years of world history that have taught even the Chinese Communist Party that planned economies are a failure – and this is true even when compared to very imperfect market ones.
It would be wrong, though, to pretend that some concerns about the NHS reform are not real. The first worry – that the changes will damage the NHS ethos – initially sounds like a powerful objection, except that large parts of NHS services are already provided by the private sector. Most GPs do not seem to be diverted from their public duty because they are private contractors, not employees, and can make profits. Many other services in the NHS – for example, in mental health – are often provided by independent organisations.
The second concern – about fragmented care – does highlight a potential problem. However, the NHS performance on joined-up care is poor. GPs often refuse to share data with either commissioners or hospitals; hospitals guard their data carefully if it is ever accessible in the first place.
The volume of paper-based notes means they are not easy to share with others in the NHS. Real markets have no problem sharing information if that sharing leads to mutual benefits, and they are a lot better than the NHS at spotting where those benefits might be.
The third concern – about the reforms leading to organisations putting profits before patient care – is wrong for a number of reasons. Most providers in the market will be NHS hospitals or not-for-profit bodies. Even those that are not, can make profits only if they attract patients by offering better care at the same price. Profits can come only because they do the job well. If a provider skimps on quality to make a profit this year, they will attract no patients next year.
This brings us to the final objection: that competition will destabilise a carefully planned NHS, leading to some services closing. It is certainly possible, but that might be a good thing, though even Andrew Lansley, the secretary of state for health, does not want to admit it. One of the most persistent problems of the NHS has been a failure to evolve services as needs and technology change. The broad balance of current investment is wrong: we spend too much on hospital care and too little keeping people out of hospitals. We find it almost impossible to shut services even when demand changes, which is why an unaffordable amount of money is being poured into the rebuild of hospitals despite there being far better ways to spend that money.
What markets do is bring change and evolution – as well as productivity and quality improvements that force incumbents to improve or leave the market. Protecting the incumbents just makes productivity and quality harder to achieve – to the detriment of patients. Markets let us choose an iPod; planners insist we keep buying the Walkman.
Indeed, it is worth reflecting on why always protecting existing services can be bad for patients and taxpayers.This can be seen in a scenario where new technology became available for non-invasive cardiac diagnostics that is safer than traditional approaches, but which requires expensive equipment. The old technique involves an invasive procedure that requires a catheter to be inserted into the heart, which requires skilled staff and is risky. Yet a typical NHS hospital will not rush to use the new kit because it requires investment and would seem to waste money already spent on equipment and training.
A hospital facing competition will see it differently. Faster, safer and cheaper techniques bring big benefits to commissioners and patients, so hospitals that do not adopt the new technology will lose work to those who do (so quality and efficiency will both improve).
This is not only a real situation, but clear evidence of why the lack of competition between providers holds back improvement in the NHS and why competition can bring real benefits to patients.
Dr Stephen Black is a health management expert at PA Consulting Group.
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