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"The opponents of markets will doom us to a poor-quality, unproductive NHS that gives all of us a Trabant for the cost of a BMW."


Is competition good for the NHS?

Dr Stephen Black
The Times
19 May 2011

PA's Dr Stephen Black, health management expert, sets out the argument for competition in the NHS in The Times.

Opponents of NHS reform argue that the fragmentation and creative destruction inherent in competitive markets will lead to chaos, loss of vital services and leave us all worse off. They could not be more wrong: it is, in fact, the NHS’s best chance of survival. The trouble with the anti-reform argument is that it is the same one that led to large parts of the world being run by central planners. Despite the attractive logic of centralism, well designed markets have proved superior, essentially everywhere they have been tried. The opponents have not learnt this lesson. They continue to insist the NHS is somehow “special”, despite all the evidence that it isn’t. They refuse to see the evidence that competition can improve costefficiency and quality of care, as The King’s Fund highlighted at its recent event on NHS Choice and Competition.

Today’s NHS, despite tentative steps towards reform, suffers from many of the failures of a centrally planned economy. It invests in things that are easy to measure, rather than the things patients need. It is better, for example, at performing limb amputations on diabetics than it is at preventing diabetics from developing circulatory problems in the first place. It is better at building hospitals than at closing them when they are no longer needed, or adapting them to take advantage of new technologies.

It is very slow, to adapt to changes in demand. It makes decisions politically, rather than rationally, so the powerful get the investments they demand, even if patients might benefit more from that money being channelled elsewhere. And new, more efficient ways of working spread slowly, if at all, so productivity stays low and quality of care doesn’t improve. And, ironically given the arguments used against markets, it is notoriously poor at providing patients with the joined-up care they need. Markets are adaptable and agile. When co-ordination matters for the customer (or the patient), markets work to achieve it, even across organisational barriers (otherwise how do we ever build a skyscraper, car, or laptop?) Markets know how to kill old technologies when better ones come along (markets give us iPods: central planners would insist we keep buying the Walkman).

Markets would discipline hospitals to meet patient needs and to adapt to changing demand. Bad hospitals that are consistently outperformed by the competition would need to improve or close, allowing the money to flow to those that would use it better. Markets work, in part because they reward what works in the real world, as opposed to what politicians think ought to work. When a new idea proves a success, new competitors will offer it and those that do not can adapt or die.

The NHS needs to find a way to shut down old services and poor hospitals so that money can be directed to innovative, higher quality, more productive services. The opponents of markets, who argue that service and hospital closure should not be contemplated, will doom us to a poor-quality, unproductive NHS that gives all of us a Trabant for the cost of a BMW. 

Dr Stephen Black is a health management expert at PA Consulting Group.

To see the article online, please click here.

To visit PA's government pages, please click here and transforming healthcare pages, click here.

To visit PA's pages on future of healthcare, please click here and delivering innovative healthcare solutions, click here.

To read Stephen's recent letter in the BMJ March 2011, please click here.


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