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Editor's blog Thursday 17 February 2011: Competition in healthcare (again) - Ham, Moyes, means and ends

Competition is back as one of the health policy buzz-words. Its early 2000s iteration was under the slightly veiled guise of "contestability": Simon Stevens was an advocate that health services which are both highly measuarable and highly constestable were appropriate realms for the introduction of market mechnisms such as choice and plurality of providers.

What was most striking about competition and its shadow patient choice was how they really didn't take off or reshape the system to any huge degree. The Kings Fund 2010 choice research shows this (among its other interesting findings, including that even people who didn't use choice value the idea that it's there).

Many of the mechanisms to allow competition and choice to reshape the landscape were there - except, crucially, for a failure regime. The increasing income from an economy booming on foundations of sand also inhibited much reshaping.

And then there was the little matter of cabinet minister campaigning against reconfiguration decisions in their own constituencies.

Why was there so little change?

One reason is that PCTs did not tend to decommission many services.

Another is that in much of the country, healthcare provision is a de facto geographical monopoly.

Another is that the case for change was very rarely effectively made - because historically, the NHS usually only engages with patients and the public when it is just about to try to close something.

Advocates for and against competition
Two articles inspired this post: the first, in Health Service Journal, is by former executive chair of Monitor Bill Moyes. (Bill is said by some to be SOS Andrew Lansley's preferred choice as Monitor's next leader as well, which would be interesting.)

The Bill-on-Bill action (Moyes on Health And Social Care Act) is very positive: he terms the legislation  "the reforms are probably the best way to preserve (a primarily tax funded healthcare system) for another generation or more".

Moyes sees two major opportunities in the Health And Social Care Bill: "to redesign services around the needs and preferences of patients, not providers"; and "for the four national organisations – the National Commissioning Board, Care Quality Commission, Monitor and NICE Excellence – and the Department of Health to work together to create the conditions for real innovation in health services. The drivers of service innovation will be competition and tariff, as well as commissioning based on patients’ preference".

He continues that "there are services and geographical areas where competitive pressures may not arise for many years, if ever".

Moyes' more interesting phrases are  on tariff. It cannot, he argues, "continue to be a validation of existing cost structures. It needs to be developed to become a means of giving pricing signals to the market to stimulate change".

He concludes that "If in five years less than, say, 5 per cent of services have been replaced by something better and more efficient, we might conclude that all the effort used to get the legislation enacted and implemented has largely been wasted. But if the outcome is a substantial volume of new and better services, what an outcome that would be for patients".

Contrastingly, Kings Fund chief executive Professor Chris Ham writes in the British Medical Journal that the Bill's provisions on competition and regulation"amount to the most ambitious attempt yet seen to apply a system of market regulation to the NHS ... (the Bill's changes to provision and commissioning) are of secondary importance compared with the radical extension of competition in healthcare".

Ham was, we should remember, Director of the DH strategy unit 2000-4, during the time of PCTs, payment by results, foundation trusts and practice-based commissioning. Anti-competition he is not - or was not.

However, Ham's work in recent years has - quite rightly - focused on the need to improve the management of long-term conditions, and Ham's research with Judith Smith for the Nuffield Trust has focused on the value in integrated care systems.

Ham suggests that the drive towards a deregulated healthcare market is informed by SOS Lansley's experiences in the telecoms privatisation of the 1980s working as Norman Tebbitt's civil servant.

Ham asks two questions: "how applicable are these principles in view of the differences between healthcare and sectors like telecommunications? Also, will choice and competition help to transform the NHS and improve patient care or will they lead to increased fragmentation as Monitor exercises its duty “to promote competition where appropriate”?".

Ham praises the Coalition Government for its clarity and details over its health policy proposals, but expresses his concerns that they "run the risk of replacing the bureaucracy of performance management with the red tape of economic regulation. Monitor will need to employ large numbers of economists, lawyers, accountants, and managers to deal with competition issues, providers who fail, price setting, licensing providers, and other work.

"Add to this the need for Monitor to work hand in hand with the Competition Commission and the Office of Fair Trading on competition, the Care Quality Commission on regulation of quality, and the NHS Commissioning Board on price setting, and the complexities of the proposed regulatory arrangements become apparent".

More broadly, he wonders as the the applicabilty of competition and deregulatory lessons from utility provision to healthcare, citing Peter Smith's 2009 OECD study findings that , “effective implementation of market-type mechanisms is . . . likely to require considerable managerial skills and impose substantial transaction costs, particularly in purchasing and regulatory institutions”.

Noting ministerial lip-service to the concept that appropriate integration should not be deemed anti-competitive, Ham adds his voice to the many calling for the legislation to make this explicit.

The problem with giving Monitor a caveat-free duty to promote competition is that it will do so - as FTs maximised their income under PbR and private patient rules.

Despite being criticised for inefficiency, when the NHS system is given targets and goals, it hits them far, far more often than it does not. Problems come with the unintended consequences, perverse incentives and loss of capacity to see the wood for the trees.

The other problem is the people a competition-focused Monitor will attract: they are likely to be competition fundamentalists. And fundamentalists, as a breed, are often not terribly nice folk - bringing to mind my namesake William Cowper's epithet, "some people are more nice than wise".

It is worth going bak to this excellent piece by Alan Maynard - which among other salient points, reminds us that competition ought to be a means; not an end.