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The Maynard Doctrine: is competition 'The Answer'?

Alan Maynard is professor of health economics, University of York

Monday 7 July 2008

During the Wilson government in the mid-1970s, clinical practice variations were identified as a major problem. They remain so today, with the Darzi report, High-Quality Healthcare For All, demanding change because similar patients with similar needs get very different treatment.

Progress in reducing clinical practice variations and measuring patient outcomes is depressingly slow in the NHS, and in all other healthcare systems public and private throughout the world. In the USA, Alain Enthoven is in his third decade of advocating competition to reduce this inefficiency. In the UK there is no competition guru, but it is developing at a surprising rate and in a rather covert manner.

Why is the growth of competition covert? The Government has put reforms in place: in January 2007 they published a set of rules for collaboration and competition in the NHS. They have also published a code for advertising. The nice question is whether these developments are fully understood by politicians.

Of course it may be that the politicians understand it all too well, but do not wish to own what they are doing. Thus they may fear Labour MPs and trade unions will cry foul and oppose competition as a “wicked onslaught” on the NHS. In this case, it is best to stay quiet about competition and let it grow by stealth.

Competition: driving efficiency or destabilising hospitals?
There is in principle nothing sinister about public-private competition in health care provision provide population risks are pooled, care is funded out of taxation and access is based on need rather than ability to pay.

Furthermore, competition is potentially useful in reducing variations and the lack of outcome measures. However, its primary role at present appears to be in stripping out activity from hospitals and providing care in the community.

Thus, for instance, private companies are going into partnership with GPs to provide ophthalmic care and diagnostics. The latter involves adopting a focus on simple, high-volume procedures to get economies of scale and low costs, leaving the hospitals with the more complex, low-volume procedures.

In ophthalmology, GP-private partnerships are using optometrists to establish community capacity to provide primary and some intermediate procedures, thereby diverting patient demand from hospitals to the community.

One of the most expensive current NHS investments is in injections of an expensive drug to treat macular degeneration. The nice issue here is whether you need physicians or just technicians to provide this therapy? The former may be an expensive luxury when the latter may save you thousands of pounds and be equally effective.

Private sector competition may be the engine of adopting the lower-skilled and more cost-effective provision of care. These entreprenuers may provide GP-free primary care with nurse prescribers and practitioners. They may use pharmacists to prescribe also. Such innovations would be legal, and could undermine the inertia that is healthcare provision worldwide.

But would it be efficient? During the period of adjustment, there would be excess capacity and higher costs. Hospitals losing services to the community would have to sack staff, including consultants. The loss of volume to primary care providers might inflate hospital costs, due to the erosion of economies of scale and the loss of capacity to cross-subsidise their expensive patients with high-volume simple cases.

Such radical notions are an inevitable product of market competition. The long established healthcare inefficiencies of variations in practice and the absence of measures of success can only be mitigated if commissioning is of high quality and if the rules of competition are carefully articulated and rigorously enforced.

Is competition the solution for the problems of the NHS? It all depends on whether regulation can create a level playing field for alternative providers to compete for business.
Competition is all about creating uncertainty about the future, so that management has to change to survive. Competition can be wasteful, and capitalists will always seek to destroy competition to protect and enhance their profits.

However without some vigorous agent of change, healthcare delivery will continue to be inefficient. It seems that greater use of carefully-regulated competition is unavoidable, as without it, patients and taxpayers will continue to get a poor deal.