01.10.15
Competition and the NHS: It must happen
Source: NHE Sep/Oct 15
Opposition to competition can actually be unfair to the patient and to the taxpayer, argue Ian R Smith and Stephen K Smith. The authors – who are, respectively, the chair of leading independent health and social care provider Four Seasons Health Care, and a professor of medicine who set up the first academic health and science centre at the Imperial College Healthcare NHS Trust in 2007 – have held a number of senior posts in UK and global healthcare, though they write here in a personal capacity.
The plain logic for competition in health and social care is compelling. Whichever provider – public, private or charity – that can deliver the best sustained outcomes for the patient at the lowest cost to taxpayers should get the right to provide the service.
It is the same logic, or common sense, that we all use in our everyday lives, when shopping or buying a service.
At the outset, we need to be clear about what we mean when we advocate competition. There is a hugely damaging misperception in the NHS that it is all about price or the privatisation of NHS services. That is not what we mean. Rather it is about putting the patient first and at the centre of the service. The person should have access to the optimal clinical outcomes available, provided it is at a cost that is sustainable for the taxpayers who pick up the bill. That may mean competition within different parts of the NHS, as we will explain later, or at times the NHS working in collaboration with private sector providers of specialist services. If clinical services are contracted out to the private sector, they are still provided to the patient through the NHS and are free at point of delivery. It is about optimum quality and value.
The human cost of poorer services
An ideology that says that the state should have a monopoly even if it delivers poorer care at a higher cost to taxpayers or that commercial organisations shouldn’t be allowed to provide these “public services” is unfair to the patient and to the taxpayer. It enables the continuation of poor services to patients and inefficient use – for which read waste – of public funds that could be spent on services for the benefit of other patients. Remember that when we talk about poor services in this context, there is a real human cost in terms of people suffering or even dying sooner.
Competition is at its best when there is an irresistible need for innovation. In industries where there is very little change, in the provision for instance of electricity, there is still a strong argument for competition to break monopolistic abuse of customers, but the argument for competition is even stronger in a sector where there is scope for innovation, which would be confounded by monopolistic inertia.
There are few sectors in the world where there is as much scope for innovation as in the health and care sector. Now, as a simplified illustration of the case for competition, it is useful to contrast developments in a competitive environment versus a monopolistic one:
- The drive to find better ways of doing things has led to exciting advances in genetic medicine that already have the potential to extend people’s lives and reduce suffering. That drive and those advances came from the highly competitive bio-medical universities and private sector companies’ research funding.
- There is enormous potential to do things better by moving from the separate silo health and social care delivery models towards integrated care organisations. The UK model of care was created in 1948, when the epidemiology of disease, social policy and people’s lives were very different from today. It was radical, innovative and world-leading at the time. Advances in diagnosis and treatment mean people are living longer. With an ageing population comes a rise in chronic long-term conditions, people with co-morbidities, increasing demand for longer-term elderly care including dementia care. There is also a rapid growth in ‘lifestyle’ diseases such as obesity and a growth in the need for improved care for mental health in the community. But the monopolistic health and social care structures and systems have hardly changed since they were set up 67 years ago.
Monopolistic inertia and lack of competition are key amongst the reasons why the UK has some of the worst health and social care outcomes in the developed world, despite our having world-class medical sciences and clinicians.
The opposition to introducing competition in the NHS is widespread. It is often passionate, even frenzied, and much of it comes from within the NHS. In one sense, this is understandable: why would anyone in a monopoly vote to expose themselves to competition – and perhaps someone who can do the job better?
Addressing the concerns
However, it would be a dereliction not to acknowledge that there are some very valid concerns about competition in the health and care system, and they need to be addressed seriously. There are typically four such objections:
- What happens if a provider fails? We can’t afford the human cost of service disruption.
- Won’t competition fragment and destabilise the system?
- Won’t competition result in providers putting cost above quality?
- Won’t competition damage the ‘public sector ethos’ of good works?
We will take each of these in turn. Firstly, failures occur within the current system, with tragic consequences. The Bristol Royal Infirmary scandal resulted in a number of avoidable deaths of children. More recently the Mid Staffordshire failure caused 1,200 avoidable deaths. Of course, failure also occurs within competitive markets. The difference is that in competitive markets, there are successful providers who can quickly take over the operations and improve them. In monopolies, failure gets ‘stranded’ – in the case of the NHS, that can last for years.
The concern about fragmentation is very valid. Health and care systems need to be more actively ‘managed’ in a way that, say, consumer markets, do not. The answer is ‘expert commissioning’. Commissioning will increasingly be based on a virtuous circle that identifies the best treatments over the full cycle of care, collects outcome information and then adjusts the treatment regime accordingly. Commissioners will manage economies of scale (building deep competence in treating specific medical conditions) and scope (taking this greater and safer competence to all parts of the country) in the interests of patients. Commissioners make sure that market failure does not interrupt service to the public.
Commissioners are also key to answering the third of the objections to competition. Commissioners need to commission based on a combination of cost and quality. Professor Michael Porter, of the Harvard Business School (who defines patient value as ‘better sustainable outcomes for the patient per unit cost’) has written in reasoned and rational terms about the need for ‘value-based competition’: “Moving to value-based competition on results has huge implications for any country’s health care system, regardless of its starting point. While other advanced countries have historically boasted lower costs, they are now facing accelerated rates of cost increase and alarming quality problems similar to those in the US. There is growing recognition around the world of the need to refocus on value, introduce competition into state-dominated programmes, rethink how providers are organised, and collect and disseminate results.”
Finally, will competition compromise the ‘public sector ethos’? A ‘public service’ rather than ‘public sector’ ethos is important, but clinicians and carers must be measured and judged by the transparent results they produce, in which case the legal structure of the organisation for which they work – public, private or charity – is irrelevant. Indeed, given the traditional dominance of the public sector monopoly in the UK, most competition within the NHS, should it come about, will be between public sector bodies.
Take, for instance, Great Ormond Street, one of the best providers of paediatric care in the country (perhaps even in the world). If it can deliver better care than the paediatric units in other UK hospitals then why shouldn’t it take on responsibility for those units?
Lessons from higher education and research
Very importantly, as we have said, competition is already fierce in bio-medical science, which is a key part of our health system. In 2014-15, the UK had four of the top 10 universities in the world, and all of them are global leaders in the discipline of biological sciences.
There are few activities more competitive than the university research system. UK universities are intensely competitive with each other and, increasingly, on the global stage. Academic clinicians can, and do, move freely to other universities around the world – as one of the authors of this article has demonstrated. To the degree that the UK has improved the health of its citizens since the NHS was formed in 1948, it is for the very reason that it has been highly competitive in bio-medical science.
The power of competition, provided it is within a system that allows service users (within the context of ‘expert commissioning’) to reward good providers with their custom or tariffs, and to force poor providers out of operation, is well illustrated in an example produced by Michael Porter. It is significant that the example is from the US. Many opponents of competition point to poor health and social care outcomes in that country, and conclude that competition does not work. This is disingenuous. We need to consider that there has not been universal healthcare, but an insurance-based system under which people may defer treatment for financial reasons and where cost competitiveness is a far more important consideration than it is here. Our focus is on the case for competition based on patient outcomes and value.
The example that Porter cites in his book, ‘Redefining Healthcare’, is that there are 139 transplant facilities in the United States. The best of these transplant facilities is excellent – and has a 100% one-year risk-adjusted* survival rate. That is, every person who receives a transplanted organ at this facility survives for more than a year. The worst facilities have a 1% one-year risk-adjusted survival rate. It is quite clear, and compelling, what a citizen armed with the ability to choose would do in these circumstances. The ordinary citizen or patient simply does not have the facts to make these decisions, yet expert commissioners – a key feature of the NHS – do have these facts.
Far from being a sector in which there is, as many people argue, no place for competition, in fact there is no sector where the consequences of the lack of competition are more tragic.
*Risk-adjusted means that the survival rates are adjusted for the fact that some patients, because of other diseases that they might have or because of their frailty will have a lower chance of surviving than fitter patients. In other words, the best facility cannot make its figures look better by choosing to take only those people with the best survival chances.
“Why would anyone in a monopoly vote to expose themselves to competition – and perhaps someone who can do the job better?”
FOR MORE INFORMATION
The authors recently published a pamphlet, ‘Away from the past and to a sustainable future: How the UK’s health and social care systems can be reformed to better align with the needs of today’s society’, which is available via the NHE website.
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