The challenges of competition in healthcare

I have to declare an interest: I am not a fan of competition. This may stem from the fact that I was always picked last for any teams at school as I lacked speed, strength, skill, accuracy and talent in almost all sports. I’m beginning to have the same feeling of disquiet when I consider recent decisions of the Competition Commission and the healthcare regulator, Monitor, with regards to proposed clinical service and estate reconfiguration proposals.

During the passage of the 2012 Health and Social Care Act, health ministers often stated that the increasing use of competition in healthcare provision would be a tool to improve quality of care for patients (and reduce costs). This would be grounded on solid free market principles. However, the application of the rules that were enshrined in the Act are, perversely, having the opposite effect.

For example, in Bristol, Monitor has strongly criticised (and may insist on reversing) the reconfiguration of hospital services that have demonstrably improved the quality of cancer care; in Bournemouth and Poole, the local hospitals are battling with the Competition Commission regarding a potential merger of two Trusts to make much needed efficiency savings; and a recent Competition Commission report into the private healthcare market in the UK has based its conclusions on what appears to be an incorrect view of the emerging NHS-provided private patient market.

It is worth considering these three examples in some detail, as each demonstrates key aspects of where competition and the application of market principles have produced some frankly illogical conclusions around clinical service and estates reconfiguration.

In Bristol, there has been centralisation of certain cancer services: head and neck cancer provision is to be delivered at the University Hospitals Bristol, with other cancers (notably breast tumour services) centralised at the North Bristol Trust. On a strategic level, this makes eminent sense and is consistent with international best practice guidance regarding centralisation of key specialist services. In addition, there is a considerable body of evidence demonstrating that “centres of excellence” improve quality of service, patient outcome and satisfaction. However, Monitor concluded that, although the merger may benefit certain cancer patients requiring complex care, this benefit did not outweigh the loss of choice and reduced “incentives to maintain quality”.

The planned merger of the Royal Bournemouth & Christchurch Hospitals with Poole Hospital Trust will almost certainly be blocked by the Competition Commission on grounds of “reduced patient choice”, despite the extremely strong clinical and financial arguments in favour of rationalising duplicated services and estate across the two Trusts.

Competition has its place but not in driving quality of care

Furthermore, the Competition Commission has recently concluded that the private healthcare sector is exploiting the lack of real competition in many areas, resulting in significant overcharging of patients. It has suggested that private operators owning a cluster of hospitals in one area should have to sell off some of their facilities. These conclusions were reached at a time when the previous restrictions on the amount of private patient work at NHS Trusts has been lifted, leading to a growth in NHS Private Patient Units (PPUs). The potential for the restriction of private sector activity in the local health markets, while at the same time supporting the development of NHS PPUs, will inevitably restrict competition rather than encourage it.

These examples show that the application of competition principles to the healthcare market are producing some illogical decisions, as they are based on a number of assumptions that do not hold water when you apply them to the NHS.

Firstly, competition does not necessarily improve the quality of care. You only need to look at the debacle over the provision of GP ‘out of hours care’ to see that competition has delivered little quality improvement, in fact quite the reverse. This example also illustrates how changing one element of the NHS ‘market’ in isolation can have untold consequences on the wider system: the current crisis in A&E admissions has been directly linked to the decreasing quality of GP out of hours provision. Quality of care is, and should be, the responsibility of the regulator the Care Quality Commission not market forces.

Secondly, the NHS has challenging efficiency targets of saving £20bn by 2015, partly by introducing market forces to the NHS to drive up quality and drive down costs. However, the only way this will be achieved is through radical service and estates transformation, something that the Bournemouth and Poole merger was trying to achieve. This collaborative plan should not be overruled by any minor concerns over the plurality of service provider and ‘patient choice’.

Thirdly, the competition rules should only apply where there is a ‘true’ open market and a fair competitive environment. In reality the NHS is a closed market and private sector providers are unable to compete on a fair basis. This is certainly true in private patient provision where NHS PPUs have an unfair competitive advantage due to indirect cross-subsidisation of the NHS Private Patient services e.g. use of clinical infrastructure and staff, tax status, the NHS monopoly position as consultant employer, the close proximity of the NHS hospital to the PPU etc. In addition, NHS Trusts tend to be increasingly integrated with NHS GP and community care services, leading to a risk of preferential internal referrals.

President Franklin D Roosevelt once said, “Competition has been shown to be useful up to a certain point and no further, but cooperation, which is the thing we must strive for today, begins where competition leaves off.”

I could not agree more. Competition has its place but not in driving quality of care. Ironically, it is the very act of ensuring competition, and thereby restricting collaboration, that is preventing service and estates reconfiguration that would truly improve the quality care and the healthcare estate.

Dr Matthew Williams-Gray is an associate director at Mace and head of strategic healthcare consultancy services