Internal market rules OK

BMJ 1994; 309 doi: https://doi.org/10.1136/bmj.309.6969.1596 (Published 17 December 1994) Cite this as: BMJ 1994;309:1596
  1. Julian Le Grand

    New rules take account of market behaviour

    When the internal market was introduced into the NHS health economists pointed out that it would have to meet several conditions if it was to achieve the ends that its promoters hoped.1 Analysis of its early operation by the King's Fund and others suggested that it was more successful than might have been expected in meeting most of these conditions.2 However, several unresolved issues remained, particularly regarding the competitive structure of the market. Economists at the Department of Health became increasingly aware of these problems as the market evolved, and they have used the experience of the past four years of market operations to develop a set of guidelines, or rules, for operating the internal market.

    These guidelines, The Operation of the Internal Market: Local Freedoms, National Responsibilities, were published earlier this week.3 They concern four areas: mergers between providers and joint ventures; mergers between purchasers; managing change when providers are in difficulty (a euphemism for reconfiguring hospitals, including closures); and collusion between providers and purchasers, or between providers.

    Mergers between providers present difficulties for markets. On the one hand, the creation of bigger units may result in efficiency savings through economies of scale. On the other hand, these large units may monopolise the market, operating against the interests of purchasers and hence ultimately of patients.

    The guidelines propose that, in general, mergers will not be challenged by the NHS Executive so long as they do not require existing trusts to be dissolved and the resulting …

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