Competition can bring benefits for the NHS—provided it’s the right kind, meeting hears

BMJ 2011; 342 doi: (Published 06 May 2011) Cite this as: BMJ 2011;342:d2857
  1. Nigel Hawkes
  1. 1London

Competition has a role to play in improving NHS services, widening choice, and slowing the growth of spending, a breakfast meeting at the King’s Fund was told on 4 May.

The success of competition, however, depends on choosing the right forms of competition, so as to avoid driving out collaboration, said Chris Ham, chief executive of the fund. He distinguished between competition for the market, where different providers compete to win a franchise to run a particular service, and competition in the market, where patients are given a choice of providers and choose which to them seems best.

Stephen Dunn, director of strategy for NHS East of England, gave examples from his region, where tight management and being “very tough” with providers has turned a £300m (€332m; $495m) deficit in 2006 into a £200m surplus today. The region pursued competition “not because we’re ideological, but because we wanted to turn it round,” he said. “We were the basket case—that’s a technical expression.”

Hinchingbrooke Hospital, running a £40m debt on a £90m a year turnover, was made the subject of an open competition for any qualified provider to take it over. The hospital would remain fully part of the NHS family, with the franchisee delivering the same services—“no cream skimming”—and undertaking to repay the deficit, meet demanding productivity goals, reduce length of stay, and provide NHS services, as usual, free at the point of use. The recommended bidder is the employee owned social enterprise Circle.

A similar process was followed for Bedfordshire and Luton, a mental health and social care trust which Dr Dunn described as “struggling” before a competition was run to find the best foundation trust to take it over. “I was told nobody would want it,” Dr Dunn said. “But we had 20 applications, ran it down to four, and finally selected South Essex Partnership NHS Trust, the first mental health trust to achieve FT [foundation trust] and university status.

“This was not a cosy NHS merger. We were looking for the best willing provider to meet taxpayer and patient priorities, not political priorities. Significant transformation has taken place since.”

Carol Propper of Imperial College Business School said that economists generally favour competition because they know that 60% of productivity gains happen because of new firms entering the market, and the exit of the poor firms they replace. In healthcare, the need for services to continue unaffected militated against this scale of change, but the evidence was that competition driven by patient choice had benefits, so long as prices were fixed. Her own studies and those of a team at London School of Economics had shown that Choose and Book in the NHS had brought about an increase in quality with no obvious increase in costs. “The gains were not very large, but you wouldn’t expect them to be,” she said.

Nor were they restricted to hospitals in cities, as some had charged. “It’s the ones around those conurbations which feel it more,” she said. “They’ve seen more movement in patient activity than hospitals in city centres.”

Anna Walker, chair of the Office of Rail Regulation and former chief executive of the Healthcare Foundation, drew on 20 years’ experience as a regulator to conclude that competition was good in some places but not in others. Where competition worked was in providing elective care such as hip and knee implants. But the same might not be true of cardiac, stroke, or cancer care. Dr Dunn agreed that there may be highly specialised areas of medicine where competition is not helpful.

But he also argued that competition could even work in integrated care, where different services needed to collaborate to deliver a seamless service. Experience in the US showed that it was possible to run competitions to choose the providers who could run the services, and subcontract parts to other providers while retaining a grip on the whole patient pathway. “In the East of England, we’re trying to work out how to do it,” he said.


Cite this as: BMJ 2011;342:d2857