The role of regulation in healthcare

BMJ 2012; 344 doi: http://dx.doi.org/10.1136/bmj.e821 (Published 10 February 2012) Cite this as: BMJ 2012;344:e821
  1. Richard B Saltman, professor of health policy and management
  1. 1Rollins School of Public Health, Emory University, Atlanta, GA 30322, USA
  1. rsaltma{at}emory.edu

Needs further scrutiny before regulatory bodies can perform effectively

In November 2011, the healthcare think tank, the King’s Fund, published an assessment of the responsibilities and prospects for the newly redesigned Monitor, the independent regulator of NHS foundation trusts.1 The report explores several sensitive problems that inevitably face a newly beefed up health sector regulator.

Regulation has become an increasingly important part of the political toolbox in European healthcare systems that are funded by taxation. When healthcare providers were directly ruled by a central or regional government office, their decision making discretion was typically limited to informal strategies to create small degrees of autonomy within government directives.2 3 Regulation was rule based, serving mostly to convey higher level political decisions to lower operating levels of the delivery system.

With the onset of planned markets in the early 1990s, the role of regulation changed. In a provider market where institutions had some degree of competitive freedom, regulation shifted from conveying a fixed content from above to focusing on ensuring that the process of competition down below was fair, that entrepreneurialism and innovation were encouraged, and that the results satisfied political expectations up above.4 Osborne and Gaebler called the process no less than reinventing government.5 Political scientists were quick to note, however, that this new type of process focused regulation, particularly when it involved multiple detailed contracts, was much more complex than command and control governing approaches and would require more skill and resources to be successful.6

It is no surprise therefore that concerns have been raised about the structure and function of health sector regulators such as Monitor in England. As a recently developed complex area of governmental activity, much can be learnt from “doing.” Hence, the common suggestion that the health sector might learn from industrial sectors—utilities in particular, such as water and electricity—that moved earlier into this new type of regulatory arrangement.

The recent King’s Fund report raises several questions. How will Monitor balance the financial needs of the payers with the needs, in terms of access and choice, of patients? How will it spot decaying finances in a hospital before services deteriorate and patients might be affected? Conversely, how will it ensure that large hospitals with clever managers don’t gobble up their competitors to create new forms of local monopoly? How will it ensure that ostensibly competing providers cooperate to deliver integrated care services for chronically ill elderly patients?

These and similar questions have characterised debates about regulation in several countries, and the King’s Fund study provides a useful codification of these ongoing regulatory worries. It also notes recent experiences on these and other problems in other countries (such as the Netherlands), as well as in the available evidence about utility regulation in England.

However, the study does not deal with some key questions that must be answered to chart the broader structural progress of the current regulatory process. Firstly, what is the appropriate balance between state control and market innovation in different subsectors of health systems? Does this balance differ between countries with different political contexts and cultures? What is the regulatory target that Monitor should be expected to hit to ensure that core NHS values are preserved while competitive efficiencies are optimised?

Moreover, the still largely nationalised inpatient health sector in England will continue to be directly accountable to parliament. In light of this, how can regulators create enough space for manoeuvre to become more than just nationalised control of the hospital sector by different means? Indeed, the wide, and often contradictory, range of responsibilities assigned to Monitor sounds more like the brief for a governmental department than for a cohesive “independent” fiscal regulator.

Lastly, it is not clear how this complex set of regulatory responsibilities will play out in what is fast becoming an era of permanent austerity in all welfare service budgets. What happens when—a situation in which most European countries and the United States may soon find themselves—there is no longer any light at the end of the fiscal tunnel.7 What will happen when there is not enough money?

The King’s Fund report raises more questions than it resolves, which is, arguably, what any good study should do. In this regard, it makes a useful contribution to an important health policy debate that is far from over.


Cite this as: BMJ 2012;344:e821


  • Provenance and peer review: Commissioned; not externally peer reviewed.