Is there evidence that competition in healthcare is a good thing? Yes
BMJ 2011; 343 doi: https://doi.org/10.1136/bmj.d4136 (Published 05 July 2011) Cite this as: BMJ 2011;343:d4136All rapid responses
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The NHS is seen as an "unopened oyster". [1]
The NHS budget is huge, and with its assured flow of tax revenues,
the NHS has long been of interest, intense interest, to the corporate
health industry, not least to the huge American Health Maintenance
Organisation (HMO) UnitedHealth. And it's not just the Americans or
UnitedHealth: many companies from around the globe, some like Atos Origin,
a French software multi-national with no healthcare background, [2] are
scurrying round ... in a competitive frenzy ... to be in on the act ... to
grab the pearls ... and run.
[1] News: US healthcare industry sees NHS as "unopened oyster," BMA
conference told Rebecca Coombes.
BMJ 2004;329:1305 doi:10.1136/bmj.329.7478.1305 (Published 2 December
2004).
http://www.bmj.com/content/329/7478/1305.1.full
[2] Feature: Medical Work Assessments: Well enough to work? Margaret
McCartney.
BMJ 2011;342:doi:10.1136/bmj.d599 (Published 2 February 2011).
http://www.bmj.com/content/342/bmj.d599.full
Competing interests: No competing interests
Dr Reynolds' 'rapid response' conflates two distinct policy issues:
whether to have provider competition, and how to pay doctors. As a number
of countries demonstrate, it is possible to have provider competition
without having to depend on the doctor payment schemes that she
criticises. Alternatives to fee-for-service range from performance-related
incentives, bundled payments, gain sharing, pay-for-value, through to
capitation. All can be found internationally, operating alongside patient
choice and provider competition.
Her response further confuses two distinct reimbursement design
questions: how to pay doctors, and how to fund hospitals. Rightly or
wrongly, the English NHS' move to a moderated pay-for-output hospital
funding mechanism has not altered the mostly salaried payments received by
NHS hospital specialists. [1]
On the first question of how doctors are paid, Dr Reynolds is
probably right that were the NHS to amend doctors' contracts so as to pay
them principally for the volume of treatments they provided, supply might
go up - but so might the amount of clinically inappropriate care. However
(as far as I'm aware) that is not what is being proposed. And of course
various alternative payment models have their own risks, and can lead to
the opposite problem of patients being undertreated. [2] That is why many
health care systems - including British general practice - have been
evolving towards more 'hybrid' or 'blended' physician payment models.
As to the second question regarding hospital funding mechanisms, in
the case of the English NHS during the 2000s, an overarching policy goal
was to cut patients' waiting times for diagnosis and treatment. This was
supported by new funding to expand elective surgery, while needing to
limit the risk of unit price inflation in a hitherto capacity constrained
system. A fixed-unit-price hospital reimbursement system that rewarded
hospitals based on elective output was arguably well suited to squaring
that circle. Indeed, English NHS waiting times subsequently fell to their
lowest levels on record. This positive result was consistent with
empirical research from the OECD examining why some countries - such as
Britain - had long waiting times and others did not. It found that
"evidence from this and other studies suggests that activity-based funding
for hospitals may also help reduce waiting times." [3]
However as the NHS now enters its most sustained budget crunch, the
English Department of Health is dampening some of those hospital volume
incentives in the 'payment by results' system, and rightly examining
supplementary payment models for chronic health conditions.
Like it or not, incentives in health care - of one kind or another -
are in practice both ubiquitous and unavoidable. The challenge is
carefully to harness them in support of improved quality, efficiency and
equity.
References:
1. One consequence is that NHS hospitals still mostly pay their
surgeons based on salaried sessions, whereas since 1948 those same
surgeons have mostly been paid (higher) fee-for-service rates for their
private patients. Since NHS hospitals in effect compete with private
practice for their surgeons' marginal time, this illustrates the
importance of not ignoring the wider labour market in designing NHS
incentives.
2. Robinson, J. C. (2001), Theory and Practice in the Design of
Physician Payment Incentives. Milbank Quarterly, 79: 149-177.
3. Siciliani, L. and J. Hurst (2003), "Explaining Waiting Times
Variations for Elective Surgery Across OECD Countries", OECD Health
Working Papers, No. 7, OECD.
Competing interests: see original article
Dr Lucy Reynold is clear and concise.
Do the Presidents of the various Royal Colleges and Faculties feel like
supporting her - or opposing her?
JK Anand
Peterborough
Competing interests: NHS patient
The current NHS reform is delineated in papers from 1987-1988 (1,2),
by Conservatives John Redwood and Oliver Letwin (both ex-directors of
Rothschilds' Privatisation Unit (3)), David Willetts (4) (inventor of
PFI(5)) and John Peet (6). These documents assert that competition would
benefit UK healthcare, but cite no evidence.
Now a government including Redwood, Letwin and Willetts is
implementing their plans. In 2005 Lansley declared that "maximising
competition" was the "first guiding principle of NHS reform"(7), and in
2011 he continues to prescribe competition as the panacea for all NHS ills
(8).
And a quarter-century after these competition-based reforms were
conceived, supporters are justifying them by citing a few recent papers
purporting to show that competition improves health outcomes, from a body
of literature which as a whole remains inconclusive (8). These are
observational studies for which confounding may explain the postulated
links between documented outcomes and competition. The case that
competition improves health outcomes remains unproven.
This competition-based reform requires roll-out of activity-based
fees-for-service (misnamed "payment by results"). Doctors' activity levels
rise somewhat if financial incentives are given (10,11) but this does not
map to better health outcomes. If doctors are underprovided in a
community, more activity may improve outcomes. If they are overprovided,
for instance when there is much competition, then their need to make a
decent living incentivises overtreatment (12), and poorer outcomes ensue
(13).
Using financial gain as a proxy incentive to treat medical need
causes both under- and overtreatment. Resources get diverted away from
those that need treatment but cannot pay, and toward those that can pay
but don't need it.
Welfare economics provides the theoretical justification for
promoting competition, but Arrow (14) explained in 1963 why this model
fits healthcare so poorly. The worst problem is information asymmetry.
Because the patient consults the doctor for advice and then accepts the
treatment that the doctor recommends, the supplier controls the demand
curve (15).
The consequence of information asymmetry combined with fees-for-
service is supplier-induced demand, which absorbed 10-12% of 2009 US
healthcare spending (16).
The phenomenon of supplier-induced demand disproves the theory that
patient choice in a competitive market limits costs and raises quality.
As George Bernard Shaw remarked (17):
"That any sane nation, having observed that you could provide for the
supply of bread by giving bakers a pecuniary interest in baking for you,
should go on to give a surgeon a pecuniary interest in cutting off your
leg is enough to make one despair of political humanity."
1. Letwin O, Redwood J. Britain's Biggest Enterprise: ideas for
radical reform of the NHS. CPS Policy Challenge. Centre for Policy
Studies. 1988
2. Redwood J. In sickness and in health: managing change in the NHS.
Policy Study No 95. Centre for Policy Studies. 1988
3. http://www.spectator.co.uk/spectator/thisweek/9515/letwin-
intellectual.thtml
4. Goldsmith M, Willetts D. Managed Health Care: a new system for a
better health service. CPS Policy Challenge. Centre for Policy Studies.
1988
5. Willetts D. The opportunities for private funding in the NHS. The
Social Market Foundation. 1993
6. Peet J. Healthy competition: how to improve the NHS. Policy Study
No 86. Centre for Policy Studies. 1987
7. Editor's blog Thursday 26 May 2011: Text of Labour shadow health
secretary John Healey's RSM speech. Health Policy Insight
http://www.healthpolicyinsight.com/?q=node/1124
8. Johnstone R. Lansley stands by his NHS competition plans
http://www.publicfinance.co.uk/news/2011/05/lansley-stands-by-his-nhs-
competition-plans/
9. Martin Gaynor M, Moreno?Serra R, Propper C. Death by Market
Power: Reform, Competition and Patient Outcomes in the National Health
Service. July 2010. Working Paper No. 10/242. Centre for Market and Public
Organisation. Bristol Institute of Public Affairs, University of Bristol.
http://www.bristol.ac.uk/cmpo/publications/papers/2010/wp242.pdf
10. Farrar S, Yi D, Sutton M, Chalkley M, Sussex J, Scott A.Has
payment by results affected the way that English hospitals provide care?
Difference-in-differences analysis. BMJ 2009; 339:b3047
11. Gaynor M, Pauly MV. 1990, "Compensation and Productivity in
Partnerships: Evidence From Medical Group Practice," Journal of Political
Economy, 98, 544-573.
12. Bennett D, Lauderdale TS, Hung CL. Competing Doctors, Antibiotic
Use, and Antibiotic Resistance in Taiwan. September 16, 2008.
http://chess.uchicago.edu/events/hew/fall08/bennett.pdf
13. Gawande A. The cost conundrum. Annals of Medicine. The New
Yorker.
http://www.newyorker.com/reporting/2009/06/01/090601fa_fact_gawande?curr...
14. Arrow, Kenneth J. (1963). "Uncertainty and the Welfare Economics
of Medical Care". American Economic Review, 53 (5)., pp. 941-973
15. Wennberg JE, Barnes BA, Zubkoff M. Professional uncertainty and
the problem of supplier-induced demand. Soc Sci Med 1982;16(7):811-24.
PMID 7100999.
16. The Economist. Waste Measurements: US healthcare spending. 17
June 2011. http://www.economist.com/blogs/dailychart/2011/06/us-health-
care-spending, plus 2009 OECD spending figures and 2010 US Census data
17. Shaw GB. Preface on doctors. The doctor's dilemma: a tragedy.
Baltimore: Penguin, 1913: 9.
Competing interests: No competing interests
I note
that Simon Stevens makes reference to Richard Horton's apparent enthusiasm
for US-style competitive practices as a means of improving health services
back home. [1] The full quote from the Smith Institute round-table
discussion (2007) goes,
"How do you drive improvement? It really is an important question.
Looking at the USA, I think the competition for patients really is driving
huge improvements, and the implication is that that has to be the way to
improve the NHS. Some of the best centres in the USA are no longer able to
compete on outcome; the doctors are all so good that what they are
competing on is the patient experience. So all the advertising is on the
basis of experience: it is not choice, it is experience. So the way they
are improving care is using competition between different doctors, and
that is what we have to introduce."
However, I feel sure that Simon Stevens will have disagreed with
Richard Horton when he goes on to say,
"Unfortunately, it comes back to this rigid professional self-
interest: that if you introduce competition, doctor against doctor, it
undermines the power that doctors have. In the NHS that ridiculous
attitude needs to be tackled and some government, some time, is going to
have to defeat the doctors. Unfortunately, now is a bad moment. It is
really a bad moment because doctors are in complete disarray and they
don't know how to get out of the corner."
[1] Simon Stevens, President, Global Health, UnitedHealth Group.
'Author's Response', BMJ Rapid Responses, 13th July 2011.
http://www.bmj.com/content/343/bmj.d4136.full/reply#bmj_el_266684
Competing interests: No competing interests
Responses to date mainly focus on three themes: the role of patient
choice, the pursuit of improved NHS productivity, and the available
evidence on NHS provider competition.
First, patient choice. Dr Tomlinson suggests that choice will not be
valued or used by vulnerable patients. This is an empirical question. In
terms of the offer of choice, the British Social Attitudes Survey [1] and
more recent survey research from the Picker Institute, RAND and the Kings
Fund found that most people want provider choice, and "older respondents,
those with no qualifications, and those from mixed and non-white
backgrounds were more likely to value choice. The results show there is
some intrinsic value in offering patients a choice of provider, and that
GPs' perceptions that it is younger, more educated patients who want
choice are misguided." [2] As to the uptake of provider choice, the
evidence of a socio-economic gradient is mixed, but GPs' active support
for their patients exercising appropriate choices could probably help
reduce it. [3,4]
But even if some patients do choose to exercise choice at a greater
rate than others, is that problematic? Economic theory suggests that if
even a small proportion of patients are willing to move provider that
could benefit those who remain, inasmuch as it sends a signal to the
original provider about the need to improve. Alternatively, Dr Buch is
concerned that those who don't choose, or make the wrong choice, might
face "fatal" consequences if they remain at a substandard local provider.
That concern underlines the importance of transparent quality measurement
as well as strong independent regulation of minimum standards. It does
not, however, justify the ethically questionable proposition that patients
who would otherwise have chosen to be treated elsewhere should be forced
to get worse quality care locally.
Second, on productivity, Dr Tomlinson rightly points out the need to
avoid improving technical efficiency ('doing things right') at the expense
of allocative efficiency ('doing the right things'). This risk can be
reduced by the adoption of appropriate productivity measures, combined
with sophisticated clinically-informed commissioning. That said, the NHS
is now facing the most sustained budget squeeze in its history, and there
is longstanding evidence of major productivity variations across the NHS -
and hence opportunity for improvement [5]. In a tax-funded globally-
budgeted health service, failing to act on these opportunities will mean
patients being unnecessarily denied appropriate care that the NHS could
otherwise have funded.
Finally, as regards evidence, Dr Buch rightly argues for the
desirability of more peer-reviewed empirical research on the effects of
provider competition. Fortunately relevant studies continue to appear in
peer reviewed journals [6,7], and others will soon [8]. In the meantime,
neither he nor other 'rapid respondents' cite any quantitative UK economic
research - peer reviewed or otherwise. Dr Struthers quotes from a book
review by Lancet editor Richard Horton, but Dr Horton is on record as
saying "Looking at the USA, I think the competition for patients really is
driving huge improvements, and the implication is that that has to be the
way to improve the NHS...the way they are improving care is using
competition between different doctors, and that is what we have to
introduce." [9] Dr Buch goes on to make the ad hominem assertion that
academic researchers Drs Bloom, Cooper, Gaynor, Gibbons, Jones, McGuire,
Pike, Propper, van Reenen, Seiler and Serro are "ideologically aligned",
apparently on the grounds that they have each authored empirical research
showing positive effects from NHS competition. Since on this definition
everyone who produces such research results would be deemed "ideological",
this appears to be a circular argument.
References
1. Appleby J, Phillips M "The NHS: satisfied now?" in Park A,
Curtice J, Thomson K, Phillips M, Clery E (eds) "British Social Attitudes:
The 25th Report" National Centre for Social Research. London: Sage
Publications, 2009
2. Dixon A, Robertson R, Appleby J, Burge P, Devlin N, Magee H.
"Patient choice - how patients choose and providers respond". London:
Kings Fund, 2010
3. Coulter A, Le Maistre N, Henderson L. "Patients experience of
choosing where to undergo surgical treatment: evaluation of London patient
choice scheme." Oxford: Picker Institute Europe, 2005
4. Dixon et al, op. cit.
5. See, for example, successive reports by the Audit Commission
www.audit-commission.gov.uk/health/Pages/default.aspx
6. Robinson JC. "Hospitals respond to Medicare payment shortfalls by
both shifting costs and cutting them, based on market concentration",
Health Affairs, July 2011 vol. 30 no. 7 1265-1271
http://content.healthaffairs.org/content/30/7/1265.abstract
7. Robinson JC. "Hospital market concentration, pricing and
profitability in orthopedic surgery and interventional cardiology", Am J
Manag Care 2011;17(6):e241-e248
http://www.ajmc.com/articles/AJMC_11jun_Robinson_e241_248
8. Cooper Z, Gibbons S, Jones S, McGuire A. "Does Hospital
Competition Save Lives? Evidence from the English Patient Choice Reforms",
Economic Journal, (forthcoming)
9. The Smith Institute. "Closing the gap: a round table discussion",
2007 page 13
http://www.newstatesman.com/pdf/NHS%20funding%20supplement%20July%202007...
Competing interests: see original article
Through the Blair years and before, huge vultures could be seen
dipping and diving in frenzied competition high above the NHS. Those
circling privateers are keenly aware of the rich pickings to be had ...
from an NHS weakened by the "diseased political corpus." The Tory
politicians' invitation to the feast has merely been postponed: the
Lancet's editor in chief thinks we should be sceptical that any real
change in direction is likely. [1] Dr Richard Horton goes on to say,
"Although there might well be a pause in plans for privatisation,
there is no serious counterproposal to strengthen the NHS without the
entry of private providers. The only source of political opposition to
private markets in healthcare can come from Labour. But as one shadow
spokesman said to me recently, Labour opposition leaders are like
"invertebrate slugs". Labour in opposition is too inexperienced, too busy
defending its legacy, too frightened to offer policies that might sound
like spending commitments, too bankrupt to think beyond shoring up its own
survival, and too lacking in imagination to bring in independent policy
experts to strengthen its thinking."
[1] The Plot Against the NHS by Colin Leys and Stewart Player -
review. Authors anatomise 'the diseased political corpus that has begun to
infect the NHS with a commercial ethos'. Richard Horton, The Guardian,
Saturday 21 May 2011
http://www.guardian.co.uk/society/2011/may/22/plot-against-nhs-leys-review
Competing interests: A former Party member profoundly disappointed with New Labour
It is without any doubt that competition which is healthy and with a
clear vision is always beneficial. This holds true for competetion in any
sphere of life including healthcare.
It is essential that there is a clear goal as to why one is
competing. Any competition in a healthy spirit is always mutually
rewarding.
As far as the healthcare setting is concerned this certainly would lead to
improvement in services, better provison of care and patient
satisfaction. The competition should not merely be to grab the funding but
to survive as the fittest!
Competing interests: No competing interests
Simon Stevens (BMJ 2011 343:d4136doi:10.1136/bmj.d4136) fails to
convince this reader that competition in healthcare provision drives up
standards, and for several reasons beyond those cited in Nicholas Mays'
critique (BMJ 2011;343:d4205).
The majority, if not all, of Mr. Stevens' evidence is non-peer
reviewed, and comes from authors ideologically aligned to the expansion of
choice and competition in healthcare; as Mr. Mays points out, even these
studies show only modest improvements in hospitals' performance that
cannot be ascribed solely to competition, coming as they did in times of
such confounding variables as rising income and effective public health
measures.
Furthermore, in saying that 'competition gives NHS patients choices,'
Mr. Stevens ignores the counterfactual; that those unable to exercise said
choice, either through being ill-informed or (as is likely when requiring
healthcare) ill health, will increasingly get left behind. Healthcare is
not like markets in other consumer goods - if you choose the worse of two
competing shirt makers, you might get a bad shirt; choose the worse of two
healthcare providers, assuming ordinary patients can tell one from the
other, and the consequences could well be fatal. This is precisely why
weakening the duty-based role of the Secretary of State is the most
dangerous element of the current Health and Social Care Bill as it risks
opening up inequalities of access to healthcare without recourse to an
elected Parliamentarian.
Finally, Mr. Stevens cites the USA as an example of how healthcare
providers competing for business is a good thing; sadly for him and the
tens of millions of un- and under-insured Americans, increased transaction
costs and prioritising profits over patients has meant spiralling bills
and worsening outcomes for the majority; hardly a ringing endorsement for
rolling out a competitive market in the NHS.
Competing interests: No competing interests
Professional concern
In 1981 I joined a practice with 10,500 patients in a small town in
Devon. In 2006 I retired from this practice of 10,700 patients. Not much
increase and not very successful from a market orientated perspective.
There were two other practices in town which grew as the town grew
and we never sought to increase our numbers. However we did seek to offer
the best service in town. We gave same day appointment and provide good
clinical and pastoral care and also sought to maximise our income from
items of service.
We welcomed computerisation since now we knew which babies had not
been vaccinated just as we welcomed Qof so we knew what had not been
achieved. We sailed into top score due to the cohesion of all who worked
there and the hard work of our manager. We were glad to have progressed
and be paid for it.
However Competition? Did we really compete as the market demands? We
held joint clinical meetings with the other practice and discussed how to
improve services (cooperation and sharing of market sensitive data like
list sizes). As we received more data from the PCT we never sought to be
the top scorer, just in front of most. Financial incentives for
prescribing were welcome but did 5000 pounds in a budget of over 1,000,000
pounds really make us use more generics when we had been doing this for
years before the PCT encouraged it. Data certainly caused us to ponder
where we were going, practice comparison charts were powerful and audit
helped.
From distant shores I wonder why 'competition' has such a
stranglehold. Is this because that is the language that business
understands? Did Simon Stevens and Labour determine policy because all
they saw were rundown practices in London (and not wonder why many of the
doctors therein were burnt out). 'I just want a good local hospital' for
Plymouthians means they want their Derriford Hospital to be run
professionally and not that they want it to compete with Exeter. Their
overriding choice is a better Derriford Hospital. They do not want their
hip done in Shepton Mallet because some private provider has skimmed off
easy cases and screwed out a contract where they get paid for performing
or not. Rarely they wanted me to refer them to a specialist in London or
Leicester because that was the person we reckoned was the best person for
their problem. No money changed hands from one area to another.
So were we the best? For some yes, for some no. Patients had choice
within the practice and within the town. However what drove our ever
improving care of our patients was a quiet professionalism fostered by our
peers, by becoming a training practice and by the royal college and helped
by IT. Competition? No I don't think so, that was left to the cricket
field.
Competing interests: No competing interests