I read a piece last week (I won’t cite it, but others will have seen it), from a doctor working for a private organisation, explaining to skeptics like me why competition was good for the NHS. To do so, he suggested, we think of GPs or hospitals as being like a coffee shop. In the world of coffee shops I don’t have to accept just one kind of coffee from a single provider of it. If I want a coffee, I get to choose where I have my coffee and what kind of coffee I want. If I don’t like a coffee shop, I go to another one. This forces other coffee shops to raise their standards, so everyone gets good coffee.
I think there are a lot of problems with this argument – it demonstrates a lack of understanding as to how markets work. But in many respects, it is the ‘competition is good for public services’ viewpoint that we’ve heard from both Coalition and Labour governments.
Problem number one is that, if I want to set up as a coffee shop, perhaps because I think that existing ones aren’t very good, I have a few costs I need to meet, and perhaps a couple of inspections, but nothing too off-putting. Setting up in healthcare is rather different. I’m either going to have to qualify as a doctor myself, or find people who will work for me that have already done this. At best, if I’m opening a surgery, I might be able to open a nurse-led practice and do away with doctors, but patients tend to still be rather suspicious of this kind of organisation, so for a new entrant, it might be risky. Even assuming I’ve got my professionals I’m going to have to get patients to come to my surgery, and that is going to take time as everyone in the area presently is probably already on someone else’s list. One of Labour’s least well-thought initiatives was to have open-access GP surgeries for commuters which seemed to be perpetually empty because no-one knew they were there, and everyone made appointments with their own GPs instead (or went to accident and emergency).
Things get much worse when it comes to opening your own treatment clinical or hospital as you will have to find much bigger premises than GPs and to typically invest in capital equipment of some kind or another. Even if you can achieve all of that, you’ve then go to get GPs to refer to you – and remember, no referrals, no money in the NHS now (unless you can get the government to back you and force referrals to you in the local health economy).
So the whole entry thing is going to be complicated. It’s going to require deep pockets and patience. But even more difficult, arguably, is exit.
I wrote last week on the problems of allowing public hospitals to fail (http://bit.ly/ri9w1G). But what about private providers (as that’s what I’m presuming we set up). Is it a problem if they go? After all, if my local coffee shop goes bust because it isn’t doing a good job, or because it runs out of money, that’s not the end of the world is it? In fact, it will lead to a more efficient allocation of capital in the long run as the money invested in the coffee shop finds a new, and hopefully, more appropriate home.
The problem is that the market for healthcare isn’t like the one for coffee. If a healthcare provider goes bust then that imposes an immediate cost on everyone who is engaged with it, even if they aren’t been seen or don’t have an appointment right now. If my private GP surgery goes bust, I’ve got to find another GP surgery, and that is typically going to involve me having not only to re-register but also go through various induction checks (weight, blood pressure etc). That’s inconvenient, but inconvenient for every member of the local area who is enrolled – which is also extremely inefficient. For a hospital things are worse – it will mean that patients who are the beds will have to be found others in different hospitals (probably involving the intervention of a local health strategic body of some kind of another), that those with appointments will have to be transferred to, and if you have that kind of volume moving to other places, that will mean having to wait. It will also mean having to re-establish relationships with doctors, and perhaps even having to be rediagnosed. In short, a mess.
So, amongst many other reasons, GP and hospital provision is not like a coffee shop. It’s hard to enter the market, and chaos is likely to ensue in the event of a provider of any scale exiting. That suggests that we need to find other mechanisms for driving improvements in our healthcare systems other than competition, because competition can never be allowed to do its magic in creating a dynamic marketplace.