Note – this is an extended version of a blog published at the Health Service Journal and available, behind their membership wall, at http://www.hsj.co.uk/comment/opinion/does-the-cost-of-private-healthcare-exceed-the-benefit/5041403.article).
This piece argues that allowing a mix of public and private provision in the NHS is a really bad idea, as it will fail to improve public healthcare, and probably even make it worse. It uses a framework from the US economist Albert Hirschman, showing that a market of public and private provision has the potential to drive out both mechanisms for improving quality (exit and voice), and suggests we need to think again about how we improve the NHS.
The logic of the NHS reforms appears to be based on driving improvements to healthcare through competition between providers, with commissioners pushing up standards by steering patients to (or perhaps choosing themselves) the best providers. Unlike the ‘internal market’ of the 1990s, the NHS will have a wide range of providers from public, private and not-for-profits competing to get care, and leading to the invisible hand of the market driving up standards.
The private sector (let’s focus on them here, but this could equally include not-for-profits) therefore act as a competitor to public provision, and provide patients with greater choice. However, this is not the only good they are regarded as providing healthcare in England – in an editorial on 26th June Alastair Mclellan also argued in the Health Service Journal that it provides extra capacity to shorten waiting lists, fuels innovation, can teach the NHS lessons about customer service, and provide an alternative career route for health workers in the UK. As such, it would seem that, in line Mclellan’s argument, the NHS benefits from a strong private sector.
I can see the strengths of this argument, but think it isn’t quite right.
The great US economist (see, I’m not always rude about economists) Albert Hirschman wrote a wonderful book called ‘Exit, Voice and Loyalty’ in the late 1960s which is primarily about how organizations recover from the quality of their services declining. The key question he goes about answering is – what kinds of mechanisms can be used to drive quality upwards? Now, the key aim of the current reforms is to improve healthcare, and so I think Hirschman’s work has some key contributions to make.
The two feedback mechanisms Hirschman explores are exit and voice (I won’t deal with loyalty here to keep things as straightforward as possible). Exit is quick, clean and simple – you go to another organization when you’re unhappy with the one you are presently using. It’s the market mechanism, and the one upon which the present reforms are based. Not happy with your GP? Choose another. Bad experience with a hospital? Go somewhere else. Choose the best provider, and with money following choices, the best providers will come through, with those not chosen losing revenue.
Voice is the means by which people make complaints, both individually and collectively, and try to achieve improvements that way. In comparison to exit it is time-consuming, messy and complicated. And, I’m afraid, the NHS has been very bad at it. Wonderful work from Judith Allsop has shown how bad the NHS has been at dealing with complaints. PALS have sometimes made some progress in representing patient voice, but are hugely variable. The NHS isn’t good at voice.
So there we go. Exit works, voice doesn’t, yes? Well, no.
Hirschman shows toxic combinations appearing where you have a mix of public and private provision, and of exit and voice mechanisms. In the case of healthcare (although Hirschman uses schools) this is because patients that choose to go private, either with their own insurance policies or money, reduce the amount of voice that is available to public organizations for driving improvements. Not only that, but those with private insurance policies will often be the most quality-sensitive, and so the ones most willing to engage and complain if they receive poor service. This means that not only does the NHS have less people willing to engage through voice mechanisms such as complaint and patient engagement to drive up care, but that those who have ‘gone private’ will give that feedback to private providers to help them get better instead.
If patients exit from public provision, therefore, it leads not only to a decline in revenue for that service, but also to a decline in feedback to help it get better. But this isn’t all.
Not only does the NHS have patients moving between the public and private sectors, but it also has staff doing the same thing. Now you can’t give 100% commitment to the NHS if you work for both public and private providers (I’m afraid that’s a truism), and so staff working in both are less likely to give the NHS feedback about how it can be made better – they’ve got an outlet for your talents which gives them less time for public healthcare.
So, in summarise so far, patients exiting from the public sector to the private sector reduce the volume of voice available to the NHS, and staff either working in both sectors, or moving from public to private provision, reduces the commitment and capacity of staff to get involved and improve the NHS.
There’s more. NHS organizations are likely to offer comprehensive care if they are hospitals, or have key roles in the local community where they are GP practices (the following may apply to community health services as well). This means it is unlikely that the governnment is going to allow them to go bust – they may be censored by Monitor (or whoever else is regulating them), or they may even have a management and ownership takeover (as per Hinchingbrooke hospital and Circle) but they won’t be allowed to fold. This means that, even if patients do exit from using their services, leading to a loss in revenue, it won’t have the desired effect and get staff to drive up standards. They will work out that they are going to get bail-outs pretty quickly.
Private organizations, in contrast, are extremely vulnerable. The private sector is already in a position where it receives 25% of its revenues from the NHS. NHS budgets are getting tighter, so the total budget for care isn’t going to get any bigger. Recessions are generally bad news for private healthcare – individual subscribers will be thinking hard whether to renew their policies, and people will think twice before stumping up from their own pockets for private treatment. There are real dangers of private providers failing.
Now governments can’t allow all the healthcare providers in a given area to fail, and faced with a choice, they are going to preserve the most important ones. If important providers can’t fold, then they are effectively immune to exit – the whole point of exit is that it is meant to give feedback through reduced revenue, and force improvements as a result. But if exit doesn’t lead to any change (other than getting shouted at by Monitor) then the whole point of trying to drive up standards using it, fails.
What this means is that a combination of public and private provision leads to both exit (patients leaving to the private sector) and voice (patietns and staff staying to try and improve things) being driven out of public provision in a healthcare marketplace. Exit won’t work because public providers will probably get bailed out. Voice will be diminished because of exit to private providers, or staff working for both sectors.
Where does this leave us? I think it leaves us with the difficult task of finding ways of reviving and improving voice as the means of improving the NHS. I think, as I’ve made clear in other postings here, that we need to have clinically-agreed targets which we hold our services to, make increased use of patient feedback which is more routinely gathered and acted upon, but perhaps most importantly, to throw out the idea that market-based reforms can work to improve services. We can improve the NHS without markets. If the logic of this piece is right, we have no choice.