What kind of market is the NHS market?

This week a merger between two hospitals in Dorset was blocked by the competition commission, on the grounds that the move would be anti-competitive (http://www.bbc.co.uk/news/uk-england-dorset-24559766). The two hospitals aren’t happy, especially Poole hospital which is apparently in a pretty bad financial state, and was depending upon the merger acting as a kind of financial bail-out for it. What are we to make of this? What can it tell us about the emergent NHS market?

Well, as I keep on complaining, the NHS is not a market. Using the term ‘market’ suggests that we are talking about something like perfect competition, a theoretical model never observed in the real world, in which there are lots of small purchasers, lots of small providers, freedom of entry and exit from the market from both purchasers and providers, and it is cheap and easy to get in and out. There is also perfect information about what is going on, and participants that make highly rational decisions.

Now others (Alan Maynard especially) like to remind me that expecting the world to be this way is unrealistic. And that’s right. But in talking about ‘markets’ we are using the legitimacy of an idea (the perfect market) to underwrite a bunch of arrangements that are nothing like this.

Because over here in the real world, the NHS isn’t like this. We have large providers (both public and private) where we can’t let the public providers exit or go bust (although we might let private managers or even private providers take them over). We have private providers who can duck out, but we’ve still got to provide care so public providers will end up having to take their place (breast implants, for example). We have lots of small purchasers, but when they are up against big providers they will appear weak and disjointed and have little power. And where we have to pay for something complicated, like care, we may need planning and co-ordination – whether it is long-term care for the elderly (which is especially worrying given this (http://www.bbc.co.uk/news/uk-england-sussex-24579496)) or for cancer care.

Now look, I like competition in markets where I think I can make sensible choices. I like it that Samsung and Apple are driving each other on to make me better gadgets. But I still have no idea how I’m supposed to make choices in the healthcare market, and I don’t think my GP does either (and s/he is meant to be doing the commissioning on my behalf). We have put in place a system of buying and selling care that labels some providers as being effectively bankrupt when they may actually be providing really good care, and little or no sensible evidence showing all the effort and expense of having the market mechanism in place actually justified its costs.

So – back to Dorset. Should the merger have been blocked? Well, there’s very little evidence showing that mergers work, anytime, ever. They take years to get over, and just about never live up to the claims made to justify them. Mergers are generally a bad idea. But equally it is ridiculous to force hospitals to merge because they are in financial trouble. Surely the question we should be asking is whether they are providing a good service to their local people? Are they providing high standards of treatment? Are they giving good care? If they are, shouldn’t we be paying for their services rather than forcing them into dubious merger manoeuvres on the grounds of market legitimacies that are based on a theoretical model rather than anything in the real world? And if they aren’t, shouldn’t we be finding ways of driving up their standards rather than assuming somehow that better management can fix it?

The NHS ‘market’ isn’t a market in any kind of sense by which we usually use the term. To use the term market is to confer dynamism and innovation upon institutional arrangements that run directly contrary to providing the long-term, stable, and open-ended care that we need. More importantly, pretending the NHS is a market conceals the need to think very differently about how we can support care by organising things differently, and how we can arrange finances to support good care, rather than forcing hospitals to try and merge to avoid running out of money and being forced into private hands. That way madness lies.


2 Responses to “What kind of market is the NHS market?”

  1. steve black Says:

    The trouble with theoretical objections to markets in health is that they don’t apply to any other real markets either but somehow those markets usually work. In other words: the success of markets is an empirical observation not a theoretical one (and the theory is bollocks anyway).

    The reason (or one of the reasons) why some elements of markets were introduced into the NHS was to create at least some incentive for providers to improve their efficiency (an incentive that doesn’t exist in a centralised system or where the providers have too much klout. Patient choice among providers is a useful mechanism to do that.

    But the design doesn’t make patients the people who pay. It is a common objection to markets in the NHS that patients are not consumers and that, treating them that way, commodifies healthcare and puts those with more money in stronger positions. But it isn’t the patients who pay, it is the commissioners. This, imperfectly, creates a market with two different sets of buyers: the patients don’t have to worry about money but can pressure providers to improve quality; the commissioners should have enough financial clout to rebalance the system away from provider dominance (and provider driven demand, which exists in the NHS nearly as much as it seems to in the rotten US system where it is blamed on “markets” not just provider dominance).

    Central planning and provider dominance are a very bad combination for both cost and quality of care. England has a very small number of hospital trusts (other countries have far more small specialist hospitals, a point recently raised by John Appleby in a Kings Fund debate). And the direction of travel seems to be to try to fix problems by merging them into even fewer entities. But mergers seem like an excuse to cover up internal problems by creating stronger, more monopolistic providers rather than to solve core operational problems.

    For example, I’ve seen clinical audit analysis from the proposed merger that suggested that, of the current patients in beds, 20% should never have been admitted and 50% shouldn’t still be there (to be fair, these are probably not particularly bad compared to the rest of the NHS). This suggest that a little operational improvement could have saved the trusts far more that a merger and done a better job for patients. In a serious market system we would allow trusts who failed to implement these sorts of internal improvements close (and, even in the current NHS in England, we could still get reasonable access to care for the population except in a handful of peripheral, low-population areas).

    What seems to dominate the debate at the moment is the assumption that money is everything. We hate markets because we don’t want to restrict care for financial reasons. Fair point, but what if better organised care was also cheaper? Keeping people in hospital longer than they need is bad for them, but most hospitals do it. Admitting people who could better be treated in A&E or at home is both bad for the patient and wasteful. The point of a market built on commissioner financial power and patient choice is to drive hospitals to improve the quality AND the efficiency of care. We know markets are good at that in other contexts (when they are well designed); why not try then in the NHS?

    • Andrew Pollard Says:

      No. Competition is for smart phones, tins of beans and paying customers not the quasi-quasi-marketplace of non-paying customers and essential rather than optional services. Large hospitals and care providers shouldn’t gbe allowed to go out of business. This idea that if everything just got more efficient then it would be great is drivel, must hospitals are massively efficient and years ahead of more developed market-based health systems like the US. The hospital I work in turns the beds around so quick the sheets don’t get cold, there’s not really much room to work with on that. If we spent less money supporting the huge bureaucracy required to support your capitalist fantasy THEN we’d be able to deliver more care

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