The Maynard Doctrine: Does competition work in healthcare?

Professor Alan Maynard wishes you all a Happy New Year, but is basically a realist, and so doesn’t propose to push it. Here he investigates competition and whether it works in healthcare.

Successive governments have become enthusiastic proponents of competition in healthcare in the USA and the UK. The nice issue is whether there is proof that such enthusiasm for and development of competition can be evidenced as having reduced the costs of providing good-quality care patients.

The Coalition government is determined to use competition to improve NHS care. They have empowered Monitor, formerly the mere inspector of Foundation Trusts, to create and sustain competition.

Three questions seem pertinent.

Firstly what is the purpose of competition and what are the conditions that need to be met if it is to be shown to be more efficient than the status quo?

Secondly what can be learnt from previous attempts to enhance competition; the most obvious example of which is the private finance initiative (PFI)?

The third obvious question that needs careful exploration is whether this policy will be dominated by faith or some facts?

Means, not ends
Competition is a means not an end. It is a mechanism which, by engendering rivalry between alterative public and private providers, may drive down costs and / or improves the quality of goods and services delivered to patients.

By putting services up for competitive tender, the established provider is required to make their comparative costs and quality transparent so that the purchaser can compare competing offers of supply.

Once a tender is let to a particular provider, then competition is replaced by co-operation. Thus if we look at Marks and Spencer or Sainsburys they expect their suppliers to be transparent and efficient in performance. Without these characteristics both the buyer (e.g. M&S) and the provider may jeopardise their cash flow and profits.

The analogy in healthcare is similar transparency and co-operation between buyer and provider.

Living in hope
Hopefully, the use of such processes, competitive tendering and collaborative service delivery, will create innovation e.g. replacing expensive doctors with cheaper and highly proficient nurses in aspects of primary care.

Such substitution inevitably will draw attention to NHS wages and conditions of employment. If these are preserved, then the impact of competition will be limited.

But will workers, be they doctors, nurses or ancillaries be prepared to give up NHS employment contracts? This is unlikely; but new market entrants may seek to recruit from outside the NHS pool of workers and in so doing, reduce the number in the healthcare labour force in receipt of NHS pay and conditions.

Some “interesting” labour market conflicts appear inevitable.

And what about evaluation?
The evaluation of “competition” is inevitable difficult. With the private finance initiative (PFI), the tenders of competing public and private providers were “commercial, in confidence”.

Consequently evaluation of PFI has been difficult.

The demand for confidentiality is understandable: its absence would show rivals details of your cost and quality structures and undermine your comparative advantage. But confidentiality makes evaluation very difficult, and likely to be dominated by opinion and polemic.

Should Monitor be obliged to sample these tendering details and evaluate their efficiency as part of their competition responsibilities? Without some such mechanism, the debate about the costs and benefits of competition in health care provision will remain at the level of political jousting, “unconfused” by facts.

But maybe that is its purpose? The use of competition at the margin is a means of unsettling the status quo and making providers much more conscious of their comparative costs, activity levels and outcomes. The development of managerial focus on these aspects of provision is well under way with ‘patient level costing’ systems, initial investment in PROMs and the creation of mortality data monitoring systems by the cardiac surgeons.

Ten years ago, the managerial norms were stay in budget and mind your waiting times. The NHS has largely moved from this macro-perspective to the acknowledgement that micro-management of costs, activity and outcomes is essential to use budgets efficiently and weather the storms of fiscal austerity.

Bringing the medics with you
However, the extent to which this micro-management has progressed in the NHS appears to be very uneven. One reason for this is that the mere identification of cost and quality outliers on the “poor” end of the distribution brings with it some major management problems, in particular how to explore these problems collaboratively with the medical profession in particular.

Such data can ignite clinical concern and interest if handled carefully, but its use as a crude device to merely challenge clinicians can alienate this vital group of potential change agents.

So what can we conclude about the new advocacy of competition?

Firstly, do let someone have the data to evaluate whether it is efficient and let’s not rely on the rhetoric of politicians and other dubious “factless” merchants of cant!

Secondly, expect more tendering - but be aware of the high transactions costs this can incur. This may induce conservatism in using competition, but such behaviour may be inhibited by Monitor if it takes a vigorous pro-competition line consistent with EU rules.

Without doubt, interesting times lie ahead. Any pleas for evaluation will be met by the Department by statements about R&D funding being adequate to facilitate this. Beware this neat response - because if data to inform any evaluation are “confidential”, as with the PFI programme, then evaluation of competition will be equally useless.
A healthy and happy new year to you all!