What happened to competition and choice?

30 March 2015

Competition and choice have been the most hotly contested terms of the healthcare debate this Parliament. While the government’s “no decision about me, without me” vision of patient centred care was widely supported, there has been much disagreement over the role of competition in its delivery.

Nearly five years ago, the NHS White Paper laid out reforms to encourage greater diversity of providers and harness the potential of competition to drive improvements and innovation. The Department of Health stated an ambition to create “the largest and most vibrant social enterprise sector in the world”.

This is consistent with a growing body of research in England, including the work of academics such as Propper and Gaynor, which demonstrates that competition has reduced waiting times and patient length of stay, improved the quality of management, increased clinical quality and outcomes, and increased efficiency. The OECD’s 2010 report on efficiency in healthcare noted the need for “reinforcing competitive pressures on providers” in the NHS to deliver greater value for money. The evidence overseas is even more compelling. According to the IMF’s benchmarking report on healthcare systems, “strengthening market mechanisms—increasing patient choice of insurers, allowing greater competition between insurers, relying on a greater degree of private provision, and allowing more competition between providers—is particularly important to contain costs.”

Despite the Coalition’s original ambitions, the results have been disappointing. While spending on non-NHS bodies has risen, it remains a small proportion of total spending. Much of the increase in recent years is attributable to the reforms of the previous Government, with the proportion of spending on private companies and charities rising only marginally from 8.5 per cent to 9.1 per cent.

There have been few new entrants this Parliament. The latest review by Monitor suggests that many historic barriers to these new entrants are still in place, from an unstable commissioning environment to limited data. Analysis by the Office of Health Economics found that private providers face a cost disadvantage equivalent to 12 to 15 per cent of total costs compared to NHS providers due tax policies, pension costs and capital investment costs.

There remains widespread hesitation within the NHS when it comes to the role of competition in procurement. A survey of CCGs in 2012 found that only 50 per cent were planning to make greater use of competition and 30 per cent identified competition as a barrier to change. While the Health and Social Care Act created the means for greater use of competition, analysis by the British Medical Journal found that only 6 per cent of contracts were subject to competitive tender in 2013-14. While a third of tendered contracts in England have been won by private sector providers since April 2013, this represents just 5 per cent of the total value of all contracts.

Another reason for this hesitation is the belief that competition will fragment rather than coordinate care. This Parliament we have seen how competition can work to coordinate care. The move to outcomes based contracts for particular services by a growing number of CCGs has opened up contracts to the provider best placed to coordinate care across a patient pathway, whether public or private. Thanks to this, patients with chronic back pain in Bedfordshire will soon enjoy a much better service. Circle Partnership has been chosen to lead local efforts in Bedfordshire to get different parts of the NHS to work together for all musculo-skeletal services for the next five years. In the same way, Virgin Care will help coordinate care for elderly patients in East Staffordshire over the next seven years.

Competition is about more than just procurement. As Professor Michael Porter of Harvard told Reform’s major conference last year, “Rather than talk about competition and use that word, I would rather use the word choice…patients ought to have a choice. That requires competition… So, in commissioning, I think part of our job is not to just have competitive tenders, but also to ensure through our commissioning that we have a number of good alternatives to give that patient choice.”

This Parliament, however, progress on patient choice has been limited. Surveys show patients consistently value choice. But while the number of patients aware they had a choice of hospitals for their first outpatient appointment had risen from 29 per cent in 2006 to 50 per cent in 2010, this has now stalled. The number of patients recalling being offered such a choice has declined this Parliament from 49 per cent in 2010 to 38 per cent in 2014. In community services progress is even slower, with a review by Monitor finding that 90 per cent of patients did not recall being offered a choice of hearing care provider and fewer than one in four patients were aware that choice was available.

The Five Year Forward View has given clarity to the nature and scale of the change the next Parliament must see. Competition is one lever for reform and improvement, but this Parliament has become the subject of controversial debate. Often competition has been simplified down to a process of tendering or exaggerated up to represent the “privatisation” of the health service. For competition to be a helpful force for change in the future, it must be harnessed as a means of delivering meaningful choice for patients between a number of high quality providers.

Cathy Corrie, Senior Researcher at Reform and William Mosseri-Marlio, Researcher at Reform. This blog follows Reform’s report Progress on NHS reform.

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