Analysis: Is competition in the NHS aimed at cost saving?

While the nation’s attention was focused on Murdoch’s appearance before MPs last week, the Government sneaked out the news that from next April, National Health Service (NHS) services worth £1bn will be opened up to ‘any qualified provider’.

Patients in England are currently given a choice of hospital for non-urgent treatment. Now patients’ choice will be extended into some community and mental health services.  Patients will still need a referral, but they will be able to choose where to go for the service from a list of registered organisations, which includes some private companies. And the NHS will pay for the service they chose.

In a letter to the NHS, the Department of Health (DoH) says this is all part of an effort to meet ‘patient demands for greater choice and control’.

Internal document
But the Bureau has been passed an internal document which outlines the expected impact of this move. And there is a strong suggestion that cost-cutting is the real agenda.

The ‘impact assessment’ report on the extension of any qualified provider is dated July 14 2010, but NHS watchers suggest this is a mistake. There are a number of references to events that took place months after July 2010.

The report starts off echoing the DoH letter with claims that the policy will ‘improve outcomes for patients’, ‘improve responsiveness of services to patients’ and ‘increase patient choice and control’. But it soon becomes clear that money saving is the policy’s real aim.

The section of the document dealing with the supposed benefits of the policy concentrates on ‘procurement cost savings’ and ‘improved efficiency of provision’.

Later on the report argues that: ‘The objective of Any Qualified Provider is … to generate genuine contestability to ensure providers deliver services that are more efficient.’

Cost cutting
The NHS could save millions, the report says. But the figures seem to have been plucked from the air. The policy will supposedly cost £5m over five years, while saving £17.7m on administration costs for commissioners. These savings will somehow be achieved by commissioners pooling ‘procurement resources’ and knowledge. It’s not clear how that total was arrived at,  or why more providers have to be available for that to happen.

On top of this, the document estimates ‘efficiency savings’ of £12m to £17m per year for every £1bn of services procured. The basis for this estimate is a piece of research (Bloom et al, 2010) that found more competition was associated with better management practices.

The report adds that ‘a key assumption for the delivery of innovative services and greater efficiency is that the proposed policy reforms will create credible threats of new providers contesting existing healthcare services’.

What this means is anyone’s guess. But the word ‘threat’ and ‘existing healthcare services’ in the same sentence won’t give much comfort to opponents of the policy such as Unison, which says that any extension of Any Qualified Provider will lead to a privatised, market-driven NHS, where cost becomes a central focus.

And clearly if the points raised in this leaked, internal document are to be believed, there are people in the government who believe that too, though on what basis they can argue costs are to be saved is as yet unclear.