Myth #4: “There is not enough competition and choice in the NHS”

In an earlier article I tackled the common misconception that the NHS is an under-reformed sacred cow. Here I look at a related argument that crops up in similar discourse about the challenges in driving innovation and change in the health service: the view that the NHS is in trouble because there is not enough competition and choice, and that more of it would improve outcomes.

As with several of the other arguments made about the NHS, this is not necessarily completely wrong, but it is incomplete and underpowered.

There are good reasons why patients should be given choice on most aspects of their care: people have agency in other parts of their life, and rightly expect it in health care as well. This article focuses on one particular aspect of choice – choice of provider. The ability of patients to choose their provider is more widespread in competitive systems, as monopoly providers tend not to want to carry the costs of spare capacity or additional alternative services.

Significant provider competition for patients is found in health care systems in the USA, Germany, the Netherlands and France. England, Norway, Sweden and Italy have introduced elements of it over time.

What difference does it make?

The question is whether choice and competition make a significant difference to the performance of the health system. There is good reason to think, based on economic theory, that some competition and choice for planned care and diagnostics will drive more responsive and efficient provision.

However, care needs to be taken that the competition is on clinical quality rather than price, as price competition can seriously affect quality. Maria Goddard of York University suggests that it’s the way that competition is applied and regulated which determines its impact.

The evidence of the impact of competition on access and waiting times is mixed and, where positive, seems not to be particularly strong. See, for example, this review by the Health Foundation, and a McKinsey paper that also found mixed evidence for the effects of competition on quality.

Competitive pressure and patient choice have helped to improve access to care while controlling costs in Sweden. Combining choice and activity-based funding has also been important in reducing excessive waiting times in the Netherlands.  

A recent policy brief from the European Observatory on Health Systems and Policies confirms the generally limited nature of the evidence, however, and the extent to which it is very context dependent. The authors suggest that closeness to providers remains a key driver of choice, and this obviously limits the extent to which there is competition. 

Different services bring different issues

There is usually less direct patient choice in emergency services, as distance and decisions made by ambulance services will be major determinants of use. This means that any impact of competition on quality can be mediated by general competitive strategies that providers adopt, rather than direct consumer pressure.

It is possible there could be some positive spillover effects from service areas where the impact of competition is more pronounced or because competition has a positive impact on management quality, as it puts a premium on improving quality and processes.

There is some evidence for competition driving quality in primary care, but the need for continuity of care means for some patients that there are substantial disincentives to switch.

Countries with more open markets for general practice often limit the number of times a year that a patient can switch, to maintain continuity and reduce the administrative burden of frequent changes. Distance, the costs of switching and the difficulty of knowing if the new practice is any better make exercising choice more difficult, although the development of phone-based models such as GP at Hand may overcome some of these barriers for patients who require less face-to-face care.

How easy would it be to create a competitive market?

One question that needs to be addressed is about the capacity of the system to actually create a sufficiently competitive market to drive results.

This is an issue for any discussions about adopting social insurance (which I have addressed in a previous article) or giving tax breaks for private insurance (which I will address in a future article). Competition is achievable in state-run systems, but it may be easier to implement in private ones as there needs to be more spare capacity, payers with more flexibility, and more tolerance for hospitals going bankrupt.

A lot of private sector work is currently done by NHS consultants working part-time. The UK has low numbers of staff, beds and diagnostic imaging equipment across the NHS, and many private hospitals are limited in the type of patients they can care for and the work they can do. This means that a big increase in capacity would be needed to create sufficient headroom for competition.

The prominence given to this issue seems to reflect a tendency to see the NHS through the prism of planned care, where competition can be effective. It is much less clear that competition would have a major impact outside these areas, or, as with planned care and diagnostics, how the costs of creating the capacity and transaction systems to create competition match the possible benefits.