A new study, by think tank Civitas, has questioned the achievements of NHS reforms in introducing competition and driving performance.
NHS ‘internal’ or ‘quasi’ market policies in England have aimed to promote competition among providers in the hope of replicating the benefits markets have been known to bring about in the private sector: decreases in cost, and increases in efficiency, quality, innovation, and provider responsiveness.
In 2002, the government introduced a new round of market-based reform within the NHS, which was initially focused on increasing choice for patients, decreasing waiting times, and improving quality of care.
Demand-side changes saw the creation of the primary care trust to perform a purchasing role similar to that of health authorities; and practice-based commissioning, a re-incarnation of GP fundholding but focused on community-based and specialty services rather than elective care. Patients were also given a choice of elective care provider (including non-NHS providers) at the time of referral.
Supply-side changes included the introduction of quasi-autonomous foundation trusts, and the encouragement of provider plurality. Market-based changes to the secondary care payment system took the form of payment by results (PBR).
The study, called The impact of the NHS market, involved a large-scale literature search on the effectiveness of these policies.
So how have the reforms worked? A summary
Patient choice studies show the percentage of patients who recall being offered a choice of hospital for their first outpatient appointment was 47% in March 2009, up from 46% in December 2008 and 30% in June 2006.
Eighty nine percent of patients offered a choice are able to go to the hospital they choose. Choice has contributed to decrease waiting times for elective surgery. There is disagreement among researchers on whether choice has had a positive or negative effect on equity. Fear of the impact of patient choice (rather than actual impacts of patient choice) has led some NHS providers to advertise services to both patients and GPs. In practice, the uptake of choice policy is not yet widely realised, and degree of implementation varies geographically.
The Choose and Book system may not be enabling as much choice as expected regarding appointment date and time and number of providers offered; GPs may use the system as an online tool to make referrals as usual. Patients and GPs desire more information on provider quality.
Neither strong theoretical nor empirical support exists on the benefits of secondary care provider competition; studies exist citing both improved and harmful outcomes.
Contestability, or the threat of competition, may be driving up efficiency but at the expense of inter-professional and inter-organisational collaboration. Competition is fostering development of more business-like cultures in NHS hospitals. Various impacts of competition policy have been seen on health economies, such as attraction of top quality nursing staff to private providers, confusion of PCTs and NHS providers over the nature of their relationships, and resentment among medical professionals toward local ISTCs regarding lack of patient treatment data.
ISTCs provide equal if not better outcomes than NHS providers, and receive higher levels of patient satisfaction; however, they treat a healthier case-mix of patients than NHS providers (as was intended by their contracts). ISTCs may have negative effects on NHS surgical training.
Increased autonomy over certain governance and finance decisions may not currently be a strong enough incentive to encourage further applications for foundation trust status. Many lay governors and directors of foundation trusts are finding their roles ambiguous and difficult to define. Many perceive that they have made little impact on the decisions of the trusts to date.
However, evidence does show gradual increased involvement of both governors and the public in their activities. Foundation trusts have generally performed well financially and have generated surpluses; and they have been high performers in routine NHS financial and quality measures when compared to NHS trusts.
Surpluses have, however, been modest in relation to total revenue; and many were among the highest performing NHS trusts even before status conversion. Little robust evidence exists to suggest foundation trusts are using their new status to innovate in a significant way.
Payment by Results has been fully embedded across the NHS since 2008. Unit costs fell quicker in hospitals once PbR was implemented, although administration costs increased. Hospital activity increased as PbR was implemented. No association has been found between PbR and quality of care. Where increases in efficiency were found post 2002 (for example, the increase in number of elective surgery patients treated as day cases, decrease in the length of inpatient stays, and reductions in avoidable admissions), authors note other policies and trends have also encouraged such results.
Many hospitals have improved financial management and have a better understanding of patient costs since PbR implementation, yet a substantial agenda of cost improvement remains for the NHS. Mixed evidence exists on prevalence of hospitals ‘upcoding’ procedures in order to get paid more.
The fact that the PbR tariff for a procedure is set at average cost encourages hospitals to become ‘average’ rather than aiming to operate at the level of the most efficient hospitals. Being paid per case through PbR produces adverse incentives for hospitals to increase activity beyond affordable levels and possibly induce demand inappropriately.
Practice-based commissioning implementation is slowly advancing. It is being led by a few enthusiastic practices working with supportive PCTs. Variation exists in the quality of local relationships and levels of PCT support; with resources and experience often limited at both PBC and PCT level. Incentives and infrastructure used to support PBC are not sufficient to engage most GPs in commissioning. And many PBC consortia are more interested in self-provision than commissioning new services.
PCTs lack the necessary skills to purchase effectively; poor local management of resources was noted. PCTs do not always take full advantage of their potential power in the purchaser/provider relationship. Only weak incentives exist for PCT managers to break historical patterns of purchasing. The World Class Commissioning programme is too new for its impact to be determined.
In conclusion
Many researchers found difficulty in attributing improvements specifically to market-based reform. Improvements in NHS care, such as major reductions in waiting times, have more often been attributed to ‘targets and terror’ together with increased spending, than to competition. Lack of a stable policy environment de-motivates staff. As yet, there is a lack of patient and public understanding and support for market-based reform. And many desired outcomes have not yet been achieved, such as innovative models of patient care.
Although there are presently very few studies that evaluate the cumulative effects of market reform, there is an abundance of research on the effect of individual policies. While evidence on the impact on quality of care is mixed, research has found attributable impacts in the form of reduced waiting times, improved access for patients, and increased provider efficiency.
However, potential confounding factors (such as simultaneous increases in funding and pressure from enforced targets), along with weak monitoring strategies, make attribution to market policies alone questionable.
The market reforms of the past 20 years have had unmistakable effects on the culture of the NHS. In particular, the introduction of competition has developed a system-wide awareness of costs, efficiency and accountability. However, the reforms have not been proven to bring about the beneficial outcomes that classical economic theory predicts of markets, including provider responsiveness to patients and purchasers; large-scale cost reduction; and innovation in service provision.
Many researchers have attributed this to the failure to create a true, functioning market, as well as a lack of a stable policy environment to inspire staff commitment and enthusiasm. The available research indicates that the NHS may have found itself in a lose-lose situation - having taken on the extra costs of competition without experiencing the benefits.