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What is the impact of competition reforms in the NHS?

22nd June 2011

After former Labour health secretaries Alan Milburn and Frank Dobson took to the papers and made contradictory claims about the effect competition and private sector involvement have had on the NHS, Full Fact has decided to investigate the issue.

“When I introduced private sector providers, some claimed it would be the end of the health service as we had known it. In fact, they strengthened it.” 
Alan Milburn, former Health Secretary (1999-2003), The Telegraph, 15 June 2011
 
“They justify their stance by peddling the myth that their promotion of private sector hospitals was a success, was the main reason the NHS has improved and good for the taxpayer. Nothing could be further from the truth.” 
Frank Dobson, former Health Secretary (1997-1999), The Guardian, 16 June 2011
 
The prospect of competition in the NHS has been a controversial one since Andrew Lansley’s white paper was published last July. Since the conclusion of the NHS Future Forum, the topic has been in the press again. Writing for The Telegraph last week, former Health Secretary Alan Milburn called the post-Future Forum reform plans “the biggest car crash in NHS history”, in part because competition-promoting clauses of the bill have been scaled back.
 
Analysis
 
Looking at the effects of the introduction of private sector providers during Alan Milburn’s time as Health Secretary, and then subsequent reforms, there is grounds for at least some of the doubts expressed by Mr Dobson.
 
A 2009 study published in the British Medical Journal (BMJ) looked at how reforms to the NHS and socio-economic changes had impacted on waiting times. When assessing those reforms and others introduced by the last Government, the study found that during the last decade waiting times did come down, and that inequality in waiting times did not increase.
 
However Mr Dobson’s assertion that the large increase in NHS funding and improved practices had more of an effect on waiting times than private sector providers is to an extent borne out.
 
The report notes: “Given the plethora of reforms aimed at reducing waiting times introduced between 1997 and 2007 in England, ascribing the drop in waiting times that occurred after 2000 to one policy reform rather than another is difficult. The rise in funding, the rigid government targets, and increased choice and competition are all likely to have played a role together in shortening patients’ waits.”
 
According to the report, the period 2001 to 2004 specifically saw dramatic increases in funding and the implementation of waiting time targets. It also "saw the planting of the seeds of choice and competition and expanded supply as outlined in the NHS plan".
 
The effect these “seeds of choice and competition” have had hasn’t been well studied, but the aforementioned BMJ report considers it “unlikely” that "patients elected to use the private sector and this loss of demand for public provision led to a decrease in waits". A University of Bristol study simlilarly said "relatively little business went to the very small private sector".
 
However broadening out the issue it seems there is some evidence in favour of increased competition in the health service.

The NHS Future Forum’s Choice and Competition recommendations itself references two articles; one from the London School of Economics and the other from the University of Bristol already mentioned. Both of these studies focus on the 2006 NHS reforms and not the reforms put in place during Mr Milburn's tenure as health secretary.

The LSE paper suggests “that hospital competition in markets with fixed prices can lead to improvements in clinical quality,” and the latter similarly found "strong evidence that under a regulated price regime that hospitals engage in quality competition and that the 2006 NHS reforms were successful".

Both studies found that competition leads to improved quality provided that prices are fixed. The importance of fixed prices is emphasised in the LSE paper in a paragraph quoted by the Future Forum: "The evidence suggests that the strengthening of choice and competition for clinical care (with fixed prices) in the NHS over the last few years has improved quality.”

The Future Forum endorsed these conclusions, saying "we welcome the Government’s changes to the Bill to prevent price competition under tariff".

But, as noted by Ben Goldacre, it doesn’t appear as if Mr Lansley initially intended to stick to fixed prices prior to the listening exercise. Paragraph 5.43 of The Operating Framework for the NHS in England 2011/12, published last December, says: “One new flexibility being introduced in 2011/12 is the opportunity for providers to offer services to commissioners at less than the published mandatory tariff price, where both commissioner and provider agree.” This flexibility qualifies as the type of “price and quality competition” that the LSE paper suggests could have a “deleterious impact on quality in health care markets”.

When the Bill amendments are tabled, it will be interesting to note whether this condition of fixed prices is met. If not, the policy would seem to be in opposition with the available evidence.

Conclusion
 
Mr Dobson's criticisms of the claims made for the impact of competition on the health service do seem to have some support in the available scholarship. A number of reports have suggested that the decrease in waiting times likely had more to do with increased funding and improved practices than the introduction of private providers.
 
More broadly, however, there is some evidence to back up claims that competition could lead to improved quality of care, particularly if competition occurs in a fixed-price system.

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