The strange death of the NHS market?

CHPI | July 31, 2017 | Editorials, Featured

The June 2017 Conservative manifesto contained a statement which looks like marking the end of a long-running and highly charged debate about how healthcare should be delivered. According to the document, the internal market in the NHS can fail ‘to act in the interests of patients and creates costly bureaucracy’.(( In the view of commentator Paul Mason this statement vindicates all those who have pointed out the inability of markets to deliver integrated, high-quality healthcare.((

As a think-tank which was set up with the explicit intention of questioning the then dominant market orthodoxy, over the past four years the CHPI has set out the evidence on why markets fail to produce good health and social care.

We have collected and analysed data on the costs of the huge range of contracts with private providers which local NHS organisations have to (but cannot) monitor (53,000), the costs of even nominally monitoring these contracts (£700m)the overall cost of administering the market (£4.5bn), the potential for fraud to emerge in market-based transactions, and the negative impact of competition on the quality of health and social care. We have also pointed out that while patient choice is an important part of any healthcare system it cannot be used to drive improvements in quality and efficiency; and we have shown that market-based healthcare systems are poorly equipped to deal with major medical emergencies. Not least, our work on patient safety in private hospitals has highlighted the extent to which the private hospital sector does not provide an exemplar of efficiency but is instead highly dependent on the safety-net of the NHS.

This critique has emerged from the evidence of the application of market-based policies to the NHS for over 30 years, beginning with the NHS and Community Care Act 1991 under John Major, which introduced the purchaser-provider split and established hospital trusts. This was followed under the Blair government by the formation of independent Foundation Trusts and ‘payment by results’, through to the Coalition’s Health and Social Care Act whereby the local NHS was fragmented into 211 Clinical Commissioning Groups or CCGs, mandated to strike contracts with ‘any qualified [healthcare] provider’, whether public or private.

So do we feel vindicated, as Paul Mason suggests? The statement in the Conservative manifesto echoes the evidence which Simon Stevens gave to the Public Accounts Committee, where he announced that the purchaser-provider split – whereby CCGs purchase healthcare, and hospitals and other services compete with one another to provide it – was over.(( But it is more than a matter of announcements. The end of the market is increasingly being reflected in changes on the ground. The Health Service Journal reports that payment by results – the mechanism by which ‘money follows the patient’ – is increasingly being replaced at local level by the use of block contracts, whereby commissioners arrange to pay hospitals for healthcare on the basis of the predicted needs of the local population.(( As public health commentators and others have been saying for years, this allows for much more sophisticated planning than simply paying on demand. Another concrete sign of the end of the market is the drive towards the creation of Accountable Care Organisations, whereby the split between commissioners of services, and hospitals as service providers, is abolished in favour of geography-based planning for defined populations.

Slowly but surely the entire infrastructure which underpinned the Lansley reforms is being dismantled: the plan to turn all hospitals into Foundation Trusts is no more((; Monitor, the economic regulator of the new market has been quietly merged with the former Trust Development Authority and now does little policing of ‘anti-competitive practices’; while the roll-out of personal budgets to patients has also come to a halt.

In other words a consensus is clearly emerging in both rhetoric and practice that pitting commissioners against providers, and providers against other providers, generates waste, not efficiency, and does nothing to drive up the quality of care. When faced with extreme austerity Simon Stevens has not turned to patient choice and competition as solutions to the problem of keeping the NHS afloat, but to integration, their opposite.

Those who – with the assistance of corporate-backed think-tanks – advocated strongly that markets would drive improvements in healthcare will not be called to account for the costs of this failed experiment. But the waste, the constant re-organisation, the undermining of the public sector ethos and the diversion of scarce resources away from patient care which they promoted stand plainly on the public record and will not be quickly forgotten.

Yet while the fallacies of market dogma have been exposed, and many key policies based on it have been abandoned, the NHS in 2017 remains highly dependent on the market and the private sector. Around 20% of all of NHS expenditure on clinical services goes out of the NHS through contracting arrangements with private bodies, and this is increasing year on year, with no indication of a decision to reverse the trend. The social care market is almost entirely provided by the private sector under a series of contracts with local authorities and private individuals, and while it is widely agreed to be on the brink of collapse, there is as yet no indication of a political will to undo the damage. Moreover, as we will show in a forthcoming report, the profits reaped by the PFI companies running NHS hospitals are consuming a larger and larger proportion of the overall health budget.

Those who are sceptical about the rhetoric around Accountable Care Organisations envisaged in the currently unfolding Sustainable and Transformation Plans (STPs) are thus right to be suspicious about their potential for handing over large parts of this work to international healthcare companies; indeed, the plans have been drawn up and are being implemented in close collaboration with private consultancy firms.

The challenge now is to ensure that whatever policy changes emerge from the abandonment of the Lansley project are rooted firmly in the requirements of the public interest and public accountability. At this stage, the move away from a market-based system is happening as a result of an implicit agreement between the Chief Executive of the NHS and the Secretary of State for Health, without any parliamentary debate or sanction, and is underpinned by purely informal new roles and structures at local level which have been created at the Chief Executive’s behest. Until new legislation sets out statutory roles and responsibilities and clear mechanisms of accountability the NHS will continue to be vulnerable to the adoption of policies which serve the interests of the private health industry rather than the founding principles of the NHS. The need for the work to which the CHPI is committed remains as great as ever.

Support Our Work

CHPI is the only truly independent health think-tank dedicated to the founding principles of the NHS. To continue our work keeping the public interest at the centre of health and social care policy, we need your help.

Please support CHPI so we can continue to impact the health policy debate.

About the author

Avatar photo


You can find out more about who makes up the CHPI on our People pageSee all posts by CHPI