Competition law can give the NHS the edge

Evidence of conflict between competition law and common sense in the NHS is everywhere, it seems. As one think tank, the King’s Fund, puts it: “The application of competition law to NHS mergers and service reconfigurations is blocking and delaying service changes that both providers and commissioners see as necessary and urgent.”

‘Each of the UK’s 40 or so health economies has different challenges. One size will not fit all.’

These concerns may reflect a misunderstanding of what competition law offers and how it works. What if competition law provides an opportunity, as well as a threat? I would go so far as to argue that competition law need not hinder, and could play a positive supporting role to the work of NHS leaders − both commissioners and providers.

Competition law is based on a simple idea. It prohibits two things − throwing your weight around and clubbing together − and only when the effect of doing so is to undermine choice and competition. If you’re in a position to dictate terms to those around you, proceed carefully: the risk of causing economic harm is very high. And when you cooperate, take care to do so in a way that makes things better, not worse.

What remains (and is more complex) is understanding how these two principles work in different contexts. Generally, the evidence is critical; every case depends on its facts and hard-and-fast precedents are rare. And the “effects” are seen from the users’ perspective − in health, patients.

Basic principles

Both of these factors have consequences, and competition lawyers can sometimes be unhelpfully glib about them. Talk of the need for “evidence” can sound like an attack on the role of professional judgement (why should NHS leaders gather evidence of the effects of their actions on patients? Isn’t that what they think about already?).

And being focused on the effects on patients (consumers) means competition law doesn’t address trade-offs (such as between patients and taxpayers) that require political accountability.

These two basic principles turn out to be surprisingly useful in predicting outcomes in complex organisational systems, including, perhaps, the NHS. The health service, like any large-scale effort bringing together people and money to deliver complex services, isn’t static but evolves as a result of the choices of people working within it and those affected by it.

Competition law asks: what effect will a proposed change − such as an offered contract, a service restructuring, a cooperative alliance or a merger − have on patient outcomes? Often, the effect will be to make things better. But if those changes undermine or side-steps patient choice, that implies the risk of significant problems. Reducing those risks can have positive effects for patients.

Cooperation is essential

A fact specific and evidence led approach makes sense. Cooperation is deeply embedded in the NHS and is essential to achieve, say, more integrated care or better patient pathways. As everyone knows, NHS reform is happening on many fronts, with progress being made where it can be and many things are being tried. Not everything will work as expected. Each of the UK’s 40 or so health economies has different challenges. One size will not fit all.

‘I want to challenge the idea that understanding competition is a distraction imposed from outside with little value to the real life struggle of NHS leaders’

These challenges are organisational, financial and managerial, as well as clinical. For example, reducing costs is expected to entail providers sharing some functions − pathology, for example − while keeping others separate. That means building processes to keep cooperative and individual activities distinct.

And in commissioning, clinical commissioning groups deploy commercial judgements as well as clinical understanding. What services should be in scope? Should contracts be longer (creating stability) or shorter (enabling change)? Competition law offers NHS leaders additional tools as they deal with these questions.

This analysis needs to be grounded in the reality of the sector, both in theory and practice. There may be limits to what patient choice can achieve. No sector is more complex than health. An uncritical application of what has worked elsewhere is unhelpful. And the terminology could be better − talk of “market power” in the context of cash strapped NHS hospitals can seem like a grim joke.

Challenge misconceptions

I want to challenge, however, the idea that understanding competition − for example, mapping ebbs and flows of demand resulting from patient choice − is a distraction imposed from outside with little value to the real life struggle of NHS leaders to improve patient care. Is there is nothing to be gained from thinking about how choice, whether it is by patients, providers and commissioners, changes a local health economy over time?  

We are a long way from digesting the implications of the decision by the Competition Commission to block the merger of Bournemouth and Poole foundation trusts. But panic seems unwarranted.

The commission’s starting point was: what effect will this merger have on patients? The trusts’ plans were considered. Patients and GPs were asked what they thought. GP referral patterns were mapped out, across each specialty. The outcome was not a general answer about all mergers, but a specific, evidence based finding. It offers a playbook for future mergers. The response of the regulators has been measured and sensible, increasing the help they will provide to those considering merging in future. 

There is widespread support for the idea that judgements about NHS reform should made by the leaders of the NHS themselves. As a citizen, that seems reassuring and right to me. as a competition lawyer, it seems consistent with the advisory role that we can and do play, right across the economy.

David Stewart is a partner at Towerhouse Consulting LLP, a law firm advising the regulated sectors. He was previously competition and markets director at Monitor and competition policy director at Ofcom