Is the NHS safe in the hands of the Competition Commission?

The publication of the Francis report has dominated the headlines. But alongside the report’s publication, and relatively unnoticed by most people, was another announcement that could also be highly significant for the future of the NHS.

‘The NHS is not a mature, competitive market at this point. The service is in transition’

The Office of Fair Trading’s decision to refer the merger between Bournemouth and Christchurch Hospitals and Poole Hospital foundation trusts to the Competition Commission demonstrates that NHS providers, whether FTs or NHS trusts, will face full scrutiny under the 2002 Enterprise Act when seeking to merge with other trusts.

Regulations governing mergers between NHS organisations are now no different from any other UK merger. This means that the Competition Commission will have the final say on whether trust mergers can proceed or not. This could have profound consequences, especially if this case results in a strong precedent against future mergers.

Trusts are under significant pressure to increase service quality, improve patient experience and guarantee their long-term financial sustainability.

Market in transition

A number of trusts believe they can only meet these challenges by merging with others and there has been a steady stream of such mergers over the last few years. The difference with Bournemouth and Poole is that this is the first merger to be considered under the new regime giving an enhanced role to the competition authorities.

There are more in the pipeline − last month, for example, Frimley Park and Heatherwood and Wexham Park announced they were exploring the possibility of merging.

The challenge for the competition authorities is to work out how to treat these potential mergers given the current market characteristics of the NHS.

‘For some time to come, in complex specialties, there will only be one supplier to choose from: the existing NHS trust’

The NHS is not a mature, competitive market at this point (acknowledging that many never want it to be, either). The service is in transition from a full, publicly operated monopoly to a more market-based system. But it’s not like a recently privatised utility market, where we suddenly have a group of providers ready to effectively compete with each other. It’s a highly managed market and will continue to be so for some time to come.

There is, understandably, little desire for competition on the basis of price, which is what drives competition in most markets. We talk much of “competition based on quality” in the NHS but the reality is that we often don’t have the information or the systems to make this more than an empty phrase at this point.

No magic tricks

In many specialties (eg: accident and emergency or complex tertiary care) and in many geographic areas, there is no viable alternative supplier waiting in the wings.

Where populations are sparse, it is unlikely that organisations will compete to provide services in complex specialties that are highly capital and specialist resource-intensive as it simply doesn’t make economic sense.

For some time to come, in these cases, there will only be one supplier to choose from: the existing NHS trust. In many of these cases there will also have been major public investment in the fixed assets of this trust whose value needs to be maximised. The scale of investment required to reproduce these assets will be a significant barrier to entry.

Some, including the competition authorities, may not like this state of affairs. Proponents of competition have argued, with some justification, that the old model has perpetuated inefficiency and waste, stifled innovation and, most importantly, produced sub-optimal health outcomes for local populations. But we are where we are − no one can magic up a fully competitive market into being overnight.

Taking the best route

The competition authorities need to recognise that trusts operating in this managed market are facing the biggest set of challenges in the history of the NHS and the current pattern of provision is simply unsustainable.

‘It’s no exaggeration to say that for some communities the competition authorities are holding the future of the NHS in their hands’

Mergers are not a universal panacea − big is not always best, as we found at South London Healthcare. But, for some trusts, mergers are the best or only way of meeting those challenges. They offer the best way to provide the 24/7 extension of key services that is required. They provide the only way to reach the critical mass required to create a viable and safe level of consultant staffing in complex specialties. They are the only route to achieving long-term financial sustainability.

For these trusts, the alternative is a rapidly descending spiral of financial deficits, pressure on quality and no means of delivering the improvements needed. For some, the spiral will end in failure and special administration. For their patients, it will lead to a poorer quality of care for an extended period.

So it’s no exaggeration to say that for some communities the competition authorities appear to be holding the future of the NHS in their hands. We can only hope they give due consideration to the wider interests of the patients who rely on NHS services and the taxpayers who pay for them.