LSE report finds competition improves productivity but highlights danger of private sector 'cherry-picking'
NHS hospitals that compete with each other become more efficient and save money, but making them compete with private healthcare providers leads to "cherry-picking", leaving them treating older and poorer patients, a new study has found.
Patients have shorter stays in hospital before and after surgery in areas where they can choose between a range of NHS hospitals, according to research by academics from the London School of Economics (LSE).
But length of stay has increased in NHS hospitals in places where there are private hospitals, and NHS hospitals in those areas end up treating more older and less well-off patients, partly because of private operators "cherry-picking" easier cases.
The findings are likely to be criticised by opponents of the government's drive to extend competition in the NHS and also by some of its supporters. They were published by the LSE's Centre for Economic Performance before the House of Lords debate on the sections of the health and social care bill that seek to entrench competition much more deeply into the health service in England.
Prof Zack Cooper, who led the study team, said their conclusions offered a mixed bag for ministers and showed that competition in publicly funded healthcare needed to be carefully handled.
"We found two core findings. Clearly competition between NHS hospitals improves productivity, quality and efficiency. But when they opened up competition to private sector in 2008 it didn't improve results," said Cooper.
"This means you need strong regulation. It shows that competition can be positive but it's not a simple policy. You need a regulatory body to make sure providers don't try to compete by avoiding patients but by raising quality."
Cooper added: "This research will make everybody upset. The folks who don't like competition will say they don't like it; the gung-ho types in the private sector will also not like it. But we have to move past public and private debate."
Greater competition, the most controversial of all the coalition's radical NHS proposals, has become the focal point of the deepening political and medical opposition to the bill.
The Liberal Democrat peer Lady Williams last week called for the entire section of the bill on competition to be dropped in order to allay staff fears and protect the service's future.
However, Williams added, the bill – amended that way – should proceed, and the watchdog Monitor should regulate prices paid for medical services and the growing number of semi-independent foundation trust hospitals.
Although ministers have made concessions on some of their other plans, they have shown no signs of backtracking on competition, which David Cameron has repeatedly said will improve standards in the NHS and lead to greater value for money.
Andrew Lansley, his embattled health secretary, and the deputy prime minister, Nick Clegg, have also defended the idea of extending competition between NHS hospitals as vital to the service's modernisation and survival in the face of growing medical and budgetary pressures.
Asked whether the current plans include adequate regulation to address the concerns raised in the report, Cooper said: "After a bumpy start, the government's response to the future forum has clearly addressed the need to limit hospitals' ability to cherry-pick patients. This is a strong step towards creating an equal playing ground between public and private providers.
"Competition creates very clear incentives for hospitals to become more efficient. But this is not a 'one size fits all' policy, where more competition is unambiguously better. Markets in healthcare require strong regulation to get good outcomes," said Cooper, such as preventing private firms picking straightforward cases to minimise those patients' time in hospital and so save money.
Cooper and colleagues Stephen Gibbons, Simon Jones and Alistair McGuire studied the records of more than 1.8 million patient observations in the NHS in England between 2002 and 2010, with a particular focus on patients' length of stay in hospital.
The NHS Institute for Innovation and Improvement, which aims to improve the NHS's productivity, says the amount of time patients spend in hospital from admission until they have had their surgery is a useful measure of hospitals' efficiency. The Guardian
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