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If you’re going to create competition you have to ensure a level playing field. There was an interesting point debated in the House of Commons last week – The Public Accounts Committee convened to discuss The Achievement of Foundation Trust Status by providers of secondary care.
A key part of the reforms is the introduction of competition, and any qualified provider will be able to bid to be a provider of healthcare services in a particular area or across a particular speciality. Tariff levels the playing field, all providers bid to provide a service mainly on quality, given the commissioner will pay a standard tariff price to any provider of healthcare services. But what if an NHS hospital trust has an unusually high cost base, what if a hospital trust is grappling with the costs of a PFI, and what if tariff (even with regional uplifts) * activity does not provide enough income for that trust to be financially viable? They could fail if we get a failure regime, or as David Nicholson eventually conceded in the discussion – they could ultimately get a subsidy.
As the recent National Audit Office report stated: “Interventions using public money to increase aspirants’ apparent viability would also risk distorting competition and undermining the policy objective to increase hospitals’ financial sustainability.”
Translation: trusts that receive a subsidy are being propped up and might therefore be more competitive in future. Market economics goes out of the window, and if I was a private provider of healthcare losing out on bids to provide services because an NHS competitor was being subsidised then I might feel pretty aggrieved. I’d be interested in people’s thoughts.
Steve Melber is Head of Healthcare at Interim Partners.
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November 9th, 2011 at 8:44 am
There is a major flaw in the assumption that tariff provides a level playing field. Examples have been quoted of different issues faced by FTs and NHS Trusts.
The biggest issue faced by FTs is the way in which the DH manipulates tariffs to suit its own purposes.
Having worked in a large FT and produced a long term financial model that demonstrated viability over 5 years based on assumptions on activity levels, productivity in the order of 3.5% per cent per annum, DH adjusted market forces factors which cost the organisation £6m; increased clinical negligence premiums nationally by 80% over 2 years and stopped the payment for emergency re-admissions, which defied all logic, thereby introducing significant financial pressures which has led to the increasing number of acute trusts struggling to balance their books.
As if that wasn’t enough, DH has been promising reform of the funding of medical training but has failed to come to a decision despite years of time and effort from senior clinicians, HR and finance staff . The vast majority of secondary care hospitals provide the necessary training for medical students, nurses and allied health care professionals as part of their day to day business. For teaching hospitals, there is substantial investment in infrastructure that is not adequately funded by the DH and consequently has to be covered by generating other income or reducing costs. Particularly for medical students, this can have a significant effect on productivity, e.g. through operating theatres, when surgeons and anaesthetists are undertaking training of medical students, which has a significant impact on their cases per list
These costs are not borne by the private sector and whilst i am sure they will come up with alternative examples, the fundamental question is whether hospitals should have to compete given that the NHS is a public service.
greater emphasis on the quality of care and patient experience would be a far beter motivation than wasting valuable public resources on tendering , procurement and legal fees that rarely fails to provide added value from the change in service
One only has to see the documentary on Southern Cross to see that the motivation for private companies is profit at the expense of patient care.