Evidence is short that competition leads to improved healthcare performance, says Prof Kieran Walshe. Collaboration and service integration is a better policy goal.

For some time – under both this government and its predecessor – there has been a powerful ideological belief that competition leads to improvements in performance in healthcare.

It’s a belief unshaken by the evidence from other countries, which seems to suggest that on the whole competition and markets are pretty hard to make work in the health sector – because healthcare exhibits more or less all the classic symptoms of market failure that economists can name.

Other levers to manage and improve the performance of the health sector seem more promising. Moreover, the international trend towards creating more integrated healthcare delivery systems, focused on providing continuing care for elderly populations with multiple chronic illnesses, runs completely counter to most forms of competition – which can make such integration impossible.

The evidence in this country is pretty underwhelming too. Zack Cooper and colleagues at the LSE have produced some data-crunching studies which conclude that competition in the internal market was associated with small reductions in hospital mortality for acute myocardial infarction in the 2000s.

But association is not causation, AMI mortality is a very crude outcome indicator with many potential biases and confounders and the research doesn’t really explain why competition might reduce mortality, nor does it explore potential adverse consequences.

This research would be judged too flimsy for the National Institute for Health and Clinical Excellence (NICE) to use to make any decision about anything. Yet it was used by Andrew Lansley and many others to make the case for the health reforms in 2010. That legislation faced much less rigorous scrutiny by Parliament of its costs and benefits than any new drug or clinical intervention would face from NICE.

The Coalition Government’s Health Act 2012 embraced competition both within and for the market.  It called for “any willing provider” to be allowed to offer services to NHS patients and it sought to force NHS commissioners to put out to tender whole service areas to allow new providers to take them over and run them. So what has happened? Sensibly, the NHS system has sought to neutralise the most toxic aspects of the Health Act 2012.

The NHS is well practised in pretending to do things that government has told it to do, but which are silly or damaging – and I suspect many Clinical Commissioning Groups are going through the motions. Some, however, have embraced competition for the market with enthusiasm and are putting large service areas out for open tender. It remains to be seen how well this works, but early experience of such changes is not very encouraging. Private providers often seem to bid low, get the contract and then fail to deliver.

There is some emerging evidence about the costs of all this – because competition is not without its costs. Applying competition law to NHS trust mergers like the abortive attempt in Bournemouth and Poole has proven very expensive – estimates of the costs of that failed exercise are hard to come by, but most reckon its upwards of £10 million. Perhaps more important is the cost of delays to necessary service changes and the chilling effect on provider collaboration that the competition regime produces.

Labour Party researchers released some data from Freedom of Interest requests to CCGs and others this week which seem to suggest that the additional costs of tendering services, bidding and getting legal and contractual advice are already about £77 million a year. That may not sound like a lot, but it’s probably an underestimate and it’s the start of what would be much higher costs if competitive tendering of clinical services takes off, as the policy intended.

So what should be done? The most obvious first step is to repeal most of the part of the Health Act 2012, which puts in place the competition architecture, and to allow commissioners to use competitive tendering, not mandate them to do so. The next step is to sort out the fragmented mess that is commissioning – which means a wholesale review of the commissioning and provision functions of NHS England, CCGs and the tariff payment system that governs how providers are paid for the work they do.

Here, the key thing is not to reorganise or restructure NHS organisations – we have all had enough of that – but to change the system rules and functions so that organisations do things differently – like promoting incentives for collaboration across health and social care, service integration and acute care prevention. It might not float the boat for the competition ideologues, but it will do much more to improve services for patients and make better use of scarce NHS resources.