If the NHS is not a market, why do we even regulate it like one? In all the policy debates, this question has been either accidentally or deliberately overlooked, but it’s highly relevant in terms of who has captured the agenda. An alien perusing through ‘The Socialist Health Association blog” might reasonably be forgiven for thinking that we are all on some giant retainer from the management consultants, and we’re paid to shill on a daily basis about the joys of the market in the NHS. Markets mean diverting money from frontline care to wasteful. repeated, unnecessary work, substituting the NHS instead  with entities that have to pay their way like businesses and, like businesses, can fail. Needs-based planning, once the hallmark of the NHS in England, could ultimately turn into the car-crash of market failure. As can be seen from charting the numerous make-overs by the NHS (foe example the McKinsey’s-led ‘transformation in 1974), solutions are sought from  external consultants and turnaround teams using an antiquated management starting point that the NHS is a massive failure. It is held that the NHS is a “scandalously inefficient “and can “increase productivity”, and hence the “less for more” or “thinking smarter” approach. The system is in fact in distress in that a market-led approach is totally unsuitable for the NHS, and this leads to downstream ‘does not compute’ errors in its regulation.

In contrast to Wales and Scotland, England has established hospitals and services as competing trusts or firms operating in a market; competition has replaced the mechanisms which enabled health authorities to monitor and respond and direct resources to the needs of the populations that are being served. Markets create winners and losers, and for any health system that is concerned about preventing widening social inequality this is a ‘moral anethema’. It is intuitvely logical  that if the Department of Health in England commissions private management consultants that derive their profits from markets you will get market solutions. Even the late Baroness Thatcher made a good effort in the 80’s with her attempt to open the door to the market but even she feared the backlash from the public. “Thatcher 2 the revenge” is having a another go. During their years in opposition, the Tories developed a systematic plan to finally break up the service. This breaking up of the service is not only a prerequisite for parcelling up the NHS into ‘bite size’ chunks convenient for privatisation, but is also a professional regulatory nightmare. Key to their strategy was the need to shift public opinion. Firstly, they embarked on a costly and dangerous fragmentation of health commissioning. Secondly. they implemented a tight financial squeeze, starving the service of critical resources. This is in no way linked to the general state of the economy, as measured by the CPI or GDP, and seems to be yet another manifestation of ‘austerity first, think later‘. However, it is critical in understanding how a business model can have profit as a primary goal, not the safety of patients. It seems that the most important element of their plan was the hostile propaganda campaign against the service with the specific aim of undermining the public’s faith in the NHS. UNISON recognised this tactic and throughout the campaign against the Health and Social Care Act (2012), the union exposed the Tories use of the right wing media to denigrate health delivery in England.

And so it came to pass that successive governments were successful in producing a “NHS Frankenstein”: under this system, the purchase and provision of healthcare in the UK was split up, with government-funded GP fundholders “purchasing” healthcare from NHS Trusts and District Health Authorities, who competed against one another for the GPs’ custom. There was nothing to gain here. The market reorganisation itself gave the NHS and patients and taxpayers nothing but higher cost. Critics of quasi-markets argue that the ‘market’ led to the phenomenon of “cream skimming” notorious in other private sector activities (see for example a previous blogpost of mine). The final denouement of course comes from the destination of the transition we are now embarked upon; this unelected move will take us up to an estimated 31% of the budget going on admin. and wastage (as beautifully articulated by the Himmelstein and Woolhandler papers). The late Lord Stockton, himself a “Tory Grandee“, would be quaking in his boots from the ‘selling off the family silver” in a bid to execute the current McKinsey efficiency savings (“family silver” in this context could include Circle flogging off Hinchingbrooke Car Park, though there are plenty of other examples).

As if this construction of the cack-handed NHS non-market were not simply bad enough, there is a rude awakening that there can be no more light touch regulation for the NHS as it’s too dangerous. Examples are too numerous to mention, for example activity which has led nurses being struck off in the private sector (Winterbourne) and the public sector (Mid Staffs). One cannot comprehend how it has to come be that numerous healthcare regulators (such as the Health Ombudsman, GMC, NMC and CQC) often reduplicate the same cases, but still end up concluding that such cases are not worth investigating. Another emergent problem now is that there are mutations of healthcare regulators in this rapidly evolving ecosystem, and in a way the landscape of the regulator (and the relative allocation of scant resources) is an artifact of “regulatory capture“. Regulatory capture occurs when a regulatory agency, created to act in the public interest, instead advances the commercial or special concerns of interest groups that dominate the industry or sector it is charged with regulating. Regulatory capture is a form of government failure, as it can act as an encouragement for firms to produce negative externalities. The agencies are called “captured agencies”. Except here, the danger is that the NHS is not simply an “industry”, and if one puts one’s regulatory eggs only into the economic regulatory basket, one can end up missing both the point AND the target.

Fast forward, onto this week where the Competition Commission (CC) is looking into a situation where just five private-sector hospital operators – General Healthcare Group, Nuffield Health Hospitals, Ramsay Health Care UK, Spire Healthcare and HCA – dominate this £5bn market. However, not content with struggling to meet domestic regulatory demands of the NHS, the present Government is wishing to unleash the rules of international free trade on the NHS behind closed doors. The irony is that the financial crash is seen as a failure in international regulation in the financial services. The reasonable response of this was to encourage financial regulators here in London to talk to the regulators in other jurisdictions such as New York. As a response to the failure of the free market, aka the ‘financial crash’, public sector nurses are now being redundant in a protacted set of nights of long knives. And yet it is international regulation of private healthcare providers, albeit working in a NHS disguise, which could hold the key to all this, and this is indeed alluded to in the recent Berwick report on patient safety. These key players in this latest UK transaction are very well  known. For example, it has been alleged that “Netcare” was warned by a top specialist to stop Israeli “tourist transplants” but the company dismissed his advice and hid behind a legal façade.“Kidneygate” is the long-running saga of how—between about 2000 and 2003—about 200 Israeli patients with kidney disease were brought to South Africa to receive organs from living donors who were presented as their relatives. To explain, I mention “Netcare” here as it was reported on 24 January 2013 that

“Listed private hospital group Netcare said on Thursday it had bought UK property investor Brockton Capital’s interests in the UK’s biggest private hospital group, General Healthcare Group (GHG), for £11m.”

This is of big news in the corporate world.  To make sense of it, you have to realise that international entities are often to be found lurking under a different name in certain jurisdictions: for example Walmart is better known as Asda here in England.

As another example, despite numerous internal reviews that turned up a widespread pattern of unnecessary cardiology procedures being performed at many of its hospitals, it is alleged that the giant HCA corporation did little to inform regulators, payers, or patients about the problem, according to an investigative report in the New York Times by Reed Abelson and Julie Creswell. The legal issues involving these companies are in a different jurisdiction to that of ours, our jurisdiction being England and Wales, and therefore it is important to state  that they, strictly speaking, have nothing to do with the current matter for consideration by the Competition Commission, where one assumes that such matters may have been disclosed in the due diligence of the investigation part of the regulatory process. Whatever one’s precise approach, the history can be indeed rather inglorious, the deeper you investigate.

This makes it all the more important that law and regulation has to be ‘effective’. This doesn’t necessarily mean that there has to be more of it. Given that this NHS ‘market’ is hugely distorted anyway, it seems insulting for public health policy experts to think about how best to regulate this non-market. Indeed, the lawyers have had difficulty anyway in dealing with traditional economic markets. Section 1 of the 1890 US Sherman act provide: “Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade […] is hereby declared to be illegal”. The prohibition contains no exemptions, and was seen as a ‘per se’ prohibition with extensive application areas. In order to narrow down its scope, US-Courts developed two separate approaches for determining whether or not agreements restrain competition, a ‘per se’ rule and the ‘rule of reason’. Meanwhile, the European Court of Justice assert that in situations where agreements do not have as object the restriction of competition, its “consequences” need to be analysed in order to know whether competition is distorted to an “appreciable extent”. Notwithstanding that, ‘undertakings’ between diifferent private providers that ‘distort’ the market can be considered unlawful under Article 101 TFEU, but the issue is that the economic regulation of this in other sectors is incredibly difficult to prove (take for example, ‘rudimentary’ petrol price fixing).

Berwick recently opined that:

“Delivering safe care is first and foremost the responsibility of providers, but having no regulation is not an option.The current NHS regulatory system is bewildering in its complexity and prone to both overlaps of remit and gaps between different agencies. It should be simplified. A high level of coherence is required across the system, with clear and fully aligned goals and incentives focused on the interests of patients at every level. All bodies involved in the oversight of health care providers need to actively avoid the creation of ‘priority thickets’ where providers become increasingly unclear about what they are doing and why, and where the goals they are supposed to achieve compete, conflict, or fail to cohere. Safety and quality stand the best chance when all of the drivers in the system – financial incentives, policies, regulatory strategies, use of competition, commissioning decisions, training, and organisational and professional norms – point in the same direction.”

Yes – they point in the same direction possibly, but it is inescapable that a failure to regulate the economic activity of the non-market in the National Health Service will force the best efforts of the professional regulators to implode. Regulators, including economic regulators here and across the pond, as well as all professional regulators domestically, need now to engage in making the NHS safe rather than simply reputation management of the NHS. It has been remarked that communication of regulatory information in the financial sector across different countries had previously been poor, necessitating better information sharing across jurisdictions (see for example this document regarding Basel). This requires a shift in culture, yet another one, to share information. The NHS is undergoing a series of critical ‘stress tests’ in regulation, and, if this regulation goes wrong, the impact could be our medical equivalent of the global financial crash. One good reason, I feel, why we must particularly try to regulate the NHS as a market even though it is not one is because the new NHS approach could introduce a component of fraud and corruption like never before.

You have a market (sort of). Now regulate it properly, or get rid of it.