Committed to the market?

Niall Dickson

No-one could accuse this government of inactivity. Unseen by patients, little understood by staff, the health service in England is undergoing far-reaching change on a scale not seen before. The story is complex, the range of reforms bewildering, but at its core is an attempt to bring about a supply side revolution – to demolish the 1948 centrally controlled, state-provided apparatus and replace it with devolved decision making and a range of autonomous organisations responsible for providing services.

Publication:  Insight
Reference:  The King's Fund bi-monthly update, June 2006

Already this has produced significant changes to the health care landscape and more is on the way. NHS patients will increasingly be treated by providers from the independent and voluntary sectors and by foundation trusts who, in theory at least, are autonomous organisations outside the traditional command mechanisms that have traditionally controlled all NHS activity. Sizeable contracts covering diagnostics and elective procedures have been awarded to independent sector providers, and ministers are making warm noises about wanting to foster new, not-for-profit operations, building on the contribution the voluntary sector already makes.

It is strange though that this drive to a supplier market has come about with comparatively little political or public debate, especially given the furore surrounding the birth of foundation trusts. This may have something to do with the ease with which people engage with a physical institution but find it harder to get worked up about transactional concepts, such as incentives and markets, although of course the one can have a major impact on the other.

None of this has been helped by the fact that the sheer number of initiatives has left even the cognoscenti suffering from policy overload. And even if you have mastered them all their cumulative effect remains an intriguing mystery, even to the architects of reform – an alarming thought.

Nevertheless, some clarity of direction is starting to appear. The 'M' word can now be used openly even if some in government remain coy – the aim is to create a supplier market with government control exercised through regulation, price setting and commissioning.

What is less clear – thus far – is precisely how this market will operate, where the real powers of commissioning will lie, how it will be regulated to prevent perverse behaviours and foster innovation while avoiding unacceptable levels of instability and disruption. Likewise we still don’t know how it can be engineered to create more responsive services particularly for the less articulate and the vulnerable as well as the wider public.

The recent devices for bringing about change, (which have delivered but also have real limitations), involve using various forms of performance management allied to an extensive list of centrally determined targets. Some of those familiar instruments of torture will survive, with the Healthcare Commission indicators and benchmarking playing an increasing role. But alongside this, the market, patient choice and competition will be expected to play a part, with commissioning and market management determining the rules and boundaries.

So something is emerging from the mist even if details remain obscured and questions unanswered. And one overriding issue is almost a matter of principle rather than detail – just how committed is the government to the development of this market? To have any chance of success we do need greater clarity on this – ministers have yet to state unequivocally that they are committed to a supplier market as the long-term future of the health service. They will need to do so if they want to continue to attract new players.

Over the next few months at The King's Fund, we are planning to stimulate this debate, encourage better understanding of the opportunities and the pitfalls and to explore possible solutions. We have just released an analysis by Richard Lewis looking at the potential for social enterprise organisations, and today we are publishing the report of an independent working group on the implications of the new supplier market – the group was chaired by Greg Parston of the Office for Public Management and brought together leaders from the NHS, the independent and voluntary sectors. That report, Designing the 'new' NHS: Ideas to make a supplier market in health care work, will be followed up with a breakfast debate later this month, as well as a one-day conference at which health secretary Patricia Hewitt will be a keynote speaker.

Given the financial problems facing the service and the political imperative to demonstrate results, the imperative for the next three years will inevitably be on driving efficiency, reducing variations in performance in areas such as referral rates, emergency admissions and care of long-term conditions. Some of this will require radical service redesign which should have been tackled some time ago. Yet while the current turmoil is a real cause for concern and must be addressed, it should be seen alongside the longer term reform agenda.