Tearing up the NHS competition rule book

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Few if any of the 2012 reforms generated as much ire as those which established Monitor as a competition regulator and put the NHS’s competition rules (established in softer guise under previous Labour governments) on a statutory footing. Supporters may have hoped that the new rules would eventually become part of the furniture but that looks as far off as ever.

Our briefing on procurement and competition law attempts something rare in the current debate: a purely technical discussion of whether an incoming government could dismantle the current rules given the relationships between UK and EU law. Reader, brace yourself for an unforgiving landscape – hacking through a near impenetrable thicket of treaties, directives, laws, regulations and case law. I will not spoil the process of discovery by revealing the answer here.

A more challenging question is whether tearing up the rule book would be a good thing. Your response to that question will probably depend more on gut feeling than hard data on the role of competition in the NHS. Even the fiercest proponents of competition in health care have to admit that the evidence base is a bit thin and that ideology fills the gap. Of course, the evidence is just as thin that healthcare is best delivered through state monopolies.

If you believe that competition has an important role to play then, like economists from Adam Smith onwards, you probably recognise the need for regulation to protect the competitive playing field. It might be some reassurance that the current competition rules for the NHS stand on the shoulders of 125 years of economic thinking, legislation and case law, from the Sherman Act of 1890 to the Treaty of Rome of 1957.

However, there has always been a fierce debate about the costs and benefits of competition law: how effectively it deters misconduct; whether it inadvertently discourages desirable behaviours; and the costs of compliance. In other sectors, regulators pay consultants to estimate the effect of enforcing competition rules, leading to reassuring headlines that the benefits are many times larger than the costs (as well as some more questionable assumptions in the body of the reports).

In the NHS, David Nicholson’s complaint is that commissioners and providers are spending large sums on competition lawyers to comply with the rules – although we aren’t aware of data to support this. For opponents of competition and the regulations, the current rallying cry is that they prevent the collaboration needed to develop the new models in the NHS five year forward view. Monitor has suggested that such critics simply oppose competition, rather than being genuinely confused about what the rules mean or how to comply with them (HSJ, 29 September 2014).

There is likely to be some hyperbole on both sides – and it’s surely going too far to suggest that the rules prevent the Forward View models of care. However, few people could claim, hand on heart, that they fully understand the section 75 regulations that set out how commissioners should procure NHS services or find it easy to determine when agreements that restrict competition are permissible.

Of course, NHS England and Monitor have an opportunity to silence the critics as they work in partnership with the new vanguard sites. Regulators used to be more willing to give informal 'comfort letters' or to give their blessing publically to particular arrangements. Those practices have fallen out of favour, and with some good reasons, but perhaps they are what’s required here. Nevertheless, there are limits to the regulators’ discretion. Monitor can take a more pragmatic stance on enforcement but it can’t simply disregard the legislation.

All of this will add fuel to the much broader discussion about the costs and benefits of harnessing competition across the broad range of health care services. We can find ways of nurturing competition on the most barren soil – we even have ‘benchmark competition’ between regional water monopolies – but it may not always be worth the bother. In health care we need to count the transaction costs of managing complex relationships through commercial contracts (think Hinchingbrooke), the costs of complying with the rules and the costs of the regulatory system. Given the uncertainty around the tariff and the failure regime in place for failing trusts, devising an appropriate regulatory framework seems as challenging as ever.

All of this might point policy-makers towards a more pragmatic and targeted use of competition in future, even if the tactical use of competition to rouse public providers raises its own challenges. If so, the clamour to change the rules seems set to continue. And so will the debates on how much the government can modify the rules given EU law. You will need to read our paper to find out.


Linda Gardner

Health Visitor,
Comment date
22 March 2015
Competitiveness does not equate with caring and quality. Both go out of the window when the tick box, micro managing ethos is adopted to meet targets and efficiency savings, all in the name of competition.

Bernard Kat

Clinical psychologist,
Comment date
18 March 2015
The rhetoric of competition and choice has not won the hearts and minds of the professionals and other staff who provide healthcare. Arguably it has alienated many of them and led to the loss of something that cannot be bought, which is commitment to the organisation and its mission. Management has clearly been incapable of reinspiring staff in some places, perhaps many places, and no amount of regulation can recreate the vital spark. So what is the point in persisting with an approach which has pathway to failure written all over it?

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