New NHS internal market has potential but too much remains unclear and untested, says the King's Fund

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Government policy is creating an internal market within the NHS but, while it does appear to have addressed some of the key problems associated with the market introduced by the Conservative Government of 1991, it is still unclear whether it can produce real benefits, concludes a King's Fund discussion paper, Can Market Forces be Used for Good?, published today.

The King's Fund director of health policy Jennifer Dixon says:

'The environment is different now. Competition between hospitals and other providers is being based on the quality and the number of operations rather than the price. Information systems are much improved and regulation of providers is tighter.

'But the government is not clear how market forces will motivate health professionals and others working in the NHS to provide better care across all local health care organisations for people with chronic conditions.'

The discussion paper highlights four directions of travel in current government policy: in addition to the existing centrist approach, the government is attempting to use collaboration, devolution and enhancement of market incentives as ways of accelerating the pace of modernisation. While the introduction of foundation hospitals has been the focus of much attention in recent months, the discussion paper notes other major policy developments that may have even more impact. These include the introduction in April of a new system whereby money follows patient choices between possible health providers.

The discussion paper showcases the debate between two senior health care economists: Julian Le Grand of the London School of Economics, who supports the introduction of stronger market incentives to prompt improved performance between hospitals, and Peter Smith of York University, who does not believe the NHS should even experiment with stronger market incentives.

The King's Fund Director of Health Policy Jennifer Dixon asks whether it is possible to combine the best of market disciplines with the planned provision of health care services.

'If we agree that a 'one size fits all' state run model is inappropriate for a modern NHS, then a 'one size fits all' market for secondary care providers, fitting all types of care, is also likely to be inappropriate,' says Jennifer Dixon.

'The implication is that two tracks may now be open for health policy: encouragement by government for a more contestable market for planned hospital services, and a different approach for chronic disease that still needs to be developed.'

Notes to editors

Can Market Forces be Used for Good?, by Jennifer Dixon, Julian Le Grand and Peter Smith, is free to download. Printed copies are available from King's Fund publications on 020 7307 2591, price £6.50.

The discussion paper is part of a series of publications from the King's Fund's Shaping the New NHS programme. Further papers will be published throughout 2003 on: 

  • What are the real costs of more patient choice?
  • Is there a role for an 'arms-length' NHS agency?
  • How will growing demands on chronic care be managed?

For a review copy of Can Market Forces be Used for Good?, or for further information, please contact Daniel Reynolds in the public affairs office on 020 7307 2581 or 07831 554927.Can market forces by