New NHS market needs stronger and more effective regulation but no super-regulator, says The King's Fund report

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The government must deliver a new system of regulation for the emerging NHS market if it is to protect patient services and manage potential and actual financial failure among hospitals and other health care providers.

A new report published today by The King's Fund, based on a comparative study of health regulation in Germany, New Zealand, the Netherlands and the Autonomous Community of Catalonia in Spain, identifies useful pointers for the English NHS ahead of the Department of Health's wide-ranging review of regulation, expected later this month.

How to Regulate Health Care in England?: An international perspective found a range of different approaches to the regulation of health care, but concludes that there is no single model that could be imported to England. However, it did find lessons for the ways in which quality and economic regulation are carried out.

It found the NHS' systems for quality regulation to be as sophisticated as those in the other four countries, but says that quality regulation, currently undertaken by the Healthcare Commission, could be refined by using a combination of contracts, licensing and quality accreditation - similar to the approach taken in Catalonia and the ambulatory care sector in New Zealand. The report goes on to advocate the creation of a single licensing process for all providers of NHS-funded care.

The report found no examples of 'super-regulation' spanning economic and quality regulation in any of the four countries and suggests that an independent super-regulator for the NHS may not be the best approach. Instead, it advocates a separate independent economic regulator for health responsible for regulating all providers of NHS services and overseeing the market for services that will continue to develop in the NHS over the next few years. This would mirror the role of the new Health Care Authority in the Netherlands.

The report argues that strengthening economic regulation is needed to manage market entry, monitor and enforce the right kind of competitive relationships between providers, and ensure a more effective regime is in place to deal with hospital failure. This would apply to all providers, whether publicly owned or private. Such an approach would maintain the separation between economic regulation and the role of the foundation trust regulator Monitor, which would act to protect public assets as a form of 'public shareholder'. A separate regulator, currently the Healthcare Commission, should continue to regulate quality of care, the report suggests.

Report author Dr Richard Lewis said:

'The NHS in England faces a number of regulatory challenges presented by the greater use of independent providers, government decentralisation and the reliance on market-style incentives. The new market in health has developed at such a pace that the existing regulatory framework is inconsistent and not fit-for-purpose. We need strong and sophisticated regulation to ensure the most vulnerable patients get equal access to care, while also reducing the risks of avoidable financial failure.

'Economic regulation is the most pressing area of concern, which needs most work - especially with regards to what sort of market we want in health care. If we want a highly competitive market, as the government appears to, then competition will need to be regulated to ensure that monopolies or large providers are not abusing a dominant position in the market. Similarly, commissioners will need to be regulated to ensure that they encourage competition and do not try to fix the market in favour of established providers.'

The report also warns that as private involvement in health care becomes more prevalent, the NHS will need to ensure that powers exist to 'take over' private assets if there is a need to ensure continuity of service following market failures, particularly where near monopolies of provision exist in certain areas. It says this could be achieved in the NHS contractually or through regulatory powers - the latter being the case with privatised utilities where powers of 'special administration' were given to the different sector regulators. The report found that the Health Care Authority in the Netherlands is developing a bankruptcy regime to prepare for hospital failure, and advocates a similar regime for the NHS.

The King's Fund Chief Executive Niall Dickson said:

'The NHS in England is going through a programme of significant reform with a range of increasingly autonomous providers from the public and private sectors competing and at times collaborating to deliver services to patients. While this market is developing, the question of how best to regulate it is becoming more pressing. One of the biggest challenges over the next year will be to ensure the right regulatory architecture is in place.

'We need to balance the danger of over-regulation, which will stifle innovation, and an unbridled market, which could deliver chaos and inequity. A clearer regulatory framework will help to achieve this. This is vital if we are to avoid market failures that directly affect patients and the quality of care they receive.'

Read the report: How to regulate health care in England? An international perspective

Notes to editors

  1. For further information, interviews or a copy of the report, please contact the King’s Fund Press and Public Affairs Office on 020 7307 2585, or 07831 554927. An ISDN line is available for interviews on 020 7637 0185.
  2. How to Regulate Health Care in England: An international perspective, by Richard Lewis, Arturo Alvarez-Rosete and Nicholas Mays, is free to download on The King's Fund website.
  3. In 2005, the Department of Health began a review of regulation in health and social care (excluding professional regulation). This was overseen by a Regulation Review Panel chaired by David Currie, the chairman of Ofcom, the independent regulator of telecoms. It was intended, among other things, to define objectives for regulation, examine the required regulatory functions and put forward how these should be implemented.
  4. The NHS has seen an increase in the number of regulatory bodies that oversee care since 1997. The creation of the Healthcare Commission, which regulates quality of care, and Monitor, which licenses independent NHS foundation trusts and regulates their financial performance and governance, has transferred significant power away from government, the report says.
  5. The King’s Fund is an independent charitable foundation working for better health, especially in London. We carry out research, policy analysis and development activities, working on our own, in partnerships, and through funding. We are a major resource to people working in health and social care, offering leadership development programmes; conferences; seminars and workshops; publications; information and library services; and conference and meeting facilities.