Competition Vs Collaboration in health

Liberal Democrat leader Nick Clegg Image copyright Getty Images

For most business people, the opposite of competition is not collaboration, or what Nick Clegg wishes to encourage in the NHS in preference to competition, but monopoly - which is characteristic of swathes of health provision in the UK.

The competition that the Tory part of the government wants to see extended in the health service would be an attack on this monopoly provision. But it would be very limited competition compared with conditions in most industries - or indeed in health services around the world that are a long way from being genuine free market.

Under Andrew Lansley's plans, now under review, private and voluntary sector health providers would be able to offer more of their services to commissioning bodies - such as the proposed new GP commissioning groups - as an alternative to what's on offer from NHS hospitals.

Services that would be opened up to such competition would probably be those that are less complex - those that are closer to being commodity services. It has been suggested to me that post-operative care might be amenable to this kind of competition.

As I understand it, what is under consideration is not intense competition on price, because there is evidence from around the world that pure price competition leads to declining standards of health care.

Instead, a tariff would be set and then bids would be invited for the supply of specified medical services subject to that price control.

The idea is not that this would see vast amounts of health treatment moving away from NHS hospitals - but that the hospitals would feel under pressure to improve the quantity and quality of what they do, if they knew that they didn't have a monopoly.

It is the idea that has underpinned the introduction of small private sector competitors to nationalised airlines or telecoms providers in economies that aren't wedded to wholesale privatisation.

That said, the threat of competition is normally only a strong spur to efficiency for an institution that fears it would be allowed to go bust when it loses business. And it is not clear that even the Tory part of the government is ready to confront the popular anger likely to be sparked by the closure of long-established NHS hospitals.

Update 21:00

This question of whether hospitals can go out of business may be the heart of the matter.

As we saw from the recent great banking crisis, competition between institutions that don't fear they'll be permitted by government to fail can lead to those institutions taking crazy risks.

So if the culture of public service in hospitals were to be supplanted to an extent by a culture of risk-taking and competition, that could lead to hospitals behaving recklessly to win business, unless there was a credible threat of closure.