Liz’s speech on “The competitive hospital”

I recently delivered a speech at a seminar for the think tank REFORM as part of my job as a shadow health minister. 


The argument I want to make today is that the title of this session – ‘the competitive hospital’ – is really the wrong issue to be focusing on.

Because the future of high quality, value for money healthcare

  • is about integration more than competition; and
  • about improving primary and community services, rather than focusing predominantly on secondary care.

The key question we should be asking is whether the Government’s plans will help or hinder these goals.


Health and healthcare in the UK face huge challenges. 

Our ageing population, increases in long-term conditions and rising expectations mean demands on the NHS are increasing at a time when its budget will remain at best static over the Spending Review period.

In order to meet these demands, the NHS must make £15-20bn worth of efficiency savings over the next 3-4 years whilst continuing to improve the quality of care.


What role should competition play in helping the NHS meet what some have called “the biggest financial challenge of its life”?

Competition between hospitals

Research by Carol Propper and others has found some evidence that competition between hospitals in a fixed price market can improve quality.

However, its important to understand this research comes from the US, not the UK, and is narrowly based – on inpatient data which suggests hospitals in more competitive areas have lower mortality rates for myocardial infarction.

Very little evidence exists about the impact of competition between hospitals on a whole range of other outcomes.

What we do know is that the ability to make strategic decisions about reorganising hospital services can play a vital role in improving quality.

For example, NHS London has recently been through a controversial re-organisation of stroke care in the capital to establish 8 hyper acute stroke units.

Within just 5 months these specialist centres more than tripled the number of patients receiving clot-busting drugs – to the highest rate of any large city in the world. Its estimated that this will save 400 lives a year as well as significantly reducing disabilities.

How will strategic level decisions like this be taken when Strategic Health Authorities are abolished?

It’s possible that GP Consortia could take on this role if they work together across larger areas. But Consortia won’t hold contracts with providers until April 2013.

Strategic decisions that could improve the quality of care and save lives are already being delayed because of the Government’s reorganisation, a fact that’s received far too little attention to date.

Foundation Trusts

The issue of NHS Trusts becoming Foundation Trusts – which the Government says must happen by 2013/14 – is relevant here. 

The current Chair of Monitor, Steve Bundred, has said that of the remaining NHS Trusts:

  • about a third should be able to become FTs relatively easily;
  • a third will need concerted help, and
  • a third won’t be able to achieve FT status in their current form, because of long term structural problems and debts, in large part due to the historic over capacity that exists in some parts of the country.

Improving the quality and efficiency of care means this issue needs to be addressed. Steve Bundred believes the responsibility should lie with the Department of Health.

Indeed the White Paper – for all its talk of devolving decisions to the local level – says “In the event that a few NHS trusts fail to agree credible plans, and where the NHS trust is unsustainable, the Secretary of State may as a matter of last resort apply the trust administration regime set out in the Health Act 2009.”

So the key question is: will Andrew Lansley take these difficult decisions, and if so, when?

Competition on price

Whilst the research about competition between hospitals is patchy, there is clearer evidence that price competition reduces the quality of care.

As the Nuffield Trust has shown, when hospitals compete on costs, quality is reduced as providers cut corners to deliver cheaper care.

When Labour was in Government, we were always clear that providers should not be allowed to compete on price, for precisely these reasons.

There’s a real danger that the White Paper’s proposal to move Payment by Results towards maximum rather than average costs will lead to price competition and the quality of care will suffer as a result.

The limits of competition

At this point I should say I’ve always believed that there needs to be some competition and challenge in the system.

I’m a long-standing supporter of Independent Sector Treatment Centres and of the need for commissioners to be able to bring in private and voluntary sector providers, as well as alternative NHS provision, where existing services fail to improve.

I am also a strong champion of giving patients more choice and a greater say, not only over which hospital they go to but all aspects of their treatment and care.

But for the reasons I’ve already outlined, we shouldn’t be over zealous about the role of competition in improving quality.

Yet this is precisely what Andrew Lansley is doing. He seems to be on a “one man mission” and won’t listen to the advice he’s receiving that the scale and pace of his reforms will create significant risks.

One of the key issues he has failed to address is the need to intervene and help hospitals and other providers (and indeed Commissioners) before they ‘fail’.

It’s not yet clear who will do this when PCTs and SHAs are abolished, which is a major flaw in the Government’s plans.


If competition isn’t the panacea that the Secretary of State suggests, how can and should the NHS move forward?

The Kings Fund and Nuffield Trust say that whilst some competition should have a role, the primary drivers of quality and efficiency in healthcare are co-ordination between providers and co-ordination across primary, community and secondary care.

As many of you know, they’ve recently looked at Integrated Care Organisations being piloted in this country, and from various types of ICOs in other countries.

The key finding from this work is that successful integration is less about merging organisations and more about:

  • integrating incentives – both financial and non-financial, such as governance arrangements;
  • integrating leadership  – yes, managers do have a role in improving the quality and efficiency of care; and
  • integrating information.

This latter point is crucial. Dr Jennifer Dixon, from the Nuffield Trust, has said that too often “Clinicians work in data desert”. Providing more and better information to clinicians, and using this to support effective peer review, can be a very powerful incentive for change – possibly even more so than providing information to patients.

This is why I welcome the Government’s aim of improving information for both clinicians and patients.

However, other aspects of the Government’s plans are likely to make integrating care much harder.  For example, commissioning will be split between

  • Local Authorities and new Health and Wellbeing boards – who will be responsible for public health (although its not yet clear how much of the money the NHS currently spends on public health will transfer to local councils);
  • GP Consortia – who will be responsible for commissioning hospital services; and
  • the NHS Commissioning Board – which will be responsible for commissioning GP services, pharmacy and dentistry and specialist care.

The risk is that these muddled responsibilites will mean care is more fragmented, not less, and that patients wll fall through the gap.

The Commonwealth Fund’s “Commission on High Performing Health Systems” consistently points to integrated care being the route to better value care.

My concern is that the Government’s reforms will achieve precisely the opposite.


Which brings me to my final point.

One of the key challenges facing the NHS is improving primary care. The increase in patients with long term and complex conditions means shifting services into the community to avoid hospitalisation and improve prevention is vital to improving care for patients and delivering better value for money for taxpayers.

Yet the White Paper says virtually nothing about how primary care will be improved. And what it does say is very confused.

For example, “GP Consortia will not be responsible for commissioning services GPs themselves provide” – this will instead be a job for the NHS Commissioning Board.

But the White Paper also says that GP consortia will “align clinical decisions in general practice with the financial consequences of those decisions” and “become increasingly influential in driving up the quality of general practice”.

  • How can a national Board possibly know what GP services need to be commissioned in areas like the one I represent?
  • Who will actually performance manage primary care services? Will it be the NHS Board, the regional outposts of the Board (if these are established) or GP consortia themselves?
  • If it’s the latter, will GP consortia have the skills, experience and desire to take on poorly performing GPs in their area? 
  • If they take on management support to do this work, including from existing PCTs, won’t Consortia just be a recreation of PCTs – just smaller and with greater clinical involvement?


Despite his pre-election promise to end top-down structural reorganisations in the NHS, Andrew Lansley is now forcing the NHS into one of the biggest reorganisations of its life.

Anyone who really understands the NHS knows this reorganisation will waste a huge amount of time, effort and resources. Indeed the best estimates are that, far from reducing costs, Lansley’s reorganisation will cost an additional £3bn.

This is money the NHS can ill afford to lose when it faces the biggest financial challenge of its life – making up to £20bn of efficiency savings over the next 3-4 years.

In addition, Andrew Lansley’s determination to create a real market in the NHS risks fragmenting care, when healthcare systems in other European countries and some parts of the US, understand integration is the key to improving quality and value for money.

It’s not just Labour that is making these points.

His recent comments to the Health Service Journal show the Health Select Committee Chair, Stephen Dorrell, clearly thinks the same.  I think its very interesting that the Prime Minister has recently set up a High Level Review Group led by Oliver Letwin to examine Lansley’s proposals before the response to the White Paper consultation and legislation are published.

I look forward to seeing the results of this review.

In the meanwhile, Labour will to continue to draw attention to the problems and unanswered questions in the Government’s plans.