Price competition would be 'unsafe' in health service

10 Feb 11
NHS leaders have told MPs that competition on price between public and private health providers would not be safe, and should be introduced only in limited circumstances over a long time period

By David Williams

10 February 2011

NHS leaders have told MPs that competition on price between public and private health providers would not be safe, and should be introduced only in limited circumstances over a long time period.

Giving evidence this morning to the Health and Social Care Bill committee, David Bennett, chief executive of Monitor, and Sue Slipman, director of the Foundation Trust Network, expressed fears over the plans.

Slipman said: ‘The thing that could drive down quality is if we have price competition – that would be very dangerous. All the evidence shows you get a race to the bottom, and that’s not desirable.’

She added that in the transition to the new NHS structure being set up by Health Secretary Andrew Lansley, the main focus must be on establishing the right standards of quality. She said although price competition should not be ruled out in the long term, ‘I can’t think of many areas where it would be safe to introduce it now.’

Bennett agreed there was a risk to quality, and said: ‘Price competition should be done very carefully. My expectation is that it would emerge in a very limited way and very slowly.’

Bennett also questioned a Department of Health impact assessment, which looked at how the reforms could enable ‘any willing provider’ to deliver NHS services on an equal footing, which he called an ‘incomplete analysis’.

He said there are ‘level playing field issues on both sides’, underlining the extra costs borne by NHS organisations. He said Monitor, in its new role as an economic regulator, would analyse the distortions in the health care market and how providers could be compensated properly.

Sonia Brown, the watchdog’s chief economist, pointed out that the NHS currently tends to treat more complex cases than private providers do, but does not receive extra funding to take this into account. She said the economic regulator would need to look at whether prices were currently set ‘to ensure that monies going in different directions work in a fair and appropriate way’. She also said that differential pricing could be brought in, and other systems adopted, such as building the cost of training into tariffs for non-public sector providers.

Slipman argued that the NHS was currently paying for the training and education of health workers, incurring costs that the private sector does not have to shoulder. She pledged to press Monitor to take that issue into account as it currently ‘places the public sector at a disadvantage’.

Brown added that most of the distortions that have been quantified by the DoH so far were ‘in one direction’.

Giving evidence at the same session, Sir Stephen Bubb, chief executive of the Association of Chief Executives of Voluntary Organisations, said he hoped the new price system would reflect the true value of the services charities provide.

‘One problem with commissioners and procurement is that it is stuffed full of people who know the price of everything and the value of nothing,’ he told MPs.

‘Monitor is used to regulating foundation hospitals, but will they be able to take account of the social benefits of third sector provision?’

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