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The emergence of social and commercial enterprise in UK healthcare

Submitted by on 26 Apr 2011 – 10:34

Professor Philip Sugarman is CEO & Medical Director of St Andrew’s, a Trustee of the Royal College of Psychiatrists, and senior lecturer at King’s College London.

UK healthcare was nationalised in 1948 to create the National Health Service (NHS), a comprehensive tax-funded service free at the point of care. Designed to banish the financial spectre of costly treatment, the NHS was long cherished for good care and good value. In recent years however annual costs have escalated to over £100bn to meet the demands of an ageing population for state-of-the-art healthcare. The NHS has implemented unpopular but limited financial solutions over the years such as prescription and dental charges, and local restrictions on new treatments (the “postcode lottery”). Despite many world class university hospitals, life expectancy, disease rates and post-treatment survival are at best mid-table amongst developed countries. Public trust has also been dented by tragic care failures headlined in the media.

Nevertheless the public generally still oppose privatisation or service reduction.  Like its predecessors the current Government is facing strong professional and union reaction to reforms intended to improve quality and value through choice and competition.  Local politics block closure of smaller hospitals and rationalisation of the inefficient and underinvested NHS estate.

Market reforms at present are being complicated by the public debt crisis and necessary financial restrictions. However long-term supply side reforms have already created internal NHS social enterprises, large not-for-profit entities with a degree of freedom, known mostly as “Foundation Trusts”.  Less visible has been progressive outsourcing of swathes of health and social care, such as care homes, hospital support services, psychiatric hospital care, domiciliary care and recently elective surgery.  Suppliers include longstanding charities with public benefit values close to the NHS, and a record of flexibility in addressing unmet patient need. Private equity has backed many new commercial entrants, including major private hospital groups with efficient southern hemisphere management, and new diagnostic and home care services attractive and convenient for patients. However the full opening of NHS care to competition beyond specific areas of outsourcing has been held back, as Foundations Trusts have been protected to preserve the integrity of local emergency and acute care.

There is now a potent mix of provider diversity, outsourcing practices and market mechanisms, driven by a need for investment in new models of quality, affordable care. There are clear opportunities to harness the benefits of competition, but accompanied by risks of unacceptable service destabilisation. Meanwhile the assurance of effective health services for the population remains a clear public expectation on government.

This is an evolving managed market that requires a fresh approach to governance, defining safety and quality clearly, with incisive inspection regimes and transparent public and commercial accounting of true cost to the taxpayer. UK health regulators and NHS service purchasers have been serially reformed, but there remains intense debate over the motivations and effectiveness of state, voluntary and for-profit provider models, and over risks, especially to the most vulnerable patients.

In the modern world models of healthcare can change and spread easily, giving an emerging alternative to governments running services directly. They can opt to focus on the assurance of population health outcomes through an effective managed market. The latest UK choice and competition framework could be a model for other countries with similar challenges of infrastructure, debt and demand. The power of the market offers affordable care with improved outcomes. In the future UK charities and commercial groups will compete more directly with social enterprises spun out from the state sector. Now is the right time for policy makers to design the market mechanisms which can make the most of open competition and informed patient choice.