Within the remit of the Health and Social Care Act the provision of healthcare services by private providers is set to endure and grow. I am not interested in the ideological arguments that surround this. What I have been considering is the battleground and potential inequalities that seem counter intuitive to the benefit of introducing market forces. Looking at existing market strategies, the closest model I can find that represents the current commissioning structure is franchising.
It could be argued, a private provider essentially becomes a franchisee of the NHS. The use the infrastructure, logistics, knowledge, brand, customers (patients) and systems of the main franchise normally in exchange for a fee and recurring charges. Within the context of bidding for work, these systems and logistics are provided for free by the NHS. Within a free market, no company of the scope and size of the NHS would authorise use of their branding and logistics without charging for it.
In regards to branding, the creation of an umbrella brand, NHS PP (National Health Service Private Provider) or the imposition of a franchise fee would seem to address this inequality. Within the context of the franchise model, it is common for the franchise to take a top slice of the profits (typically 20%) or a percentage of turnover (typically 5%). These figures are taken as an approximate average of the publicly available franchise models available on the internet. Such a market force is not present in the current commissioning process and potentially represents a free market distortion. Finally, the franchisee has the ability to damage the NHS brand. This brand has a value. Such brand and reputation damage could be subject to punitive action in the commercial sector.
With market forces come the tenant of the marketplace, risk and reward.
Any enterprise faces risk. However, within the remit of provision healthcare from commissioning, a large element of risk is shielded from the private provider. In the event the proposed treatment does not go as planned, the provider has the safety net of sending the patient to the NHS. Some private providers will have a sufficient scope of work that they are able to rectify their mistakes, but most will not. For most ventures, this risk is artificially removed. If a truly equitable commissioning process was to occur, this exposure to the cost of failure needs to be accounted for. This asks the question, how can this can be calculated? Well every patient going through the NHS has the activities performed logged and aggregated according to nationally agreed tariffs. This sum of tariffs can be passed onto the private provider, or a percentage of it. One only has to look at the case of Mr. Sellu to see that without proper logistics (and their cost), the private provider system can come crashing down with disastrous consequences for all involved. The private provider should consider the costs of a more complete implementation of patient care and accountability for this to be an equitable market.
The premise of commissioning care is based on saving money, hence preserving the ability to maintain services despite budget restraints. However, the recent legal dispute in North London regarding the verdict of a Clinical Commissioning Group raises questions. If the commissioning process creates legal vulnerabilities that could result in multiple lawsuits and the loss of any savings, then it is in fact flawed. The cost of litigation would need to be factored into any commissioning process. If genuine market forces were to prevail, repeated lawsuits brought through the commissioning process means commissioning will fail to deliver the promised savings. If it does not save money for the taxpayer, then what is the purpose?
I understand the franchising model is not a perfect fit in finding a real world comparator. However, I am struggling to find a better business model that allows for a shared brand. We welcome the discussion on what may be a more suitable comparison and the role of commissioning.
NHS Survival is not pro or anti privatisation.
However, for the sake of the public in interest, transparency, the pursuit of true efficiency, if competition is to exist, balanced competition is required. As it stands, the NHS will struggle to compete on these terms which suggests, the free market desire for competition is in fact, something else instead. Which is a shame, as without balanced competition, the NHS cannot learn and improve based on the skilled input from its private partners.
A Royal Commission could look at franchising fees, branding and risk exposure as well as other issues such as trade secrets when deciding how to optimally implement private provision. However, it would seem the current marketplace can be improved to reflect genuine market forces to bring more of the advantages. With a neutral commissioning process, the best provider will succeed which is the ultimate goal of commissioning healthcare. If we are to successfully incorporate private provision within the NHS, a more equitable vision of commissioning may need to be incorporated.
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