NHS: Competition
(10 years, 10 months ago)
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Lord Turnberg
To ask Her Majesty’s Government what assessment they have made of the place and value of competition in the National Health Service.
Lord Turnberg (Lab)
My Lords, I am delighted to have this opportunity to debate the place and value of competition in the NHS. It is perhaps a little unfortunate that I received notice that I had secured this debate rather late last week. As a result, we have a rather select and distinguished band of noble Lords speaking today.
I want to make the case that we now have an unhealthy degree of competition, but in doing so I do not want to suggest that competition per se is necessarily a bad thing; nor do I want to get sidetracked into an ideological argument about the relative merits of free markets versus collective action. I want to try to tease out what the evidence really is for the value of competition in the NHS.
It is probably a basic human urge to compete. When I was a physician working in a hospital in Salford and when I was dean of Manchester’s medical school—here I express my interests in both—I have no hesitation in admitting that I was competitive in wanting my hospital and my medical school to be the best in the country if not in the world. It so happens that Salford Royal hospital is now lauded as being one of the most advanced in the way that it provides its services—it has obviously taken advantage of my absence to do great things.
However, when one comes to the National Health Service—that is, the national service—naked competition can become very counterproductive. We can certainly have too much of a good thing and the unhealthy degree of competition that we have now is interfering with our need for that collaboration and co-operation that are so vital for optimal patient care, to say nothing of its impact on integration as I will describe.
It is not as if we have never had competition before now; indeed, the previous Labour Government introduced the principle of opening up services to private providers. However, we took a devastating leap forward, or more accurately backward, with the health Act 2012 and the unloved Section 75, which placed a virtual obligation on commissioners to go out to tender for any and every service. It is that obligation that distinguishes it from what went before. We need to get the balance right between healthy and unhealthy competition. I shall give some of the many examples of where we have not got it right in a moment or two.
Those who promote competition in health services say that it improves patient care and efficiency, but what is the evidence for that? Does it work and, if so, in what circumstances and for what particular services? As one might expect, there have been a number of academic studies to try to tease this out and the results have been far from conclusive. The Office of Health Economics report in 2012 was very cautious and found that while some aspects were improved, others were made worse. Let us listen to those who have done the research. Dr Light wrote in the Journal of Health Politics:
“Promotion of competition is guided by political and ideological considerations and is not supported by any scientific evidence”.
Valentina Zigante and her colleagues have written:
“The ideology of competition and choice is running way ahead of the evidence that it improves efficiency, equity or quality”.
Dixon and Le Grand have said that there is,
“no evidence that the choice policy has resulted in significant changes for the patient or to patient pathways”.
However, we do not need to rely on academic studies to recognise the difficulties that we now have with the competition agenda: the problems are absolutely clear in the many day-to-day examples in the NHS. One only has to look at the gross case of Poole and Bournemouth, where everyone involved—the public, local authority, the doctors, nurses and managers—all agreed that amalgamation of the trusts’ services was essential if they were to be able to provide a safe and efficient accident and emergency service, avoid the £8 million black hole that was looming and save £14 million a year. After reportedly spending some £6 million on legal fees and gathering mountains of documentation, the whole thing was blocked by the Competition Commission. You do not need too many examples like that for managers around the country to run a mile before engaging in similar rational mergers or use of resources.
There are many other examples. Let us take the case of the CCGs in Blackpool which had found a better and cheaper way of dealing with patients with headaches than having to send them to a hospital, only to be challenged by Spire private healthcare for not sending them enough cases. The cost to the CCGs in money and time of having to sift through mountains of records to fight the case was very high and will certainly make others think twice before going down the same route. There are reports that in Bristol, the unified cancer care pathway has been put on hold, while at King’s College Hospital the plan to integrate care for the elderly with the local council has been stopped by competition law.
It is not as if this bonanza for the lawyers was not predicted. In our debate on the Section 75 regulations last April, several speakers, including myself, warned of just this sort of costly litigation. As Sir David Nicholson said to the Health Select Commons Committee recently, the NHS is getting,
“bogged down in a morass of competition law”.
Despite all the reassurances given by the noble Earl when we debated the statutory instrument last April, managers in the health service are running scared of coming up against competition law whenever they set up their contracts for services. It is hardly surprising, according to a recent survey in the Health Service Journal, that nine out of 10 chief executives are making their top priority the cutting back of competition rules, and it is not difficult to see why they feel obliged to avoid litigation when they have Monitor breathing down their necks, as well as the Office of Fair Trading backed by UK public procurement regulations and EU competition law looming above them. It is of little use to managers that the kindly David Bennett of Monitor is hinting that he will not pursue them if they take a sensible approach and do not go out to tender for anything and everything, because in practice the law is biting hard.
It is hard, too, to see how multiple contracts with a range of providers can fail to impact on the need to focus specialised services in a smaller number of hospitals or to centralise scarce facilities. These rational and laudable aims can hardly avoid being inhibited by the drive to competition. And, of course, there is the knotty issue of integrating care across the hospital/community divide, which everyone wants to see but which will be inhibited by competition for the different elements of what should be seamless care. There seems little doubt that uncontrolled competition can result in a fragmentation of services that simply frustrates the need for a strong and coherent set of services.
What can be done about it? We have to tackle the legal driver of competition law which is creating such an expensive diversion of resources and manpower away from more important work like caring for patients. It is no use saying that commissioners have the freedom given by reassurances from Monitor on the one hand when they find that they have to defend themselves from legal action taken by private providers on the other. I have only one question for the Minister. Will he help to obviate this legal quagmire into which we seem to have blundered by repealing this onerous and damaging set of regulations and starting again with a less destructive set?
Baroness Thornton (Lab)
My Lords, I hope that the Minister is not feeling got at, and I am extremely pleased to note that the noble Baroness, Lady Brinton, will be speaking in the gap. I think that the lack of speakers in this debate bears out what we knew during the passage of the Bill—that this is a hellishly complicated matter. I wonder, indeed, where the noble Lords, Lord Clement-Jones and Lord Marks, and the noble Baroness, Lady Williams, are. I know that the noble Baroness, Lady Jolly, is here today, but she is now bound to support what the Minister has to say. Where are the noble Lords who helped to get the current competition regime through your Lordships’ House and on to the statute book two years ago, and why are they not here to explain how well they think it is working and that their support for it is therefore justified?
We know that people are fearful, as my noble friend has explained. They are fearful on the ground. They do not know how to express their worries, and often they realise too late that something precious has been undermined when the decisions their doctor is making may have something to do with Spire Healthcare or Richard Branson’s Virgin Care on the bottom line than what might be best for them—or that, at the least, those two things are being balanced against each other.
We know that competition comes in many flavours. Peer competition, as expressed by my noble friend, for clinical excellence is fine. Indeed, I have long championed the provision of social enterprises, and what value they can bring to some healthcare as being good for everyone concerned—not least the taxpayer because 5% to 10% is not being siphoned off into the pockets of shareholders across the world. That profit is being ploughed back into the social purpose of the provider and innovation. Indeed, we know that there has always been a mixed market in the provision of healthcare, and always as part of a planned process of provision.
Competition in various forms between NHS providers has been tried, as with the wide choice of acute providers for routine operations. As my noble friend has said, by 2010 the Labour Government had come to accept that there may be some occasions when an incumbent NHS provision could not be brought to the required standard and an open competition might be best. Tactical use of open competition could therefore be a tool. However, the Health and Social Care Act was always about competition as a strategy which essentially sees healthcare as a commodity and, essentially, Part 3 of the Act brings into play the ideas that have been used for the privatisation of utilities in the past. We went through this at length and, on this side of the House, we predicted what might happen.
The NHS has now tendered three-quarters of new contracts to competition. Section 75 regulations were made under the Health and Social Care Act in April last year. They appear to force competition on to the NHS in contravention of ministerial promises made during the stormy passage of the Act itself. At a critical juncture, the then Health Secretary Andrew Lansley wrote to the new local—as they became—clinical commissioning groups, telling them that,
“I know many of you have read that you will be forced to fragment services, or put services out to tender. This is absolutely not the case. It is a fundamental principle of the Bill that you as commissioners, not the Secretary of State and not regulators, should decide when and how competition should be used to serve your patients’ interests”.
He told the House of Commons:
“There is absolutely nothing in the Bill that promotes or permits the transfer of NHS activities to the private sector”.—[Official Report, Commons, 13/3/13; col. 169.]
Indeed, the noble Earl, Lord Howe, promised us here in your Lordships’ House:
“Clinicians will be free to commission services in the way they consider best. We intend to make it clear that commissioners will have a full range of options”.—[Official Report, 6/3/13; col. 1691.]
However, when the regulations emerged, there was a storm of protest. The noble Earl repeated:
“It has never been and is absolutely not the Government’s intention to make all NHS services subject to competitive tendering”.—[Official Report, 12/11/13; col. GC266.]
Can the Minister put a percentage on what he thinks is a reasonable amount to go out to tender and what he thinks is not a reasonable amount to do so?
Critics, including leading lawyers, say the redrafted regulations did no such thing; they did not fulfil the promise that the noble Earl had said that they would. They still enforced compulsory markets in the NHS, regardless of clinical or local wishes and in contravention of government promises. Indeed, my noble friend has given some examples.
In the debate on 24 April 2013, Liberal Democrat health spokesperson, the noble Lord, Lord Clement-Jones, told the House of Lords:
“Commissioners will not be forced to tender”.—[Official Report, 24/4/13; col. 1486.]
Indeed, the noble Earl backed him up, saying that,
“it is NHS commissioners and no one else who will decide whether, where and how competition in service provision should be introduced”.—[Official Report, 24/4/13; col. 1508.]
The noble Baroness, Lady Williams, told the Lords:
“We have learnt in the debates in this House to trust the noble Earl, Lord Howe”.—[Official Report, 24/4/13; col. 1496.]
Well this is a matter not of trust or otherwise, but of whether the Government’s course is the right one. We believe that the evidence now shows that, indeed, it is not. The proof of the pudding is in the eating, as my noble friend has said.
Is the Minister now prepared to release the Government’s legal advice on this matter, which has not been released so far despite requests from various people, including my noble friend Lord Hunt? Overall, the impact of the Health and Social Care Act has been negative, as it has deflected money and energy from clinical care into administration. We have seen the fears from CCGs around what Section 75 means. It appears to mean—certainly, this is what many CCGs understand—that almost every service has to be competitively tendered.
We have seen a CCG offering the biggest NHS contract in history, in Cambridge, and making a thorough mess of that process. We have seen claims by a CCG in Oxford to be leading on competition for outcomes, and, again, stalling when confronted by providers. My noble friend has also mentioned what has been happening in Blackpool, in relation to Spire. I would like the Minister’s comments on what has happened in Blackpool, and what he thinks are the implications of the Spire challenge, and Monitor’s support for it.
I also want to ask the noble Earl about the amount of money that has had to be spent in Bournemouth and Poole on the merging of the hospitals there. The merger seems to be completely justified on clinical grounds; however millions of pounds have been spent on lawyers and paperwork. This is one of the hospitals that already have a deficit: the merger is urgently needed. Does the noble Earl think that can be justified in today’s cash-strapped NHS?
We have heard from many people that they believe that the requirement for competition is hindering the need for integration and co-operation—as we said it would. The people who seem to be benefiting most from the new regulations and the new NHS, as structured by the Government, are competition lawyers. They are being allowed to call the shots, it would appear. Most of all, the vision expressed by Mr Lansley in 2006 for a regulated market for our healthcare seems to be losing its supporters and its driving force is gone. Indeed, rumours abound that the once-enthusiastic Liberal Democrat fellow travellers are now seeing the light. Much of what Mr Lansley wanted is being rolled back or ignored.
The problem is that the market requires no strategic direction because it has its own impetus, which is to make profits where they can best be made. The NHS needs a strategic direction. The Government, however, are incapable of delivering that strategic direction because in the passage of this Act they have given away the levers that would allow them to do so. They can make statements, they can make plans, they can pass strategies, but they no longer have the levers to be able to deliver them.
What does the future hold? Would the Minister speculate about what the next Conservative manifesto might offer the NHS? Noble Lords may remember that the Prime Minister promised that there would be no more tiresome, meddlesome top-down restructuring. That statement may have been wiped off the internet by the Conservative Party, but we remember it very well. What does the Conservative Party think that it might bring forward in its next manifesto? I finish by quoting what David Nicholson, the retiring head of NHS England, has said about this:
“We are bogged down in a morass of competition law. We have competition lawyers all over the place telling us what to do and causing enormous difficulty”.
He also said,
“All of [the politicians who drew up the Health and Social Care Act] wanted competition as a tool to improve quality for patients. That’s what they intended to happen, and we haven’t got that…”.
Baroness Brinton (LD)
My Lords, I am grateful for being allowed to speak in the gap, and I congratulate the noble Lord, Lord Turnberg, on securing this debate. The noble Baroness, Lady Thornton, may wish to know that the noble Lord, Lord Clement-Jones, had hoped to speak in this debate, but is speaking instead on the Immigration Bill in the main Chamber.
I am pleased that he and other Liberal Democrats persuaded the Government to make some key changes to Part 3, on procurement, in the Health and Social Care Act, which limited private practice in the NHS and beefed up Monitor with regard to the promotion of competition, in order to provide reassurance that other factors could and should be taken into consideration.
This nuance in the debate is often lost by the two opposing views of pro- and anti-competition. Not all competition is bad, as the noble Lord, Lord Turnberg, has pointed out. The Labour Government were quite content to have it in the NHS. I, for example, was using Healthcare at Home, which was contracted by a number of hospitals prior to the coalition Government to provide domiciliary support for patients injecting medication at home. The service and support were excellent, and the economies of scale, I am sure, enabled them to provide that at a good price. The ancillary contracts are, I hope, less contentious than deciding how to contract out core clinical services: those issues are justly more sensitive. That is why I am grateful to my noble friend Lord Clement-Jones for his perseverance last year in pushing for amendments to the regulations to ensure that cost is not the only guide to winning a procurement contract. Transparent, proportionate and non-discriminatory processes must be evidenced to support procurement decisions.
The new guidance will remove doubt about where quality and competition interact, and Monitor’s role in taking the lead over the OFT and the Competition Commission is a positive step forward. The Monitor guidance on the National Health Service (Procurement, Patient Choice and Competition) Regulations 2013 makes this abundantly clear. For commissioners, this will mean a considerable change in approach to procurement. Finally, the guidance is so explicit that cost alone is not the route to follow that even the competition lawyers will have to take note. Patient need, quality, and improvement of service are key factors that must be taken into account.
The EU directive on public procurement due to be implemented during this year reinforces this. The new regime for health service contracts requires that,
“award criteria can take into consideration important elements in the provision of health services including quality, continuity, accessibility, comprehensiveness of services and innovation”.
Further, the directive makes it clear that,
“greater emphasis is put on considering environmental and social issues in public procurements … Simply considering price, rather than quality, as the only award criterion will be discouraged”.
I hope that this will provide clarity for future CCGs as they start to consider whether they need to tender.
Finally, we should remember the core principle in competition and choice in the provision of healthcare services in the NHS in England, which is that competition should be employed where it serves the interests of patients; it must not be an end in itself. NHS England has said that competition is just one means of improving the quality and efficiency of NHS clinical services and securing value for money. I would ask my noble friend the Minister, given all the noise we are hearing at the moment about problems with competition lawyers and others disagreeing about where the lines are drawn, whether the EU directive guidance and the Monitor guidance will clarify matters enough to remove that doubt. If that is the case, I hope that improved transparency, a focus on patient needs and proportionality will act as the guardians of our excellent services in the NHS.
Lord Hunt of Kings Heath (Lab)
My Lords, I declare my interests as chairman of an NHS foundation trust, as president of GS1 UK, and as a consultant trainer with Cumberlege Connections Ltd. I, too, welcome my noble friend’s debate and the opportunity to return to the issue of competition. I think that it has to be seen in a wider context. No one can be in any doubt about the pressure that the National Health Service is currently under, often because of conflicting policy objectives that the Government are setting. On the one hand, quality and safety demand more staff, but on the other hand, that must take place at a time when the NHS is in its worst financial position. The health service also has to face up to huge demographic pressures. However, the response so far has been to see a vast number of frail elderly people being admitted to hospital and then staying in too long because of a lack of appropriate community care and support. We have debated the urge for seven-day working in our hospitals, which is to be highly commended, but that is being jeopardised by the failure of primary care and social care to respond in parallel. Instead of leadership, co-ordination and partnership, the Lansley changes have bequeathed a dysfunctional system where essentially the Government have legislated for fragmentation—and fragmentation is certainly what has been delivered.
Clinical commissioning groups, often staffed by very good people working with the best will in the world, cover too small a population to be able to give strategic direction across a health economy. The local area teams of NHS England are focused exclusively on micro-management rather than leadership, under the weight of excessive performance management from NHS England headquarters. NHS England was itself promised autonomy, but is getting anything but. Its target-obsessed approach seems strangely at odds with the post-Francis culture that is required. Fragmentation at the local level seems to be matched by confusion that reigns at the national level. The Lansley “hands-off” model has been ripped up by the current Secretary of State, who intervenes at every turn. How else can we explain the weekly meetings that he has with the bosses of NHS England, Monitor and the CQC, all supposedly independent bodies? Independent, my foot.
On top of all this, we have competition, which we have debated many times. Of course, choice and competition have a role to play in the National Health Service—on that, I agree with my noble friends. Indeed, when in government I was involved in involving the private sector to help provide extra capacity, speed up hip replacements and cataract surgery, and reduce waiting times for the NHS. Moreover, I have no doubt whatever that where existing services have consistently underperformed, alternative providers, including the private sector, third sector, mutuals and social enterprises, are important as a way to turn things round. However, to conclude that market principles are a panacea is simply wrong. It is enforced competition and enforced marketisation that we on the opposition Benches are opposed to.
I know what the Minister is going to say. He has consistently told us when we have debated these issues that CCGs were free to commission services and would not have to create markets against the best interest of patients, but I remain of the view that Part 3 of the 2012 Act and the Section 75 regulations mandate the open tendering of services.
I listened with great interest to the noble Baroness, Lady Brinton, and welcome her to our debate. I say to her that while I accept that the Section 75 regulations were withdrawn and rewritten, my reading of them remains as I read them at the time: that, in the end, CCGs will essentially be forced to tender all services. That is certainly what the health service thinks. We can see already the impact of this. FOI requests have unearthed the fact that in the first six months of the new system, clinical commissioning groups had spent at least £5 million on external competition lawyers. We also know that NHS providers have reported a sharp rise in their legal bills as a result.
Both my noble friends have mentioned the intervention of the Office of Fair Trading, which is causing absolute havoc. We have the cases in Dorset and in Bristol. The impact of this has been the putting of a lot of sensible reconfiguration proposals into cold storage but, my goodness me, how much we need bold reconfiguration proposals to be implemented in order to provide high-quality, safe care. What has happened in Greater Manchester, where the move to centralise cancer services into fewer top-performing specialist centres is apparently in jeopardy because it is being claimed that it will be anti-competitive and reduce patient choice? My noble friend mentioned the Blackpool case, and I hope that the Minister will respond to that. My understanding is that the CCGs have had to hire administrative staff to collect thousands of documents, tracking every referral from GPs. What a complete waste of time and effort. I refer the noble Earl to a survey of hospital chiefs conducted by the Health Service Journal last December, in which 88% of them said that securing change to competition and choice rules should be a priority for the incoming chief executive officer of NHS England. What a lot of priorities he will have to face when he starts in April.
All this is well known both to the noble Earl’s department and to NHS England. I do not want to repeat what his honourable friend Norman Lamb said, because my noble friends have already done it, or the evidence that Sir David Nicholson gave to the Health Select Committee last November, when he highlighted the cost and frustration caused by the way in which competition law was being used.
I want to ask the noble Earl about the proposals that NHS England is putting forward to centralise specialist services in a small number of centres—or at least it has been said that that is what it is going to be doing. Can the noble Earl confirm that? Is he confident that such proposals will not lead to Office of Fair Trading interventions if he is reducing the number of specialist centres? In view of what Mr Lamb and Sir David have said, will the Government bring proposals to the House in the next Session to put this right? The Opposition stand ready to help the noble Earl make changes to legislation in this regard.
Clearly, competition has a place—I have no doubt about that. I stand by the work that I did to encourage some private sector involvement in order to get waiting times down. That is a very good example of when it is useful to use the private sector. But competition is not the be-all and end-all; it is not the panacea that some claim. The noble Baroness, Lady Brinton, made a very reasoned argument. My response to her and to the noble Earl is that I know that we are getting guidance and further work is being done in this area, but the fact is that the health service thinks it has to tender almost all services. I am afraid that once you do that, in effect you have a competitive market. That is the problem we face. I hope very much that the noble Earl will tell us that the department and the Government will actually listen to the concerns which have been expressed by a considerable number of people in the NHS, NHS England and his own department.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con)
My Lords, I join other noble Lords in thanking the noble Lord, Lord Turnberg, for tabling this topic for debate. I will begin with three simple statements, to serve as mental marker posts, as it were, before I respond to the questions that have been raised.
First, amid the many changes that we made to NHS commissioning through the Health and Social Care Act, one area of the law that has not changed one iota is the law relating to competitive tendering. That law has been in place for a number of years; it has been governed by a European directive; and, as regards the rules governing NHS procurement, the Section 75 regulations change nothing at all.
Secondly, the noble Baroness, Lady Thornton, referred to “Mr Lansley’s agenda” on privatisation. There is no government agenda to privatise NHS services—quite the contrary. We made it illegal in the Health and Social Care Act for the Secretary of State, Monitor or NHS England to have a policy deliberately favouring the independent sector.
Thirdly, the noble Lord, Lord Hunt, spoke of a deliberate policy of enforced competition and marketisation. I must correct him. It is NHS commissioners alone who will decide whether, where and how competition in service provision should be introduced. There are no obligations on commissioners to create or promote markets; nor are they required to fragment services against the interests of patients.
Those three points are key to understanding what the Government are doing and what we are not doing. I will now turn to the place and value of competition in the NHS, which has long existed. As the noble Lord, Lord Turnberg, pointed out, patients have long exercised choice over where they receive services from. I was pleased to hear the noble Lord, Lord Hunt, acknowledge that third sector and independent providers play an important part in providing NHS care; for example, in hospice care for terminally ill patients, mental health services and long-term nursing care for the frail elderly.
We have seen over the past decade the independent sector treatment centre programme and the introduction of payment by results in 2003, the advent of patient choice in 2006, and the transforming community services programme of 2008. I must point out to the noble Lord, Lord Turnberg, that it was this changing landscape that introduced greater competition to the NHS; it was not the Health and Social Care Act. There is robust evidence from a variety of sources that quality-based competition can work to the benefit of patients, and I shall come on to cite that evidence in a moment.
The previous Administration put in place a set of rules to manage that competition, known as the Principles and Rules for Co-operation and Competition, and the Government committed in their response to the NHS Future Forum report to maintain these and place them on a statutory footing so that they could continue to apply to commissioners. That is exactly what we have done; there has been absolute continuity in how the rules apply. Clinical commissioning groups work within this framework to secure the best services for patients that they can, from whichever provider best offers that prospect. In essence that is the value of this framework of rules. They will be supported in this activity by guidance from NHS England and Monitor, and through the work of commissioning support units.
The noble Baroness, Lady Thornton, asked me what I would regard as a reasonable proportion of NHS activity to be put out to tender. I have no view on this, and nor should I. The decisions on tendering are entirely up to commissioners and not Ministers. The noble Baroness also indicated that seven out of 10 NHS contracts have gone to the private sector since last April. I point out that that figure is highly misleading. It was quoted in a newspaper article, but the contracts in the sample that was quoted amount to a tiny and unrepresentative sample of the scale of NHS activity. In reality, spending on healthcare from private-sector providers equates only to around 6% of total NHS expenditure. It was roughly 5% at the end of the previous Administration.
My noble friend Lady Brinton asked whether there will be guidance from Monitor to clarify the duties on commissioners, and the noble Lord, Lord Hunt, suggested that commissioners are confused about that. Monitor has now published its guidance to support commissioners in understanding and complying with the Section 75 regulations. Monitor, along with NHS England, will undertake further engagement with commissioners to support them in understanding the requirements. I acknowledge that there is a degree of misunderstanding out there, but not everywhere. NHS England’s forthcoming procurement guidance will provide further guidance on the EU requirements.
The noble Lord, Lord Hunt, raised concerns about fragmentation and barriers to integration. To the extent that fragmentation exists, I say to him that it existed as greatly under his Government. I am proud to say that this Government are taking practical steps to make integration more commonplace throughout the country. We are supporting a number of integration pioneer sites, which will trailblaze new ideas to bring care closer together. They will be leaders of change—a change we have to see in the system if we want to offer the best-quality care.
We are also supporting the system through the £3.8 billion Better Care Fund, which will encourage organisations to act earlier to prevent people reaching crisis point, to offer seven-day services, and to deliver care that is centred on people’s needs. That idea and that fund have been widely welcomed. Therefore, our focus is for commissioners to innovate and to work with partners in the sector to design integrated care pathways for patients that allow for a seamless experience of care. I assure the Committee that the competition rules do not stand in the way of that. In fact, the Section 75 regulations explicitly allow for it.
Under the regulations, the objective of a commissioner must always be to secure the needs of patients, including through services being integrated. For example, in Milton Keynes, substance misuse services used to be delivered by several providers, resulting in fragmented care. Users found services difficult to navigate, which impacted on treatment entry and retention rates. In response to this, NHS Milton Keynes CCG and Milton Keynes Council developed an outcomes-based approach to commissioning. Existing services were brought together into one fully integrated, recovery-focused service, delivered by a third sector organisation, which enabled more effective delivery of care and efficiency savings of 15% to 20%. That is a clear example of good commissioning delivering improved services for patients.
I turn to the OFT’s role and the review of mergers. Again, it is important to realise that the NHS has long had arrangements in place to review mergers on competition grounds, and that in considering mergers the competition authorities are acting under their existing powers under the Enterprise Act 2002.
The noble Lord, Lord Turnberg, criticised Part 3 of the Health and Social Care Act. Repealing Part 3 of that Act would not remove the powers of the competition authorities. In fact, the 2012 Act was important in clarifying those powers in order to address the legal uncertainty for NHS bodies as to whether mergers between them would be considered by the OFT or the CCP. Without this clarification, providers would have been at risk of double jeopardy, with both bodies potentially seeking to undertake a review.
The noble Lord, Lord Turnberg, cited several examples of challenges being issued on competition grounds which he attributes to the existence of Part 3 of the Act. I do not want to comment on the detail of those cases—it would be wrong of me to do so—but I would point out that challenges of that kind would have been quite capable of being brought even if the Government had never introduced the Health and Social Care Bill.
Lord Hunt of Kings Heath
My Lords, I understand where the noble Earl is coming from in relation to the Enterprise Act. However, is it not a fact that essentially what happened was that the 2012 Act was a signal to the market that a market was being put in place? Why have a 300-page Act and why have the Section 75 competition regulations? In essence, the Government opened the door in this regard and that is why these challenges are now taking place. They did not take place before the 2012 Act.
Earl Howe
The market, however, did exist, which was the point that I made. The market was out there well before the 2012 Act and well before this Government came to office. It was incumbent on us to clarify and simplify the rules that the previous Government put in place. We did that through Part 3 of the Act. It was not a signal to anybody to marketise the NHS. Indeed, as I said, we explicitly provided for it to be illegal for Ministers or Monitor to prefer the independent sector over public sector providers. That is explicit in the Act, so the noble Lord cannot accuse the Government of enabling legislation to promote marketisation.
Baroness Thornton
My noble friend’s question was actually about the signal. If, as the noble Earl has told us, all these things existed before the Act, why did we have to have Part 3 of the Act? Why was it necessary? The only reason that it seems to have been necessary—we think that the evidence now shows that to be the case—is that it increased marketisation in the NHS.
Earl Howe
Let me be clear. Repealing Part 3 of the Health and Social Care Act, which is what the noble Baroness appears to be suggesting is desirable, would not stop competition law applying. It would not remove the powers that the OFT has, which were introduced by the previous Government. It would just mean that a health expert regulator—Monitor—would not be the body considering the application of competition law to the NHS. I do not believe that that is in the best interests of patients. That provision was widely welcomed by those who understood these matters.
I was asked about the case involving Blackpool and Spire. It would not be appropriate for me to comment on an ongoing investigation by the independent regulator but I stress that, in considering this case, Monitor is doing nothing that the Co-operation and Competition Panel could not have done under the principles and rules for co-operation and competition. As regards the Greater Manchester proposals which the noble Lord, Lord Hunt, raised, I can inform him that Monitor has closed that case and NHS England is pursuing its procurement of these services.
The noble Baroness, Lady Thornton, asked about Bournemouth and Poole. I want to be clear that there is nothing to stop two providers coming together if it is in the best interest of patients. The OFT has already cleared two out of three mergers. However, while in some places mergers have improved things for patients, there is evidence that some mergers can be costly and may not deliver the benefits that were intended. It is therefore right that these are examined. The competition authorities have listened to concerns raised in the system. That is why, in October last year, they set out their commitment to work together with Monitor to ensure that the interests of patients are always at the heart of the merger review process; that the process works quickly and predictably; and, importantly, that any costs can be minimised.
Monitor will take a more active role in supporting merging parties and advising the OFT. This means that some mergers may not need to go to the competition authorities at all, and that those which do can be dealt with more quickly. For example, the proposed merger involving Torbay and Southern Devon Health and Care NHS Trust—an integration pioneer—and the South Devon Healthcare NHS Foundation Trust is one of the first cases in which, with the help of Monitor, the trusts have been able to self-assess and conclude that they do not need to notify the merger to the OFT, as it would be unlikely to raise concerns from a competition perspective.
The noble Lord, Lord Turnberg, challenged me on the evidence for the value of competition. There is robust evidence, as I have already mentioned. A report of January 2012 by the Office of Health Economics states that,
“evidence both from the UK and internationally suggests that quality based competition with prices fixed by a regulator can be beneficial, producing higher quality care at the same cost on average and, importantly, not leading to increased inequity in access to care”.
Researchers at the London School of Economics have found that hospitals in areas where patients have more choice of provider have shorter lengths of stay in hospital and lower death rates than in less competitive markets. Research by York University found an increase in quality at a hospital stimulated local rivals to respond, as well as to increase the quality of their services. The research found improvements in relation to mortality rates, stroke readmission and patient satisfaction.
There are various other answers that I would like to give, but I have been advised that I am well over time, for which I apologise. I simply conclude by saying that this has been, as ever, a stimulating debate on a topic to which I am sure we will return in coming months. I hope that my comments today have at least partially clarified the legal position and wholly clarified our intentions regarding the place of competition in the NHS. I hope, too, that they have provided some measure of reassurance to noble Lords that the system is acting upon the concerns that it hears.