“Liberating the NHS”: have they thought this through at all?

To: Liberal Democrat MPs

Cc: Everyone

Re:  From: The Health Policy Trust

Date: 19 March 2012

Despite seemingly detailed scrutiny, it is only now that many of the flaws in the Health and Social Care Bill are becoming apparent. It has been belatedly realised that one of the main advantages cited in favour of CCGs as a means of cost control, the treatment of minor ailments within the CCG’s member practices, would in fact be illegal under EU competition law. A CCG can be interpreted to be, under EU law, “an association of undertakings”, and EU rules prohibit such entities from commissioning services from themselves.

We sought clarification from EU competition expert Michael Lloyd, who told us that such services would have to be tendered out. Tendering is a time-consuming and costly process at the best of times, but this would make it more complex still, due to the need to ensure the “level playing field” between bidders that is at the heart of competition law, especially when those judging the competition between providers are so strongly connected to one of the competitors. He said

“It’s going to be pretty much impossible to do. It would require the creation of “Chinese walls” between the CCG’s provider and commissioner roles to make it legal, but in practice this arrangement would create strong grounds for external challenge by other potential providers.”

So GPs who do as instructed and self-refer work may be required by Monitor to compensate their private sector competitors under EU competition rules, with this being enforced by the NHS Cooperation and Competition Panel (CCP).

The Bill will merge the CCP with Monitor, whose other role is the privatisation of NHS hospitals. The CCP enforces rules which subordinate cooperation to competition with the rationale of protecting patient choice as the overriding priority. It assumes that competition is always in patients’ interest, and requires proof of benefit to patients for any reduction in competition. It is chaired (for about £80 per hour) by Lord Carter of Coles, who is also chairman of US private health giant McKesson UK (at more than $500 per hour) and of a private equity firm registered in a tax-haven with major investments in healthcare [1] .

He excludes himself from decisions directly affecting his other employers, but he is responsible for enforcing and promoting a regime which strongly favours private sector entrants into NHS-funded care, to create a mixed competitive market, meaning an influx of such profit-led transnationals and asset-strippers such as Lord Coles’ other employers. The CCP’s governing Principles and Rules for Cooperation and Competition have been described by a more moderate economist from the Kings’ Fund think-tank as “written by a neoliberal economist on speed”[2] . It summarises itself thus:

This document sets out the principles and rules which the Department of Health expects commissioners and providers of NHS services to follow to ensure cooperation, while protecting competition, in NHS services. It includes obligations regarding fair commissioning, requirements to cooperate, prohibitions of anti-competitive behaviour and rules on approval of mergers.

It prioritises protecting and encouraging competition with the justification that the increase in choice for patients that this creates is always beneficial. This is the benefit to patients that the White Paper speaks of. All the rest is downside.

McKesson has been forced to pay hundreds of millions of dollars in compensation for defrauding the US government, and its former Chief Executive swindled its shareholders out of $8.6 billion, suggesting that its corporate culture is unlikely to enhance NHS care. McKesson UK’s new Operations Vice-President (who will oversee the company’s bids for new contracts as well as its ongoing NHS IT contracts) was formerly the CCP’s Chief Executive. There he assisted a group of private firms in demanding a public investigation into commissioner discrimination against them. This is an option available whenever a public sector provider wins a tender for providing NHS services. He also advised them to petition the government to strengthen competition regulation when the Bill passes into law[1].

In the Netherlands, the Competition Authority recently fined the national GP association £6.4 million (€7.7 million) for trying to ensure that everyone in the country had access to a local GP by preventing over-provision of services in more desirable areas, leaving some places unserved [3].

Andrew Lansley’s promises that commissioning by CCGs will be more responsive to patients and cheaper are shown to be quite wrong, founded on wishful thinking and lobbyist’s demands to open up the NHS budget to the private sector. Part of the reason why he keeps making these mistakes seems to be that he doesn’t fully understand the reform, and has no real idea how it could work in practice. When challenged on why he will give no detail of how the reforms will work in practice, he recently said that the details would be worked out in partnership with doctors. That approach seems likely to land the GPs with a lot of fines for contravening competition rules.

There is going to be chaos in the NHS.

It’s also going to be expensive.

This is due to the introduction of several extra layers of profit extraction (for every referral, commissioning support organisation, hospital or other secondary care provider, and another for any facilities that any of them outsource), creation and maintenance of multiple commissioning (market) administrations, competition regulation, and the redundant capacity required to support a market. The idea of self-referrals was one of the few mechanisms suggested by which the new system could deliver better value, and now it emerges that it won’t work.

The government’s solution to cover this extra cost is to bring in “private sector funding”. This means individuals and possibly employers, as in the USA and Germany. There will be a core package of NHS funded services, delivered increasingly (and in five years or so almost entirely) by the private healthcare industry, much of it based in the USA. We will be required to pay directly or to purchase private health care insurance individually to secure any care beyond the minimum NHS-funded package [4].

This is plainly an electoral disaster in waiting for both parties in the Coalition, but it is far worse than that: there may be no way back. If a service is taken back into the NHS and private providers are excluded, they can sue under competition law: this threatens the reversal of the gradual denationalisation that this Bill sets in train.

[1] Rose D. NHS fairness tsar urged to quit by doctors over ‘conflict of interest’ following £799,000 payment for U.S. private health giant. 4 march 2012  http://www.dailymail.co.uk/news/article-2109907/NHS-fairness-tsar-urged-quit-doctors-conflict-following-799-000-payment-U-S-private-health-giant.html

[2] Gainsbury S. Chris Ham slams anti-competition guidance: Agreements between hospitals over the provision of specialist services could be seen as a criminal breach of competition rules. 5 March 2009. http://www.hsj.co.uk/chris-ham-slams-anti-competition-guidance/2000921.article

[3] Sheldon T. Dutch GP association is fined €7.7m for anticompetitive behaviour. BMJ 16 January 2012;344:e439 http://www.bmj.com/content/344/bmj.e439.short

[4] 2012 Health Policy Summit 29 February -1 March 2012 http://www.nuffieldtrust.org.uk/summit/2012