Coronavirus Has Destroyed the NHS Internal Market Overnight, Proving That It Never Worked

by Jo Sutton-Klein

27 March 2020

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Covid-19 has forced the government to make drastic changes to the fundamental structure of the NHS, as the service struggles to cope. 

Since the 1990s the UK’s healthcare provision has been subjected to increasing marketisation, in particular through the so-called internal market. Introduced by Margaret Thatcher, this system splits the NHS into purchasers and providers who must trade with one another. 

This market ideology has permeated all aspects of NHS provision, to the extent that in compulsory teaching sessions I attended as a junior doctor we were asked to consider the patient as an object, whose flow through the hospital should be assessed to consider whether each step added value to their journey.

But under pressure to meet the demands of a pandemic, the internal market – 30 years in the making – has fallen apart overnight, proving that it was never fit for purpose. 

Money, beds and structural change.

On 11 March Rishi Sunak allotted an extra £5bn to the NHS, but by 17 March this budget had already been all but forgotten, as the chancellor was instead pressured to commit a blank cheque for all coronavirus-related expenditure within the health service.

The current guidance repeatedly reassures NHS trusts that all Covid-19 costs are guaranteed to be covered – this includes building more capacity for beds with oxygen; staffing, including costs associated with extended periods of absence by NHS workers who are self-isolating; and even social care for people who would otherwise end up in hospital – an area which was excluded from NHS budgetary increases before the crisis.

Another obvious change to health provision is the block buying of almost all private healthcare beds for NHS patients at cost price. Although this is as much a bailout of private healthcare providers as it is an offer to NHS patients, it has, at least for now, almost eradicated the private healthcare sector in the UK.

But while these changes are the most visible, there are even more significant structural changes being made just below the surface.

The internal market has been decimated.

Since the 1990s the NHS has operated within the constraints of the internal market.

Initially, Thatcher’s arrangement simply split ‘providers’ of healthcare from newly created ‘purchasers’, who commissioned services for specified populations. Over time, the internal market became increasingly entrenched, resulting in an unwieldy marketised arrangement of NHS services. Within hospitals different departments and services function as financially separate entities, and hospitals themselves are forced to compete with each other to win contracts from Clinical Commissioning Groups (CCGs) in the local area.

This system of marketised healthcare could not withstand even the earliest pressures of the Covid-19 crisis – and it has not fallen apart gracefully.

By mid-March many elements of the internal market within hospitals had been put on hold, as some wards had stocked up on personal protective equipment leaving other wards in the same hospitals short. The purchasing and distribution of Covid-19 supplies was instead centralised within hospitals – meaning purchases no longer needed to come out of ward or department budgets. Since then the procurement of coronavirus supplies has been centralised nationally – with the government coordinating daily deliveries of supplies to hospitals.

Hospitals usually have their services commissioned by CCGs, with payments made on a cost-per-case basis and each intervention given a set price in a national tariff  – but this system has now been thrown out of the window, with the government requiring that hospitals are instead given block contracts to provide acute Covid-19 care.

Even the procurement of ventilators, which is now being funded and coordinated centrally, marks a huge step away from the normal system of hospitals, or departments within hospitals, being individually tasked with procuring necessary equipment in the most cost-effective way.

Marketising healthcare has never made sense.

In America, which doesn’t have the capacity or political will to instantly de-marketise its very commercial healthcare system, the healthcare market has been thrown into disarray by the Covid-19 pandemic, with hospitals and states competing against each other to buy supplies.

While the UK government dragged its feet on many measures, it very rapidly moved to completely de-marketise the NHS Covid-19 effort, likely realising that the internal market was inevitably going to fall apart sooner rather than later.

The internal market of the NHS relies on the individualisation of healthcare, enabling it to become a commodity with value attached to the benefit medical intervention brings to an individual. But the health of individuals is always a consequence of, and contributor to, the state of society. In essence, all health is public health – it’s just a shame that it has taken the coronavirus pandemic to make the government realise this.

A de-marketised future isn’t certain.

The structural changes that have been made to the NHS over the last few weeks represents a disruption of the status quo. We have seen the internal market replaced with a system that doesn’t just work better during a crisis, but would work better regardless. Despite this, it is too soon to assess the permanency of this change – it would be very easy for the government to reinstate the internal market of the NHS once the Covid-19 pandemic is over.

What a complete reorganisation of the NHS – and many of the other measures the government has been forced to implement – shows, is that radical change is possible. There is no reason that completely abolishing the internal market in the NHS should not be on the agenda of the next Labour government.

The complex arrangement and rearrangement of services and funding within the NHS is an intrinsically dry subject, which is perhaps why most of the Left’s organising on the NHS has been around the juicier issues of calling for increased funding and an end to privatisation. But it is worth getting our heads around NHS internal structures now, because the very existence of the internal market affects the way healthcare is delivered, for the worse.

Covid-19 has forced the government to give us some respite from a marketised healthcare system that does not work – but it’s up to us to make sure that we don’t go back.

Jo Sutton-Klein is a junior doctor in Sheffield and has an MSc in social epidemiology.

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