The NHS Can Only Guess


Dr. Eamon Butler, director of the Adam Smith Institute, made an excellent point towards the end of his e-bulletin this week, which I feel is worth elaborating on a little.

He wrote: “NHS kills 10,000 people, Tesco horsemeat kills none. (But guess who’s apologising in two-page newspaper ads.)” 

After some investigation I came upon an article in the Independent newspaper from July last year on findings from research conducted by the London School of Hygiene and Tropical Medicine into hospital deaths. The study found that 11,859 preventable deaths occurred in NHS hospitals in 2012 as a direct result of basic errors by medical staff. This is what the first part of his statement refers to.

The second part is referring to the fact that trace amounts of horsemeat DNA was recently discovered in various frozen and chilled products containing beef that were being sold in several supermarkets, including Tesco. Last week Tesco took out a two-page spread in a popular free London newspaper called The Metro (they may have run ads in other national newspapers as well, I’m not sure because I don’t read them) in which it admitted to its customers that its standards hadn’t been good enough in this instance, apologised for this, and explained what changes it had already made to ensure it doesn’t happen again.

I guess one of the fundamental things we all want from supermarkets is for them to prevent stuff from getting into their products that shouldn’t be there, which is generally known as quality control. Some supermarkets had failed to do this for a particular range of products, albeit in a minor way which posed no health risk, but still it was minorly concerning, and I imagine many people felt the same. Only days after the news first broke it was reported that the supermarkets concerned had switched supply lines as soon as they traced the source of the problem. The very real possibility of losing customers to rival supermarkets, even just temporarily but perhaps forever, as a result of fostering distrust, was incentive enough to prompt such swift and decisive action by those supermarkets concerned – action aimed entirely at better serving their customers. Almost overnight they undertook a significant change to their operations, and incurred any costs of doing so, simply to better please their customers. A near-instant response to the very real prospect of losing market share in a very competitive market.

In organisations such as the NHS, which are bureaucratically managed, such dynamism is near-impossible. It makes no difference how dedicated the manages of the NHS believe they are to serving their ‘customers’ when those customers cannot take their business elsewhere. The difference between NHS customers and customers of other vendors in other non-monopolised markets is that the latter can declare themselves dissatisfied with vendor x AND act upon this dissatisfaction by taking their business elsewhere, the former can only voice their dissatisfaction with the NHS whilst having no choice but to continue to avail of their services. Which renders their dissatisfaction as pointless as being annoyed at the rain because no action can remove the unsatisfactory state of affairs. And just like rainy days we must accept that this undesirable state cannot be avoided. One of the best ways of coming to terms with such a state is to focus on its positive aspects, which is what NHS customers are left with no choice but to do – whether they realise it or not.

Swift action in response to your customers’ requirements can only happen in organisations that are managed with the aim of maximising profit, which in turn is something that can only be achieved by aiming all action within a business at the goal of satisfying its customers better than any other supplier in the same market. The only way for a business to calculate whether it’s achieving this goal or not is by comparing its profits to those of others, if others are more profitable, then they are serving customers in a more satisfactory way. All businesses must pursue the goal of satisfying their customers to the best of their ability because their very existence depends on doing so. If any given business’s best efforts are not good enough to maintain a surplus to remain operational in that market, then its assets will be liquidated and shifted to other areas of the economy where there is demand via lenders. This is good for society overall because it minimises misallocation of resources. Overall, everyone ends up where their efforts are most productive.

The question we must ask ourselves is: how can the NHS know whether it’s serving its customers better than competitors when there is no competitors? The answer is that it cannot. Yes, it can survey its customers, but how can customers know whether the NHS is satisfying their needs and preferences in the best possible way when there’s no other provider to compare the NHS’s best efforts to? The answer is that they cannot. It may be true that many people feel satisfied with the service provided by the NHS currently, but in a free-market there’s always the strong possibility that another provider may enter the market and provide the same level of service more cheaply, a better service at a higher cost, or a better service at a lower cost. This results in customers having to re-assess what they judge to be satisfactory in terms of quality and cost because now they have more information to base their decision on. This happens all the time in markets where providers can enter the market and (relatively) freely compete. Take the mobile phone market, for example. A decade ago Nokia was the dominant vendor because, in a world without the iPhone, its products satisfied more customers to a higher degree than other suppliers did. Then along came the iPhone and almost overnight Nokia’s products had gone from being judged as the best by the majority to being deemed inferior by the majority. The popularity of the iPhone has left other vendors no choice but to aim at bettering the iphone or concede defeat and focus their efforts on satisfying customers better than anyone else in a particular subset of the market. The net effect of this intense competition is that quality has been driven up whilst prices have been driven down. Every customer, regardless of their budget, is better off now both in terms of the quality of products they have to choose from and in terms of the price they must pay than they were in the pre-iPhone age. You can buy a phone now for as little as £2.95 that’s as good as the average mobile phone was a decade ago, which would have cost £30-40. Astonishing. There are countless other examples from the world of (relatively) free markets.

One of the fundamental things we all need, let alone want, from a hospital is to not be killed by the negligence of its medical staff. After all, we go to hospital in the hopes of restoring our health. Tragically, a little under 12,000 people a year are dying as a direct result of basic errors by medical staff in NHS hospitals. That’s two or three people every day on average. Without competition and the for-profit motive the quality of service provided by the NHS has flat-lined or is barely making strides. This is because it has no way of determining how well its achieving its goals, which in turn is because its ‘customers’ have nothing to compare the NHS’s best efforts to. There’s no profit loss to spur highly motivated action to increase quality or decrease costs, such as there was for Nokia when Apple came along with the iPhone. Nokia had to act. The NHS doesn’t. It really doesn’t.

If two or three people on average every day were getting food poisoning as a result of eating at a particular restaurant, that eatery would quickly find itself bereft of customers. Not so with the NHS, it probably has more ‘customers’ than ever. For the lack of a better term, this is unnatural. A window cleaner who scratches windows and makes them more dirty doesn’t keep getting more customers. Eventually he ends up with none because people are free to stop trading with him and therefore stop funding his operations. It’s impossible to stop funding the NHS without being fined or thrown in jail. Why would we do this if our goal is for people to be able to have the best medical care?

The NHS doesn’t have ‘customers’, it has hostages called tax payers. About 60 million of them. Tesco spent time and money on apologising to its customers via a two-page spread in a newspaper because it knows its customers can simply walk away from Tesco and never come back. People think Tesco is powerful. It is not. It’s entire dependence rests upon satisfying the myriad of wants, needs and preferences of millions of fickle people. A most precarious existence.

I fear we will be waiting quite some time for the government’s apology for monopolising the provision of medical care and for providing a level of service as such that it kills nearly 12,000 people a year. After all, what’s to apologise for, we get ‘free’ medical care right?

Expecting the NHS to provide the best possible healthcare at the lowest possible cost is like expecting to soar off into the sunset after jumping off a tall building and flapping your arms. It’s never gonna happen. The NHS is flailing about in the dark desperately trying to get some grip on its customers’ needs but either has no way of determining what action to take or when it does figure it out can only do it very slowly, and by then it’s probably too late. All the while, during a boom, government hurls more and more money into the darkness in order to bribe votes out of people. During a bust, like now, government pulls money out in order to keep the goverment from going bankrupt (well, that’s their hope anyway). NHS managers have exactly zero chance of meeting their customers’ needs with the best possible medical care when they have to operate in this kind of environment.

It’s time to let go of the highly mistaken notion that medical care must be shielded from the for-profit motive and instead have its provision monopolised by the state and funded by coercive means. Liberty is the solution. We must stop preventing people with the genius, skills, motivation, knowledge, capital and entrepreneurial skills from providing medical care to society and we must allow them to compete with each other. When we finally realise this state of affairs we will be on our way to realising our goal of a sustainable solution to medical care for all.

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