Public sector monopolies are a good thing right. They can’t affect private provision or innovation, and they are what they are. And in the case of the National Health Service in the UK, it’s a miracle. Thank goodness laws protect us from private companies taking over the NHS.
That’s the public service dialectic. Well, I have some worrying news for you.
Baxter’s law (also known as the Bell doctrine) is a law of economics that describes how a monopoly in a regulated industry can extend into, and dominate a non-regulated industry, named after law professor William Francis Baxter who was an antitrust law professor at Stanford University.
Here’s an example:
A new nurse-led social enterprise sets up on the South Coast of England to provide a wound dressing service. The local CCG likes the new service and signs a three-year contract. Costs go down as the service dresses wounds more innovatively, patients spend less time as an inpatient and pharmacy bills reduce.
At the end of the Contract, the CCG advertises a new Contract. The local NHS provider offers a lower price for the next tranche of the agreement. They undercut the local social enterprise by using funding and revenue from other areas of the local health monopoly. They win the new contract. Of course, they do this to protect their income in others areas of their business. Classic monopolistic and anti-competitive behaviour.
So what happened?
Did the cost of care on the South Coast go down? Did the quality go up? Or perhaps the NHS used it’s monopoly to reach into a Third Sector and kill innovation and alternative provision and protect its income. I would content that Baxter’s law applied and the NHS used its power to stifle innovation.
My concern is that many are unaware of the anti-competitive nature of this monopoly position. Next time you attend a meeting looking at NHS Contracts or as a member of the public at a Health and Wellbeing Board you might think to ask;
- What steps are we/you talking to limit the monopoly of NHS provision?
- Are we/you aware of any examples of the NHS limiting innovation or new service provision through the use of economic muscle?
The NHS and the public it serves will be better for it.