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What makes the NHS different to other services that have undergone market reform?

Alisdair Stirling looks at what makes the NHS ‘market' unique and what similarities the model proposed will have with utility companies that have gone before

The Health Bill and Social Care Bill will for the first time place the NHS on the same legal footing as utility and transport companies.

On the face of it, there appears to be little common ground between the supply of healthcare and the supply of water or electricity. The NHS is about people - not inanimate commodities. It´s also a service most of us are emotionally involved with, not least because of such matters as birth, sickness or death that make it referred to by some as ‘our cherished NHS'. Few get misty-eyed about electricity or the gas supply.

But opening up the NHS to a greater range of providers as the Bill sets out to do, means practical steps have to be taken to safeguard vital services should those providers fall victim to adverse market forces and go bust.

And in its calibrated legalese, Chapter 6 of the Bill takes the radical step of replacing the parts of the NHS Act 2006 concerning ‘voluntary arrangements and dissolution' to be replaced by the relevant sections of the Insolvency Act 1986.

The Insolvency Act allows ‘step-in rights' for the industry regulator to ask the courts to appoint a ‘special administrator' - usually an accountant – not to pay off creditors and close the service down and as they might do with a normal company, but to continue to run it.

Former Labour Transport Secretary Stephen Byers invoked the Act in 2001 when Railtrack the company which then ran the rail network foundered. Accountants Ernst and Young were brought in to run the service as special administrators.

These powers will be invoked in the NHS when a service provided by an insolvent company has been ‘designated' by Monitor as essential in response to an application from a GP commissioning consortium.

Monitor will be able to apply to the courts for a ‘health special administration order' when a provider – which could include an NHS Foundation Trust - becomes insolvent. Where that provider provides designated services, the legislation will ensure that those services continue to be provided.

And as with the utilities and the transport sector, that could mean big accountancy stepping in and running the provider as a ‘zombie', rationalising it or splitting it up, transferring its services to a new provider -either inside or outside the NHS family- or, most radically, transferring the running of the service to its own healthcare provider arm.

And firms such as Ernst and Young are already prepared for action in the health sector.

‘Health care is not a utility - but it is also not a religion,' says Andrea Longhi, health partner at Ernst and Young.

‘While healthcare is incredibly important to all of us, other services are too. If the taps stopped running, how long would we last? If London Underground stopped tomorrow we´d face serious problems as a society. The utilities and the railways can´t be allowed to go under.

‘In the NHS, the Care Quality Commission could close parts of a hospital leading to loss of income and they could run out of cash. Or there could be a structural issue to do with overcapacity that could have the same effect.

‘In a case like that, the Bill allows that a special administrator, such as Ernst and Young, could be appointed, to take over and ensure the service continues to be provided – without missing a heartbeat.'

Alisdair Stirling is a freelance journalist

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