Extra-market incentives in the new NHS

This paper focuses upon a number of features of the NHS reforms which are external to the new market created by the purchaser-provider split. Initially, the market and the problems associated with its operation are examined. Particular consideration is given to the extent to which these problems are likely to hinder the achievement of the Government's objective of improved efficiency in the NHS. Each of the provider, purchaser and consumer sectors of the market is then examined more closely in relation to the extra-market incentives present. It is argued that these incentives do have the potential to complement the purchaser-provider split in encouraging improvements in efficiency. However, in several instances, the incentives are either the wrong incentives or are too weak to have any real impact in changing behaviour. In conclusion, it is argued that there is a need for more direct incentive structures to be introduced if improvements in efficiency are to be realised.