NHS London Market Analysis

1. 4 September 2012 NHS London Market Analysis Knowledge Transfer workshop slides

2. Introducing our Market Management slides As part of our work for NHS London, we have developed a series of four workshops designed to begin to introduce the concepts associated with market management The following slides contain the main elements of the workshops held in September and October 2008 at which both NHS London and PCTs from across London were in attendance The slides are meant to be a useful reference, with more detailed guidance for PCTs to follow Should you have any questions, please do not hesitate to contact us at jhely@uk.ey.com

3. Contents Slides Workshop 1: Market definition in healthcare Workshop 2: Using market definition and analysis to develop commissioning tools Workshop 3: The London healthcare market Workshop 4: Moving from potential to realisable benefits

4. 4 September 2012 Knowledge Transfer (1) Market definition in healthcare

5. We are working with NHSL to analyse markets, recommend interventions and define functions and competencies Where the NHS is today From system design to management Fixed price systems with active PCT commissioning and direct patient choice PCTs to decide the scope and extent of competition locally… …within acceptable principles and rules (PRCC) HQCfA: increased choice of GP and community

6. Commissioners should commission services from the providers who are best placed to deliver the needs of their patients and population Providers and commissioners must cooperate to ensure that the patient experience is of a seamless health service, regardless of organisational boundaries, and to ensure service continuity and sustainability Commissioning and procurement should be transparent and non-discriminatory Commissioners and providers should foster patient choice and ensure that patients have accurate and reliable information to exercise more choice and control over their healthcare Appropriate promotional activity is encouraged as long as it remains consistent with patients’ best interests and the brand and reputation of the NHS Providers must not discriminate against patients and must promote equality Payment regimes must be transparent and fair Financial intervention in the system must be transparent and fair Mergers, acquisitions, de-mergers and joint ventures are acceptable and permissible when demonstrated to be in patient and taxpayers’ best interests and there remains sufficient choice and competition to ensure high quality standards of care and value for money Vertical integration is permissible when demonstrated to be in patient and taxpayers’ best interests and protects the primacy of the GP gatekeeper function; and there remains sufficient choice and competition to ensure high quality standards of care and value for money

7. The objectives of the knowledge transfer workshops To create an understanding of the economic fundamentals of markets and competition To understand how to analyse markets, develop strategies and levers and move to execution To present preliminary analysis of NHS markets in London To consider the steps you need to take to market manage

8. Objectives of this session Provide insight into how to think rigorously about competition Provide a foundation for the development of commissioning tools and strategies Help you to understand documents and analysis coming out of Department, SHA and others

9. Overview of the session Following this introduction, this session has 4 parts: Overview of markets and competition Geographic market definition Product market definition Market definition – bringing it together

10. Market and competition: why bother? Potential benefits of competition are well known: patients and public: improved quality, health outcomes, reduced inequalities tax payer: better value for money NHS: effective use of resources, environment that rewards excellence and innovation, strong NHS brand and reputation Understanding competition is about knowing: When to use competitive mechanisms How to realise the above benefits when using competition

11. Competition is one tool among many DH and NHS have a wide range of tools available to meet health service objectives: Clinical rules and regulations Training standards and requirements Regulatory instruments Contractual conditions and requirements Competition in and for the market Competition, like all the others, is a means to an end. The right tool will depend on the circumstances.

12. Overview

13. We think of markets in terms of: supply and demand, and competition in and for the market Markets in health are characterised by: supply: Trusts, Foundation Trusts, Independent Sector, Social Sector, PCT provider arms, GP practices etc demand: PCTs, GPs, patients Competition can be: in the market : Trusts compete to attract patients directly for the market: Trusts compete to attract commissioners Competition brings benefits to elective and also non-elective health care. For non-elective care the competitive dynamic operates through the commissioning process.

14. What do we mean by “the market”? Example: Enter a grocery store, where does the market begin and end? Soft drinks, juice, wine, meat…

15. Two concepts are used: competitive tension … Competitive tension is the incentive to perform created by the ability of: your customers to switch your competitors to change their offer new competitors to enter Switching is at the heart of competitive tension (following our example: Coke, Pepsi and Chicken)

16. …and critical loss Q: But how much competitive tension is enough? A: When it prevents a significant erosion of quality because of the risk of losing too much revenue

17. Together that provides the overall framework The market is defined in: Geographic space: competitive tension that exists because of proximity of providers Product space: competitive tension that exists because there are alternative procedures or clinical resources The determination of the relevant geographic and product space rests on: Competitive tension Critical loss

18. Geographic market definition

19. There are different types of geographic market

20. Historically, this is mainly a demand-side question… Where there is competition in the market: patients do not know the administrative boundaries patients unlikely to care about pure distance travel times matter the most to patients

21. …but there are clear supply-side elements Where there is competition for the market: PCTs may be more focused on administrative boundaries… …but wider issues of provider location increasingly important… …need to consider travel times for many services Particularly the case where providers can enter easily

22. Appropriate definition will depend on how choice is exercised, and by whom There is no simple rule to apply for the choice of geographic area (e.g. length of travel time) Need to consider different: geographies (rural versus urban areas) modes (public transport versus by car) opportunity costs (children, working age, pensioners) services (GP versus acute) Existing precedent may not be very helpful

23. Product market definition

24. Product market definition in health is mainly a supply-side question … Central question for product definition: to what extent can providers switch clinical resources between treatments? Puts focus on supply-side flexibility of capital equipment flexibility of staff And on the location of treatment (in-patient versus outpatient) On demand side – cannot really switch between treatments once diagnosed (although some exception in primary and community care)

25. …but there are demand-side issues Particularly in the distinction between: Prevention and treatment Location of treatment and in-patient versus out-patient status Areas of well being (e.g. obesity)

26. It involves answering a few key questions Defining the relevant product market returns to switching: How quickly can a provider switch from one service to another? for example: can a knee surgeon do hips? Can an ultrasound technician do X-rays? At what level do patients or GPs make choices? based on the level at which GPs can diagnose and refer

27. This results in a segmentation of the market May consider a product market segmentation based on specialties and sub-specialties

28. Market definition – bringing it together

29. Example: knee replacements in Camden

30. Market definition: define geographic and product markets

31. Definition allows us to diagnose the state of markets

32. But market definition is only the start

33. 4 September 2012 Knowledge Transfer (2) Using market definition and analysis to develop commissioning tools For information on applying this template to an existing presentations, refer to the notes on slide 2 of this presentation. The Input area of the Beam can be customised to reflect the content of thepresentation. The Input area is an AutoShape with a picture fill. To change this, ensure you have the image you wish to use (ideally a .jpg or a .png file) in an accessible folder. The image should have a ratio of 1:1 to ensure it does not appear distorted. It is not possible to reposition the image within the Input area. Acceptable images for importing into the Input area of the Beam are the three approved graphics (lines), and black and white photography or illustrations which follow the principles laid out on The Branding Zone. Colour images should never be imported into this area. Please be aware that replacing the Input area with high resolution graphics will significantly increase the file size. Contact your local DDC for assistance with updating the Beam. Customise the Input area of the Beam as described below. Click on the View tab from the menu bar and select Master>Slide Master Right-click on the Input graphic and select Format AutoShape From the Fill menu, under the Colour and Lines tab, click on the drop-down arrow next to Colour and select the Fill Effects menu From the Picture tab, click on Select Picture. Navigate to the folder containing the image you wish to insert in the Input area. Highlight the image and tick the Lock picture aspect ratio box. Click on OK You can now preview the image before continuing. If you are happy with how it looks, click OK to continue. Otherwise, repeat the process until you are happy with your selected image To exit from Master View, click on View>Normal. The change you made to the Input graphic should now be visible on the title slide.For information on applying this template to an existing presentations, refer to the notes on slide 2 of this presentation. The Input area of the Beam can be customised to reflect the content of thepresentation. The Input area is an AutoShape with a picture fill. To change this, ensure you have the image you wish to use (ideally a .jpg or a .png file) in an accessible folder. The image should have a ratio of 1:1 to ensure it does not appear distorted. It is not possible to reposition the image within the Input area. Acceptable images for importing into the Input area of the Beam are the three approved graphics (lines), and black and white photography or illustrations which follow the principles laid out on The Branding Zone. Colour images should never be imported into this area. Please be aware that replacing the Input area with high resolution graphics will significantly increase the file size. Contact your local DDC for assistance with updating the Beam. Customise the Input area of the Beam as described below. Click on the View tab from the menu bar and select Master>Slide Master Right-click on the Input graphic and select Format AutoShape From the Fill menu, under the Colour and Lines tab, click on the drop-down arrow next to Colour and select the Fill Effects menu From the Picture tab, click on Select Picture. Navigate to the folder containing the image you wish to insert in the Input area. Highlight the image and tick the Lock picture aspect ratio box. Click on OK You can now preview the image before continuing. If you are happy with how it looks, click OK to continue. Otherwise, repeat the process until you are happy with your selected image To exit from Master View, click on View>Normal. The change you made to the Input graphic should now be visible on the title slide.

34. Overall process

35. Markets in health are characterised by: Supply: Trusts, Foundation Trusts, Independent Sector, Social Sector, PCT provider arms, GP practices etc Demand: PCTs, GPs, patients Competition can be: In the market : Providers compete to attract patients directly (contract in place) For the market: Providers compete to attract commissioners (little choice) Competition brings benefits to elective and also non-elective health care. For non-elective care the competitive dynamic operates through the commissioning process. Recap fundamentals of markets and competition

36. What do we mean by “the market”? The market is defined in: Geographic space: competitive tension that exists because of proximity of providers Product space: competitive tension that exists because there are alternative procedures or clinical resources

37. Market definition: define geographic and product markets

38. Summary of levers available to Commissioners

39. What is Strategic Sourcing – A definition

40. Strategic Sourcing – isn’t…

41. Parallels with Commissioning

42. Traditional Sourcing levers (goods & services) – pricing (cont.)

43. Commissioning Portfolio analysis – Positioning as-is The market analysis informs whether the care type requires competition in the market, for the market, or (occasionally) a hybrid of each.

44. Aligning to Sourcing levers and interventions – To Be

45. Benefits beyond procurement

46. 4 September 2012 Knowledge transfer (3) The London healthcare market For information on applying this template to an existing presentations, refer to the notes on slide 2 of this presentation. The Input area of the Beam can be customised to reflect the content of thepresentation. The Input area is an AutoShape with a picture fill. To change this, ensure you have the image you wish to use (ideally a .jpg or a .png file) in an accessible folder. The image should have a ratio of 1:1 to ensure it does not appear distorted. It is not possible to reposition the image within the Input area. Acceptable images for importing into the Input area of the Beam are the three approved graphics (lines), and black and white photography or illustrations which follow the principles laid out on The Branding Zone. Colour images should never be imported into this area. Please be aware that replacing the Input area with high resolution graphics will significantly increase the file size. Contact your local DDC for assistance with updating the Beam. Customise the Input area of the Beam as described below. Click on the View tab from the menu bar and select Master>Slide Master Right-click on the Input graphic and select Format AutoShape From the Fill menu, under the Colour and Lines tab, click on the drop-down arrow next to Colour and select the Fill Effects menu From the Picture tab, click on Select Picture. Navigate to the folder containing the image you wish to insert in the Input area. Highlight the image and tick the Lock picture aspect ratio box. Click on OK You can now preview the image before continuing. If you are happy with how it looks, click OK to continue. Otherwise, repeat the process until you are happy with your selected image To exit from Master View, click on View>Normal. The change you made to the Input graphic should now be visible on the title slide.For information on applying this template to an existing presentations, refer to the notes on slide 2 of this presentation. The Input area of the Beam can be customised to reflect the content of thepresentation. The Input area is an AutoShape with a picture fill. To change this, ensure you have the image you wish to use (ideally a .jpg or a .png file) in an accessible folder. The image should have a ratio of 1:1 to ensure it does not appear distorted. It is not possible to reposition the image within the Input area. Acceptable images for importing into the Input area of the Beam are the three approved graphics (lines), and black and white photography or illustrations which follow the principles laid out on The Branding Zone. Colour images should never be imported into this area. Please be aware that replacing the Input area with high resolution graphics will significantly increase the file size. Contact your local DDC for assistance with updating the Beam. Customise the Input area of the Beam as described below. Click on the View tab from the menu bar and select Master>Slide Master Right-click on the Input graphic and select Format AutoShape From the Fill menu, under the Colour and Lines tab, click on the drop-down arrow next to Colour and select the Fill Effects menu From the Picture tab, click on Select Picture. Navigate to the folder containing the image you wish to insert in the Input area. Highlight the image and tick the Lock picture aspect ratio box. Click on OK You can now preview the image before continuing. If you are happy with how it looks, click OK to continue. Otherwise, repeat the process until you are happy with your selected image To exit from Master View, click on View>Normal. The change you made to the Input graphic should now be visible on the title slide.

47. The objectives of this session are to: Discuss the process through which a view on market dynamism can be obtained Discuss the key indicators relevant to understanding market dynamism Use two to explore what the information tells us and consider potential responses

48. Four key elements help us to understand level of dynamism

49. Market dynamism is designed to drive up quality Competition is one tool among many It is a means of improving quality – and should only be used when suitable Assessment of costs and benefits Understanding of market failures It cannot be understood with a single indicator – it is a process

50. Some things to keep in mind when interpreting the examples we will present This reflects very preliminary analysis - treat it as illustrative for now Health markets are historically concentrated Competition is only one mechanism to drive up quality Much of the reforms, particularly choice, are in their very initial stages There is no single indicator, or hurdle, for when there is sufficient competition

51. To illustrate how this approach works we have applied it to two hospital based services

52. UCLH treats 20% of chemotherapy patients

53. Barking, Havering and Redbridge appears to treat the most number of trauma patients

54. Choice for chemotherapy patients appears to vary across London

55. …where access for trauma patients falls outside the centre

56. Concentration is relatively low and uniform for hospital-based chemotherapy services

57. …but trauma services see more areas of higher concentration

58. Indications are that chemotherapy patients are switching between providers

59. …as they have in relation to trauma services but are the drivers the same?

60. Using both quantitative and qualitative analysis, an assessment of market rivalry can be made What has been the levels of market entry and exit? Who has left and why Who has entered and why What is the level of information asymmetry between patients (or their commissioning agents) and providers? How concentrated is the market and to what degree has it been manipulated?

61. Dynamism provides a useful economic assessment of the market…but overlaying quality adds to context Quality metrics are likely to be different between markets The range of metrics used to indicate the level of quality need to be both input and output dimensions For hospital-based chemotherapy services, quality indicators may include ‘performance metrics’ but are, in reality, likely to be more focused on patient experience surveys Whereas for trauma indicators may include EBDs, readmission rates, SMI, wait for surgery, procedure utilisation, volume of procedures There is no single indicator, or hurdle, that indicates quality

62. A dynamism dashboard offers an interesting but preliminary insight into markets

63. We’ve analysed the market…so what?

64. Knowing the “as-is” allows us to consider the future optimal state and the potential levers for change

65. 4 September 2012 Knowledge transfer (4) Moving From Potential To Realizable Benefits Knowledge transfer workshop For information on applying this template to an existing presentations, refer to the notes on slide 2 of this presentation. The Input area of the Beam can be customised to reflect the content of thepresentation. The Input area is an AutoShape with a picture fill. To change this, ensure you have the image you wish to use (ideally a .jpg or a .png file) in an accessible folder. The image should have a ratio of 1:1 to ensure it does not appear distorted. It is not possible to reposition the image within the Input area. Acceptable images for importing into the Input area of the Beam are the three approved graphics (lines), and black and white photography or illustrations which follow the principles laid out on The Branding Zone. Colour images should never be imported into this area. Please be aware that replacing the Input area with high resolution graphics will significantly increase the file size. Contact your local DDC for assistance with updating the Beam. Customise the Input area of the Beam as described below. Click on the View tab from the menu bar and select Master>Slide Master Right-click on the Input graphic and select Format AutoShape From the Fill menu, under the Colour and Lines tab, click on the drop-down arrow next to Colour and select the Fill Effects menu From the Picture tab, click on Select Picture. Navigate to the folder containing the image you wish to insert in the Input area. Highlight the image and tick the Lock picture aspect ratio box. Click on OK You can now preview the image before continuing. If you are happy with how it looks, click OK to continue. Otherwise, repeat the process until you are happy with your selected image To exit from Master View, click on View>Normal. The change you made to the Input graphic should now be visible on the title slide.For information on applying this template to an existing presentations, refer to the notes on slide 2 of this presentation. The Input area of the Beam can be customised to reflect the content of thepresentation. The Input area is an AutoShape with a picture fill. To change this, ensure you have the image you wish to use (ideally a .jpg or a .png file) in an accessible folder. The image should have a ratio of 1:1 to ensure it does not appear distorted. It is not possible to reposition the image within the Input area. Acceptable images for importing into the Input area of the Beam are the three approved graphics (lines), and black and white photography or illustrations which follow the principles laid out on The Branding Zone. Colour images should never be imported into this area. Please be aware that replacing the Input area with high resolution graphics will significantly increase the file size. Contact your local DDC for assistance with updating the Beam. Customise the Input area of the Beam as described below. Click on the View tab from the menu bar and select Master>Slide Master Right-click on the Input graphic and select Format AutoShape From the Fill menu, under the Colour and Lines tab, click on the drop-down arrow next to Colour and select the Fill Effects menu From the Picture tab, click on Select Picture. Navigate to the folder containing the image you wish to insert in the Input area. Highlight the image and tick the Lock picture aspect ratio box. Click on OK You can now preview the image before continuing. If you are happy with how it looks, click OK to continue. Otherwise, repeat the process until you are happy with your selected image To exit from Master View, click on View>Normal. The change you made to the Input graphic should now be visible on the title slide.

66. Understanding the current landscape What are the challenges that you face in some of the markets across your PCT? To what extent does your PCT understand the its current markets? For the 3 markets below, what steps can you take to better understand current market dynamics: - GP - Maternity - Community Services

67. Defining the “future” state and how to get there Within the 3 markets, discuss how will you establish a future market state? How much choice and competition do you need? What is the role of customer engagement in shaping the future state? Is choice a means, and end or both? Discuss the levers that you believe will deliver the improvements you require. Balance between commercial and consumer levers? How will you identify and engage potential new market entrants? What changes are required to incentives/contracts? How do you approach sourcing? How do you segment customer wants and needs and engage differentially? How will you know if you’re making progress?

68. Priorities and actions What are the barriers to achieving “utopia” and what may mitigate these? What do PCTs need to do differently to become market developers/managers? become more commercial and better at sourcing? engage the customer more effectively? What prevents them getting on with this? How will MM link into your WCC competency development plans?

69. Workshop feedback: What are the challenges that you face in some of the markets across your PCT? PCTs are on one hand encouraged to drive patient choice, while being provided contradicting messages to support failing organisations. This does not feel like a true market… PCTs are questioning why they should support poor performing providers if this is resulting in poor outcomes PCTs are standing by failing organisations, who are strategic partners, and feel strongly that they will work with them to improve clinical outcomes PCTs are finding it difficult to understand the market for specialist services where there is little understanding of service provision, i.e. prison services It is felt there is a lack of understanding about how GP and other services such as pharmacy interact and how much competition exists between them PCTs are beginning to understand the information needs, but are still developing a baseline from which to be able to assess the data It is difficult managing expectations of stakeholders who assume WCC is already in place, which is not the case Differing ranges of providers are required to cater for the diverse communities that exist within PCTs

70. Workshop feedback: Challenges in the GP market Extremely difficult to close or merge GP practices to raise quality of service The criteria by which GP practices are approved do not take into account the range of other community services that are or may not be in place, such as practice nurses etc APMS contract offers PCTs a wider range of levers to manage the GP market, than the restrictive GMS contract Financial incentives are proving less effective in driving the appropriate behaviour, as GPs are now being well remunerated and the incremental reward, in some cases, is insufficient to make them change behaviour GPs are becoming increasingly business based and will not take on new partners, but rather employ salaried GPs There is difficulty bringing in new providers into the GP market as barriers such as capacity and infrastructure are relatively high Perceived GP quality is different from the service quality actually being delivered

71. Workshop feedback: Challenges in the Maternity Market Patient choice is not always logical, demanding maternity services be provided close to home but regularly going to hospitals further away for their maternity services, due to perceived quality factors GPs are increasingly getting involved in pre and post natal services There is a case for strong maternity brand hospitals (i.e Queen Charlotte) to provide outreach centres and/or franchise their services

72. Workshop feedback: Current understanding of the GP market Ageing GP population Fragmented market Patchy supply of GP services Increasing regulation Existing GMS contract in not fit for market management Segmented consumers – changing with lifestyles Political sensitivity to bring in new providers Nationally there is around 10% of patient switching in the GP market, 5% of which is not with changing address

73. Workshop feedback: Defining the future of the GP market Some GPs are acting as commissioners and providers Limited number of clinicians Perverse incentives must be avoided The people who will not exert choice are the most vulnerable with LTCs Removing GPs from the register needs to become easier PCTs need to publicise more data to inform and educate patients

74. Workshop feedback: Levers available to PCTs National tariffs need to be reviewed More collaborative PCT work is needed Contractual levers need to be deployed more widely Poor performing organisations need to be removed quicker Higher bar needs to be set for QOF points Commissioners should set standards of care Commissioners need to understand what other providers are out there Greater intelligence is required in the number of providers Culture / language factors of choice need to be accounted for more GMS contracts need to be reviewed QOF standards need to be raised

75. Workshop feedback: Value of workshops PCTs need regular forums to meet and discuss WCC Further pan-London dialogue is required about the new commissioning system A standardised and agreed language of WCC terminology needs to be developed, to ensure everyone has the same understanding individually and across PCTs

76. 4 September 2012