Consolidation it is not.

  |   Thought Leadership

A major frustration for us since forming in 2013 and observing NHS policy has been the inability of the NHS to find new voices.


Some NHS think tanks are responding to recent challenges with an urgency to find new models to drive sustainable returns. For the King’s Fund and their war on integrated care, or the Vanguards that are “the battering ram of change” the initial response has been to fortify current sources of competitive advantage.


This often involves consolidation (integrated models), as a possible attempt to create value through vertical integration and scale.


Health Commissioners, faced with pricing pressures, increasing regulatory compliance, and financial distress are running out of ideas beyond transactional leverage and their freedoms appear to be diminishing.


Hospitals, health systems, and primary care are rightly focused on increasing operational efficiency. Yet they are also now obsessed with consolidation such as Integrated Models, Chains and Groups.


Consolidation can bring greater integration and control as well as the opportunity for capturing scale efficiencies. However, the significant investment in vertical infrastructure and organisational dynamics, combined with market concentration, often bring challenges in capturing those opportunities and delivering them to patients. Big is not necessarily beautiful.


These types of responses are understandable. Faced with a period of increased change, uncertainty, and performance pressure, our incumbent health leaders have adopted tactics that seem to offer greater control. Unfortunately, what they are gaining is likely just an illusion of control. The efficiency measures described above may indeed temporarily bolster performance, but they eventually lead to diminishing returns. Costs can only be cut by so much while maintaining quality.


Worse, as we consolidate, the incentive to innovate decreases. In the long term, health care delivery systems may find themselves becoming even more bureaucratic, finding it more difficult to innovate under vertically integrated organisations with significant infrastructure investments.


The consolidation experienced by the banking industry in the 1990s provides a useful illustration of the degree of structural change that market and regulatory changes can catalyse, and underscores the need for incumbents to embrace transformation rather than continue to play by old rules.


The key is a shift in your mindset. Consolidation is not Transformation.


The acceptance of this dynamic and may finally open the door to the evolution of new ideas and potentially new clinical models. This could then allow in more innovation and a new set of incumbents.


If there was an incentive to let them in…