Competitive Strategies in the English National Healthcare System (NHS) - A Case Study of York Teaching Hospital

Increased patient choice and competition are well renowned reform strategies in European Healthcare systems. Despite some debate, these strategies are generally felt to improve efficacy and quality of healthcare. The National Health Service (NHS), England’s publicly funded healthcare system, is similarly undergoing significant government reforms as a result of substantial increases in health care spending and an ageing population. Prior to the reforms, hospitals in England were given a fixed annual budget from the government to treat the patients living in their catchment area and there was no competition and patients subsequently had no choice over where they could have their care. However the government reforms being rolled out over a ten year period propose the following changes: removal of the annual budgets, split up of care into purchasers and providers of care, allow for negotiation on services, introduce a new payment system based on results, introduce a new system whereby patients are given at least four or more providers to choose from, allow private providers to bid for services, and finally allow primary care doctors to commission out services as required. All these reforms allow for increased patient choice between providers and mean that hospitals will have to develop competitive strategies to meet these challenges. The aim of our study is to assess what strategies managers in English hospitals can use in order to gain a competitive advantage and meet the challenges posed by the government reforms. From our literature review we concluded that potential strategies could be either deliberate or emergent and potentially further analysed on a theoretical basis of whether they address the “external” or “internal” frameworks as represented by Porters Theories and the resource based view (RBV) of the firm respectively, as these were felt to be the most applicable to our aims. The SWOT framework was proposed as an appropriate tool as it can be split into these two separate schools of strategy. The first school of strategy characterized by the industrial organization or Porter’s theories is represented by the opportunities and threats and the second school of thought, RBV of the firm, is represented by the strengths and weaknesses. Based on the explorative nature of our research question, a case study using York District Hospital in England was conducted with the use of semi-structured interviews with key management personnel as well as a survey questionnaire to account for all hierarchies of management and to establish the resource profile of the hospital. Firstly we established what competitive strategies are currently being used in the hospital and then a SWOT analysis of our primary data was undertaken in order to analyse and suggest competitive strategies utilising the “external” and “internal” theoretical frameworks. Our results demonstrated that the hospital’s competitive strategies were a mixture of deliberate and emergent strategies. The deliberate strategies predominantly addressed the reforms already in place and focused on improving the quality of essential services in terms of aiming to be the main provider of acute services in the catchment area, attracting standard elective work with existing long waiting times, and expanding non-acute/non-elective care capabilities by forging partnerships and sharing clinical support. As these strategies focus on “where” (acute/elective service) a hospital should be competing they therefore represent the external framework based on Porter’s “positional” approach although there were elements of both schools of thought. The emergent strategies on the other hand, more specifically addressed the reforms being rolled out and were devised taking into consideration aspects such as size, internal resources and competences and therefore represented the internal framework or resource based view as they all involved service diversification by virtue of using specific internal resources and included: increased recruitment of specialised staff, re-organisation of existing clinical space, updating outdated technology and promoting formation of new services such as a weight management clinic with integrated bariatric services. Our study demonstrates that by including important elements from different theoretical perspectives this allows for a greater complexity and a wider scope of analysis when evaluating strategy and enhances our understanding of sustained competitive advantage in the English healthcare system. Based on our study we therefore propose a framework for hospitals in England to use in addressing the competitive challenges posed by the reforms, which consists of two broad but distinct strategies: predominantly deliberate strategies for i) competing on quality of essential services and more emergent strategies for ii) competing on service diversification. Suggested future research possibilities in this area would include repeating the study once the full government legislation comes into place to assess differences in competition and the impact of our suggested strategies.