Information failure in the NHS

The NHS gives us so much value, as Economics teachers, as it serves as a great example of so many areas of theory. The story which heads up the BBC News site this morning is another useful one: NHS waiting time data for elective surgery has been found to be 'unreliable'

The NHS, although not strictly non-excludable or non-rival, is provided as if a free public good in order to benefit from the huge positive externalities to be gained from a healthy population.

It is a glowing example of The Economic Problem: scarce resources which have to be allocated as efficiently as possible in order to satisfy our infinite (and growing) needs and wants for healthcare. Waiting time targets have been set by government (government intervention) in order to try to overcome the potential for inefficient use of those resources, which may arise in the public sector without the incentive of the profit motive that the market mechanism would supply.

This also helps to ration the use of those scarce resources. In order to introduce some consumer choice into what is really a monopoly market, patients can choose where they would like to have planned operations - and to overcome the problem of information failure, in which patients don't know which hospital to choose, data is collected and published about how long patients will have to wait for that operation at each hospital.

There are over 19 million referrals from GPs to hospitals for planned operations each year - that implies an operation is needed by almost one in five of the population of the UK each year. The government's target is that the waiting time between referral and having the operation should be no longer than 18 weeks, and the NHS is just about meeting this at present. However, the National Audit Office (which has two aims: to hold government departments and bodies to account for the way they use public money, thereby safeguarding the interests of taxpayers, and to help public service managers improve performance and service delivery) has found that the data supplied by hospitals is unreliable. It found wrong and inconsistent recording after reviewing 650 cases in seven trusts, and said it was unable to discern whether this was deliberate, but says it should be investigated.

Could it be that the data provided by the hospital trusts about their waiting times has been 'fudged' in order to make it appear as if they are meeting the targets, when in reality they are not? Hospital managers may be finding ways to massage the data; the NAO said that in about a quarter of the cases they reviewed, the rules for calculating waiting times were not being correctly applied.As so often happens, government intervention designed to correct for market failure rears its ugly head - it may be that the rules of the system are too complicated or that they don't apply in practice to the range of problems the hospitals face; it's also probably an example of how an attempt to solve one problem simply gives rise to another, and the law of unintended consequences as the requirement to meet targets results in systems of data collection which enable the target to be met, rather than keeping the focus on allocatively efficient use of resources to meet patient needs