Internal Market Reform of the British National Health Service

Prologue: In 1984, Gordon McLachlan, then director of the Nuffield Provincial Hospitals Trust in London, invited Stanford professor Alain Enthoven to spend a month in the United Kingdom reviewing the British National Health Service (NHS). At the end of his visit, Enthoven was to give a talk to the Nuffield board of trustees, offering his views on which direction the NHS should head as the British government contemplated its reform. Enthoven's findings were published in 1985 as Reflections on the Managment of the National Health Service , a document that eventually reached the hands of then Prime Minister Margaret Thatcher and her advisers. “Enthoven's notion of an 'internal market 1 in the NHS … looks remarkably like the solution adopted by the government four years later,” Rudolf Klein and Patricia Day have noted. In this article, Enthoven examines the concept of internal market reform, which is designed to address the perverse economic incentives that have existed for years in the NHS. “The NHS is intensely political,” Enthoven said. “All over the world, it carries much ideological freight. What I have done is to look at it as a practical problem in organizational management: how to structure the service so that desirable innovations will happen.” Enthoven's association with Britain is a long and fruitful one. The son of a British father, he studied at Oxford as a Rhodes scholar, received a master of philosophy degree in economics, and later returned as a visiting fellow at St. Catherines College, Oxford. He received his doctorate in economics from the Massachusetts Institute of Technology and is Marriner Eccles Professor of Public and Private Management at the Stanford University Graduate School of Business. More recently, he has studied the Dutch and Swedish health systems and has advanced the notion of “managed competition” in the United States.