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Survival of the fittest: will social enterprises thrive in the new world?

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We’ve consistently heard the government message that the NHS should become “the largest social enterprise sector in the world”. Tied into the government’s Big Society vision, it is hoped this will promote local ownership and community interest in public services.

At the same time, the government is committed to promoting greater competition in the health service by allowing any qualified provider to deliver services – a policy which has raised fears over the privatisation of the NHS. Does the encouragement of social enterprise demonstrate a more politically acceptable alternative, i.e., a greater diversity in provision, but delivered by organisations with a social purpose, and a commitment to reinvesting any surplus for the benefit of their patients and staff (rather than into the hands of shareholders)?

This all sounds good in principle. The question is whether these emergent organisations can really compete with the likes of private companies and large voluntary sector providers – who may have more experience in negotiating contracts with commissioners. In particular, large private sector providers of NHS care may have more of the necessary business acumen to operate and grow in a competitive market. They can also keep costs down through economics of scale and provide services across large areas.

In contrast, many social enterprises have emerged from primary care trust provider arms – some taking the entire provider service with them, and others breaking away into smaller enterprises that deliver distinct types of care. Through our research we found that some of these organisations decided to move in this direction because they could see the benefits of freeing themselves from central management and giving staff more control over the way the organisation is run.

However, there were others that jumped ship much more reactively – seeing social enterprise as a way of securing a long-term contract with their PCT and protecting themselves from being taken over by another organisation.

This security is no longer available – these long-term contracts are not guaranteed and the government commitment to any qualified provider means that these breakaway organisations will not automatically become the preferred provider. Instead commissioners will be looking for providers that deliver value for money and can demonstrate a track record of achieving outcomes. Social enterprises might again be vulnerable to failure when pitted against larger and more experienced providers, making it very difficult for them to compete in this environment.

The intention of competition is that it drives efficiency and innovation. Social enterprises – without the constraints (but also the security) of the Department of Health oversight – have the freedom to become more efficient in the way they deliver care, and think intelligently about how to grow their services. It is only through developing more sophisticated and long-term business models that meet and anticipate the needs of the patient populations that social enterprises will be able to compete with the big players.

The latest on health and social enterprise, as reported by LGC’s sister magazine, HSJ.

Health reporting HSJ and LGC logo

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