Fewer hospitals, more competition

The NHS should not be immune from the drive to reduce public spending. The structural deficit in the public sector is due to sustained over-spending and the largest part of that spending was targeted on the NHS. The NHS accounted for 40 per cent of the increase in inputs across the whole public sector between 1997 and 2007.

The closure of hospital services, in most cases due to a redesign of service provision, will be one of the best ways for the NHS to reduce activities and control costs. It is consistent with the long term change in health needs. Since the conquest of infectious diseases sixty years ago, health services have defined their core business as short episodes of hospital-based treatment with the aim of reducing mortality from coronary heart disease and cancer. Now health services face the key challenge of improving quality of life for survivors with longer term conditions and reducing disability.

The NHS has been right to reduce hospital beds by over a third over the last twenty years, from 270,000 to 160,000. But these reductions have mainly been achieved in specialist care while the acute sector has only seen modest reductions since the early 1990s.

London, the North East and the North West have the highest density of hospital beds and should be expected to deliver the greatest closures of services. The North East has 4.13 beds for every 100,000 people compared to 2.54 beds in the South Central SHA. Similarly there is one acute trust site for every 73,000 people in the North East, compared to a ratio of one site for every 196,000 people in the South Central SHA.

The Department of Health asked Strategic Health Authorities to develop proposals to reconfigure services as part of the 2008 Darzi Review and, following the recession and the expectation of zero funding growth from 2011, called for updated plans by March 2010. The London Strategic Health Authority has published a plan to reduce bed numbers in the capital by a third, while other Strategic Health Authorities are currently developing plans to meet the spending squeeze.

The reconfiguration of services will be most effective if they are local initiatives carried out by locally accountable managers. But the current policy framework militates against this. While Primary Care Trusts are nominally in charge of individual reconfigurations, the Department of Health has sought to centralise decision-making over the last three years. As such, there is a risk that service redesigns become top-down exercises, which would not answer local needs and would lack local legitimacy.

A further constraint on the ability of Primary Care Trusts to effectively reconfigure services is the reluctance of Ministers and MPs to support local hospital reconfigurations. The Conservative Party is wrong to pledge a moratorium on service redesign should it win election. Such a moratorium will hold back the improvement in efficiency that the service needs.

The ability of competition to drive up health standards and productivity becomes especially important when service redesigns are being undertaken. Some take the opposite view, believing that greater competition will lead to greater capacity and so increasing cost. But this fails to consider the ability of competition to lead to productivity improvements. These can mean that the supply of health services can expand even when bed, ward and hospital numbers are falling.

In recent years NHS leaders have turned to integrated care as a model of health services that has the potential to deliver higher quality at reduced cost. However, without competition and reform on the front line, integrated care threatens to transfer bad working practices to another part of the system without reducing costs. Real innovation will come from reforming the front line, not simply driving change from the centre.

Key ways in which better standards and improved productivity could be driven in the health system include:

  • Commission the service not the facility. Commissioning should not be used as a mechanism for protecting numbers of beds, wards and hospitals – commissioning should focus on health outcomes not inputs into the service.
  • Commit to greater plurality in supply and reverse the “NHS preferred provider” policy. The ability of competition to drive better standards and productivity growth is crucial for ensuring that spending reductions do not lead to “salami slicing cuts” and a decline in quality.
  • Commit to plurality of supply within existing settings – such as through approaches like service line management (where decision making and budgets are devolved to specific, clinically-led operational units).
  • Ensure the rules for competition are clear, consistent and enforceable. This could involve asking the NHS Co-operation and Competition Panel to review existing provision (as well as changes to that provision).
  • Incentivise service redesign through reform to make the NHS locally accountable and by clarifying the ability of Primary Care Trusts (PCTs) to retain some of the financial savings that they achieve from improvements in health outcomes and productivity.
  • Incentivise service redesign through considering reforms such as giving patients a choice of PCT (to ensure that ongoing pressures for service redesign reflect the preferences and needs of consumers).