NHS reform: national mantra, not local reality

Reform’s fourth annual NHS report begins with a review of seven international clinical benchmarking exercises presented in 2007. The exercises have revealed what amounts to a cradle-to-grave performance gap compared to peer group countries. Separate reviews of UK services, such as maternity, have also raised grave concerns. The consultation document for the redesign of the London NHS gave a realistic assessment: “The UK is falling behind other countries in the quality of care we give to patients, access to care, and the cleanliness of our hospitals.”

Other research has shown that the NHS is facing a perfect storm – an ageing population, expensive new technology and a more informed society. The compliant stoicism of post-war Britain has evaporated.

The medium term requirement is investment in many areas. Funding will be restricted given the immediate pressures of a slowing economy and longer term concerns over economic competitiveness. The strategic challenge is to redesign and improve services within a ceiling of 9-10 per cent of GDP.

2008 is a turning point, with two possible futures:

  • NHS opportunity. In the positive scenario, greater efficiency and productivity would not only release resources for new investment but also release local managers to innovate. Dedicated staff would achieve better results for patients and for local communities – and derive a greater sense of reward in terms of innovative local services. Excellent service and immediate access are achieved for 9-10 per cent of GDP.
  • Managing NHS decline. The negative scenario would see cost increases eat away at the margin for investment in new services and at management capacity. The service would suffer from the illusion that “progress” is measured in extra resources. An outflow of talented staff would exacerbate difficulties. Substandard quality and access are achieved for 11-12 per cent of GDP. The performance gap would widen.

The Department of Health’s rhetoric is consistent with the positive scenario. Officially, 2008 will see the completion of the current reform programmes (except payment by results). But this is a national mantra rather than local reality.

The problem is not the principle of reform. In principle, the reform programmes will rightly shift the balance of power in the service towards consumers and allow competition and choice to drive innovation. They will also reorient services towards integrated care and prevention.

But the internal market has become lopsided. Crucially, the demand side programmes have failed to drive significant changes in services in the interests of patients. Management ability, flexibility and (increasingly) financial surpluses lie on the side of the providers:

  • Primary Care Trusts. The great majority of PCTs have not embraced competition or sought to achieve a reorientation of services towards prevention and primary care. The Department of Health continues to distract PCTs from long-term thinking with short term directives.
  • Practice-based commissioning. While PBC uptake is widespread, practices still lack timely and credible budgets.
  • Patient choice. The proportion of patients being offered choice is less than 50 per cent and falling. Some PCTs see patient choice as a risk factor rather than a means to improvement. One independent sector hospital provider reported being told by a PCT that an ISTC would be taken off the choice menu if it proved too popular.
  • Independent sector secondary care. Such provision is in retreat. Current policy will not create the critical mass of provision identified by the Department of Health’s Commercial Directorate in 2005. The future of the sector lies in the hands of local commissioners but few PCTs will interpret contestability as a gain to local services.
  • Independent sector primary care. The procurement of new privately run primary care practices is welcome but too small to have any meaningful impact on supply in underdoctored areas, on quality in underperforming PCTs and on greater access (including out-of-hours care).
  • Payment by results. Both the widening of the national tariff and its unbundling have been delayed.

The return of the service to financial surplus does not signify a new settlement in which investment can take place. The surplus is due to a temporary combination of the last years of major funding increases and a pause in centrally-prescribed cost increases, which are already building up again. The Department’s latest estimate for the future costs of hospital construction is nearly £15 billion, for example, compared to its maximum estimate of £6 billion two years ago. It made spending commitments of over £1 billion in December 2007 and January 2008 alone.

Current trends therefore point to the scenario of decline. But this is not inevitable. An acceleration of real change would unlock the benefits of reform before the next General Election.

The key to unlocking opportunity is an economic constitution for the service that defines duties to create value at all levels. It should have the following features

  • More power to customers. The constitution should be based on informed choice of both commissioner and provider. This would be a major advance due to the introduction of choice for non-consultant-led services. It should also increase the use of direct payments.
  • Stronger independent commissioning. There should be clear and distinct separation of roles at all levels.
  • Provider pluralism. The economic constitution would set out the priority of developing a variety of providers. A viable market can only develop where the NHS accepts that its own capacity is going to reduce over time in order to allow a market to develop.
  • Flexible labour markets. The inability of central agencies to plan manpower, salaries and training make these a priority.
  • A clear success and failure regime, on the model of the private sector.
  • Flexible prices determined by quality and cost.
  • Separation of central regulatory and political/strategic responsibilities.

Such a constitution will create incentives for better financial management. The system continues to lacks the basic tools of financial management which give staff the capability for achieving value for money.

It would meet the Prime Minister’s call for a new focus on public health and inequalities. The reform agenda is essential for any new moves to improve access in deprived areas.

The current drift of policy ignores the very clear international evidence about the gains to choice and competition. Strong use of incentives and pluralism have practically eliminated waiting times in a range of developed countries including Denmark, Belgium, Spain and Australia (and have led to as good or better outcomes and better access area than in England). England has seen significant reductions in waiting but these have been bought at a huge cost. They could have been achieved much more quickly by use of competition and pluralism with a more limited and targeted increase in funding

An economic constitution based on incentives, pluralism and local capability should be the key outcome of the Department’s current landmark review.