The hospital is dead, long live the hospital

The financial pressure facing the NHS is unprecedented. Over the course of this Parliament the health service must deliver £20 billion of efficiency savings. With 50 per cent of the health budget spent in hospitals, NHS hospital trusts are in the front line in the drive to achieve more for less.

Cutting costs in hospital services means that services need to be transformed, with fewer beds, smaller wards and in some instances complete conversions of the way in which hospitals work. The financial pressures on hospitals are not a short term problem. Some hospitals have been facing difficulties for years, often associated with the delivery of poor quality care, and a growing number will become financially unviable.

Over the course of this Parliament as many as 40 hospitals may have to change radically or close. Currently, hospital failure is averted by granting a variety of forms of interim financial support, yet if the Government is to continue to protect all of England’s hospitals from closure or reconfiguration then this “inefficient hospital fund” could grow to as much as £8 billion. This would mean that the Chancellor will have to find an extra £5 billion to bailout the NHS by 2013.

It is not only financial pressures that are causing hospitals to change. Changing health needs and the challenges of managing care for people with long term conditions make it imperative to develop new health services. Alongside hospital turnarounds to ensure affordable high quality healthcare, integrated care services will have to be organized around patients outside the hospital settings. Integrated care demands that more services are delivered in the community and home, harnessing the potential of modern medicine and the latest technologies.

NHS hospitals currently try to be all things to all people and deliver every healthcare service to everyone. This is no longer clinically no financially sustainable and it holds the NHS back from delivering better, safer and higher quality care. To survive hospitals need to change their business models. They should become either “solution shops”, which focus on diagnosing patients, or organize treatment efficiently and safely in a “factory” mode or production that delivers “valued added processes” for patients.

To some extent, these modern organisations already exist in the NHS and across the world in emerging economies and more developed countries. But if the NHS is to deliver outcomes that are among the best in the world and remain affordable, all hospitals will have to change the services they offer to patients.

When passed, the Health and Social Care Bill will create more pressures on hospitals to change, through stronger commissioning and extended patient choice. Yet politicians of all parties are still reluctant to support hospital conversion . The Government’s pledge to protect hospitals and create additional barriers to redesigning local services will make it harder for the NHS to deliver £20 billion in savings and maintain quality care.

Key ways in which national policy can support the emergence of better models of healthcare delivery in England include:

  • No bailout for the NHS: the learnt behaviour in the NHS is that the Chancellor will always find more money to avoid the embarrassment of a hospital closure. This weakens the case for change for NHS leaders and confuses the incentives for all in the system. For hospitals to change they cannot believe the Government will bailout them out.
  • Better commissioning: commissioners acting on behalf of patients should disinvest in expensive and poor quality acute services and instead invest more resources in primary and community care, forcing incumbent hospitals to change the services they provide or go out of business.
  • Intensify market pressures: greater patient choice and new providers will create real incentives for NHS hospitals and other service providers to modernise to deliver better services at a lower cost.
  • Failure regime: the Government must set out a clear, transparent and enforceable failure regime for hospitals. This will force hospital leaders to change their business models and empower other organisation to intervene and turnaround failed institutions.