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Gamekeeper turned watchdog, by Karen Day

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25 February 2005

Having overseen the Department of Health's 'big bang' NHS policies, Andy McKeon now scrutinises their impact from an Audit Commission standpoint. Karen Day spoke to him

Andy McKeon barely hesitates when asked his views on the state of the health service since 1997. 'Better', the Audit Commission's managing director for health fires back. After a few worried glances from his PR minder he offers to elaborate on why he thinks the health service is so improved. Just in case this purveyor of independent audit and former head of policy at the Department of Health is mistaken for a raving Blairite.

McKeon jumped the hallowed Whitehall fence 18 months ago, ironically just as the policies he oversaw at the department, payment by results, foundation trusts and Patient Choice were beginning to take shape on the ground.

In a smart move, which will no doubt pay dividends, the commission snagged the very civil servant who can uncover any 'cut corners' or 'missing steps' in NHS reform. This will be handy currency indeed in an era of strategic regulation and efficiency.

McKeon has wasted little time in peering into the vast abyss of NHS reform – dubbed by some watchers as the big bang for health. Hospitals and primary care trusts face a barrage of changes; PBR, foundation status, three new pay regimes – Agenda for Change, the new consultant contract and the general medical service contract – practice-based commissioning and Patient Choice. Unsurprisingly, the volume of these policies is causing some volatility in the sector, but PBR has been generating more than its fair share of fears.

McKeon has already highlighted some of the flaws in the new system, which moves from traditional block funding to cash following the patient. In a report last summer he warned of the poor quality of data with which to measure activity, primary care trusts' lack of financial capacity and inability to manage the risks, and the apparent incentives for trusts to 'game' the system.

He wryly quotes Simon Stevens, Tony Blair's former health adviser, who recently jumped ship to US giant UnitedHealth group, who described PBR as helping the strong get stronger and the weak get weaker.

'The good purchasers will get the best out of this and the weak purchaser will get worse,' McKeon explains. 'I don't think the financial capacity of PCTs to deal with this has been addressed. Even those who are very well set up found difficulty in operating the system.'

Last year the DoH conducted a more detailed risk assessment and promptly scaled back the timetable for PBR. From April, trusts will begin using the system for elective admissions only, around 30% of their work compared with the 70% intended. Foundations trusts, which have been piloting the scheme, will continue to roll it out across all services.

The scaling back also came after the furore over Bradford Teaching Hospitals NHS Trust late last year. Monitor, the foundation's watchdog, intervened and removed the trust's chair after a predicted surplus of £2m turned into a potential £11m deficit within months of implementing PBR. Monitor has since ruled that it was 'no one thing' that caused Bradford's problems but it is microcosm of the potential pitfalls of the system. It has valuable lessons for other trusts, McKeon says, and the commission is to report on the 'early lessons' of PBR for foundations and their commissioning PCTs in March or April.

In the meantime, McKeon says there are several 'missing steps' in the regime, which need to be addressed urgently. He bemoans the lack of monitoring of the system and although he says there is no evidence that foundation trusts have been 'gaming' to get maximum cash, there's no evidence that they haven't either. 'Other countries that have introduced this have found significant increases in activity and have put mechanisms in place to prevent that.'

The DoH, he says, has been aware of this problem 'for some time' but 'has had rather a lot to do', referring to its reform agenda, and has not yet got round to solving it. Unsurprisingly, the commission has already pitched for some sort of monitoring role, which would audit the activity of trusts and the expenditure of PCTs.

The commission, he says, will also continue to work with PCTs to help them improve their financial capacity and skills. Again, he says, the DoH was 'fully aware that the whole operation of foundation trusts and PBR would demand a higher level of management skill from PCTs and indeed trusts'.

Asked whether the full implementation deadline for PBR, 2008, can be achieved for such a regime change, McKeon uses one of his many historical analogies. 'I think six years is long enough to implement anything,' he grins. 'Dunkirk to D-Day was only four.'

He also appears to have little sympathy with fears that the NHS is overburdened by change from a government anxious for tangible improvements. Fifteen years ago, he says, the service was facing 'echoes' of current reforms, a new GP contract, the regrading of nursing staff, the creation of hospital trusts and GP funding. 'People then said there was a lot but never too much.' One wonders, now he's left the DoH, if he has any doubts over the policies bearing fruit. 'I always think why did I do that – it seemed like a good idea at the time,' he laughs.

'The world has more than moved on. Quite a lot of what I was doing is being rolled out and the implementation is taking different twists. So, PBR has taken some different turns than I thought in 2002. Although former colleagues jokingly say: "It's your fault", I don't feel I'm scrutinising things for which I was responsible.'

Until his move to the commission in 2003, McKeon was your typical career civil servant. After graduating in history from Cambridge University he followed his father, who worked for the Inland Revenue, into the service, going straight into policy at the DoH. His 27-year stint was peppered only by brief secondments 'in the field', first to Guy's and St Thomas' and then Barts in the 1990s. His policy brief was wide ranging, from the sale and supply of pharmaceuticals to doctors' pay and regional performance management.

In 2002 he became a departmental board member and director of policy and planning. But a year later he found himself 'in a rut', with his job changing from having a broad focus to 'just dealing with ministers and policy'. He is undoubtedly a coup for the commission and colleagues describe him as highly competent and just as approachable. His sense of humour and not a little mischief shines through and one imagines how the Sir Humphreys in the civil service viewed his down-to-earth and fun, but confident approach.

He is happy to recall his dubious honour in the Guinness Book of Records for the worst defeat in a lacrosse game at national level – 30 to two – but it was a few years back and he took it on the chin, he says, laughing. Now he contents himself with cricket and photography, with his office overlooking the Thames displaying some of his handiwork.

He refuses to reveal who were the incompetent or horror ministers when he worked at the DoH, stating coyly but knowingly that 'they're still alive'. But ministers he has a high regard for include Ken Clarke,

who 'taught him a lot'; Stephen Dorrell, for his negotiation skills, and more recently Alan Milburn. It's this experience that perhaps makes his contention that things really did get better under Labour even more significant. Objectively, he says, a lot more money has gone into the system and while money doesn't always equate to a superior service 'you can't produce a better one without it'.

'A lot of money has gone in and that has shown through. Where I think it's better is where the government has addressed some of the fundamental issues about the provision of clinical services. The introduction of national service frameworks, the introduction of the National Institute for Clinical Excellence, and the drive on clinical standards has actually produced a better service,' he explains.

But what about financially? Early work from McKeon suggests that 107 NHS trusts, PCTs and strategic health authorities failed to break even in 2003/04. This is about one in six of the total and up from 71 the previous year. But he still maintains that financially the service is better managed. 'The issue is whether the challenge has become greater.'

He says there is a much tighter financial system, where old bolt-holes that allowed trusts to move money around, such as the non-cash limited budget on GP drugs and capital-to-revenue transfers, have been plugged. A fuller picture of the health of NHS finance should emerge in a joint report from the commission and the National Audit Office. Expected late last year, it is finally due next month, which is 'what happens when you do things in partnership. I find that with my family – it always take longer,' he smiles. He will not go into the detail of the report, except to repeat his oft-quoted line: 'It's always supposed to be the worst year for the NHS and the deficits are always less than predicted when it comes to accounting time.'

McKeon suggests that the overall NHS deficit could amount to around £250m, small fry for a service with a budget of £60bn. The turnover, he explains, is not the issue. However, the position of individual trusts and whether some are under severe financial pressure is, he adds ominously.

With the government breathing down the neck of regulators in a post-Gershon era, next month's financial report won't be the last 'partnership' project. The commission is also investigating the 'delivery chain' of the government's public service agreement target on halting the rise of obesity in children. This will be conducted again with the NAO and also the Healthcare Commission. The three bodies will also be examining the NHS's national programme for IT.

In the longer term, McKeon says that the NHS may be squeezed if the pressure for healthcare and new technologies inexorably outstrips growth in GDP. By 2007/08, once Labour's largesse begins to slow, health spending should be at around 7%-8% of GDP.

Choice should be rooted in the system, as should the use of the private sector in areas such as treatment centres. Health Secretary John Reid has already indicated that in this future market, some trusts may not survive, but McKeon says this will depend on 'whether you think you're in a rising market or a fixed market'.

He delves again into his historical store and points to the medieval Hanseatic League, a cartel of trading nations, which believed there was a fixed volume of trade. 'What's occurred in the past 400 years is that the volume of trade has risen and we've all benefited from it,' he says metaphorically.

He predicts a continually evolving health service, with the role of strategic health authorities changing as PBR and PCTs develop, and Patient Choice making its impact on services. All of which will keep McKeon more than busy in his role as health watcher.

PFfeb2005

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