03 November 2006
In many ways, the NHS has never had it so good. But that's not what the public thinks. Public Finance and Deloitte convened a round table of health service policy makers and practitioners to explore this conundrum – and to ask what happens after 2008. Judy Hirst reports
Gordon Brown and David Cameron both want to take its day-to-day running out of the hands of politicians. All the major parties claim that its future is safe in their hands.
The subject is, of course, the NHS: that totemic institution, so close to the hearts of the British public that – in the words of a former chancellor, Nigel Lawson – it has the status of 'the national religion'.
The chance of politicians relinquishing control over the health service to the fashionable alternative of an independent board is probably remote. With an annual budget of well over £90bn, and around 1.3 million employees, there is simply too much at stake. But then, from its origins in 1948, the structure, financing and organisation of the NHS has always been a deeply controversial and intensely political subject. And rarely more so than today.
Despite doubling health service spending, and making some important advances on waiting list times and clinical outcomes, the government faces glum opinion poll ratings on the NHS. A range of negative indicators on productivity, efficiency and financial management has recently contributed to the sense of gloom.
Meanwhile, the Opposition is making serious political capital out of the job cuts and closures that are resulting from NHS deficits and health service reconfiguration. Unions and other organisations are joining the fray this week, with a mass lobby of Parliament.
It was against this heightened background that Public Finance last week convened the fifth in its series of round-table debates on public service issues – this time, on financing and reforming the NHS. A wide range of health service policy-makers, practitioners and politicians came together on October 25, in association with Deloitte, to explore some of the major challenges on the NHS reform and finance agendas.
Chaired by Tony Travers, director of the Greater London Group at the London School of Economics, the gathering included former Number 10 health policy adviser Professor Julian Le Grand; Andy McKeon, managing director of health at the Audit Commission; Stephen Dorrell MP, co-chair of the Conservative Party's Public Service Improvement Policy Group; and Liberal Democrat health spokesman Steve Webb.
Presentations from keynote speakers (see below) outlined some of the main challenges facing health service managers, both in the here and now and in the financial climate that will apply after 2008.
Opening the debate, Julian Le Grand – a progenitor of many key NHS reforms – drew attention to an apparent paradox. Why, he asked, when improved waiting times, better health standards, and gleaming new hospitals and surgeries bear witness to 'all the indicators moving in the right direction', is it so difficult to win support for the government's health policies? 'The principal challenge still facing the NHS reform process is to convince everyone it's a good idea.'
Some of the opposition to market-orientated reforms reflected wider political difficulties facing the government, he said. But some arose from legitimate – if misguided – concerns about equity and Patient Choice. In fact it was the poorest patients, not the middle classes, who had the most to gain from choice, he stressed. There was also the issue of many NHS staff who, despite the substantial sums poured into the health service, remain disaffected from the quasi-market reforms. This, he believed, was a legacy of earlier heavy-handed command-and-control policies: 'Public sector professionals don't like being told what to do, and being pushed around from above.' Replacing the discipline of central control with the discipline of the market should, in theory, free them up.
A number of participants took issue with aspects of this analysis. Steve Webb said that one indicator that is not going the right way is health inequality. 'The reason why some of the poorest people want choice is so they don't end up with the grottiest services. But I'm not convinced that shopping around for hospitals is going to drive up standards,' he argued.
Professor Rod Griffiths, president of the Faculty of Public Health, was also sceptical about the language of empowerment and choice. 'There are too many obstacles, like transport and car parking costs, in the way of people making choices,' he insisted. And as for preventative health measures, he said, 'Poor people can't take enough exercise because local authorities have shut so many parks.'
Elizabeth Wincott, chair of the Long-Term Medical Conditions Alliance, welcomed the government's commitment to Patient Choice, but drew attention to 'the enormous financial restraints and weasel words' that prevented it becoming a reality.
Meanwhile, former Conservative health minister Stephen Dorrell wondered – more than a little wearily – why everyone is still asking the same old questions about commissioning, 'marketisation' and what used to be called the purchaser-provider divide. 'There is a real sense of déjà vu. But there is also a real conundrum over how the concept of choice relates to the concept of commissioning, rather than just to providers,' he said.
Joseph Ippolito, co-head of public sector health at Deloitte, had a different take on the choice debate, regarding it largely as a red herring. 'Choice might work in a free or semi-free market, which adjusts itself to serving customer needs. But I don't understand how the government thinks choice can work for the NHS, which isn't a market with free entry or exit.'
He also had some trenchant comments to make about NHS management skills. The NHS was right to reduce the number of strategic health authorities, not least because of the dearth of quality management teams. 'Nobody is focusing on the lack of teams skilled enough to implement the reforms,' he said.
This produced some spirited debate from around the table. Caroline Clarke, director of finance at the Homerton University Hospital NHS Foundation Trust, insisted that 'most people running hospitals know how to run them, and there is no universal solution available from the commercial sector'. In any case, with around 70% of costs set nationally, hospital management teams have only limited discretion – something the government's 'turnaround teams' have been finding out. Michael Parker, chair of the King's College Hospital NHS Trust, stressed that NHS managers are often being asked to manage 'dysfunctional systems', with a lot of perverse incentives. 'We are managers but we're being asked to act like civil servants, each time the government screws things up.'
Le Grand had some sympathy with this view. 'It's the system we're in that creates the appearance of poor management,' he said. 'But there are good people out there, and in a different system that will come through.' Precisely what that system might look like was flagged up by another strand in the debate, which focused on rising health expectations, rationing and national standards.
Richard Brooks, associate director of public services at the Institute for Public Policy Research, argued that people's rising expectations should be a spur to improvement. 'But if they are disproportionate, they can undermine the health system as a whole.' Despite the efforts of the National Institute for Health and Clinical Excellence and other bodies, 'we don't have a strong, legitimate mechanism for setting priorities'.
Ann Rossiter, director of the Social Market Foundation, picked up this theme. Ironically, recent service improvements 'had taken away the rationing mechanism of the waiting list', she said. 'But we have failed to establish an alternative, hence the pressure on Nice'. There needed to be a coherent, overarching debate on the whole process of rationing, and setting national and local priorities.
For Dorrell, the imperative was 'a national steer on outcomes, not just on a few drugs'. Whoever is in government 'has to sit opposite John Humphreys at 8:10am, and explain why there are different outcomes in Leicestershire compared with Devonshire'. The differences in national provision 'are being experienced by the patient as an anomaly, not localism', he stressed.
These tensions were one of a number of issues raised by Andy McKeon's presentation on the financial health of the NHS – an issue that the chair, Tony Travers, compared to 'a malign comet that flashes across the sky from time to time'. One had just gone past, and McKeon acknowledged that the sector's financial problems had sapped its confidence over the past year or two.
However, he was relatively upbeat on the prospects for the NHS recovering financial balance, believing that many of the commission's recommendations on this front were being implemented. But this begged the question of what kind of mechanisms would help trusts and foundation trusts move on from financial balance. 'Many of the points being made about NHS efficiency have been with us for a long time. What will impel further changes?'
The answer, he argued, lies in 'a more nuanced approach' to choice, to failure regimes and to the payment-by-results tariff. 'For example, choice might be the right approach for elective care, but not necessarily for cancer care, where command and control might be more appropriate.' Likewise, decisions about whether to maintain a failing unit within a hospital involves local choices and buy-in. As for patient-focused measures – such as the shift from secondary to primary care, or the aspiration to reach Sir Derek Wanless's 'fully engaged' scenario on preventative health and managing long-term conditions – there was still a way to go.
Tim Crayford, president of the Association of Directors of Public Health (UK), picked up on the tariff issue, arguing that there was scope to use it 'to shape what we want out of services, for example, to incentivise normal deliveries over Caesarean sections'. A lively discussion ensued on the practicalities – and ethics – of using the tariff to encourage different clinical outcomes.
John Sussex, deputy director of the Office for Health Economics, was not in favour of using PBR to affect behaviour in this way. And Jo Webber, deputy director of the NHS Confederation, felt that in many ways tariffs addressed only 'the easy end of the market'. The areas with potential for real improvement often cross health and social care boundaries, she said.
A number of participants, including Nigel Johnson, head of health audit at Deloitte, put in a plea for far greater consistency in the use of the tariff and other cost drivers to help trusts that are constantly firefighting tariff instability. Meanwhile, Kevin Orford, director of finance at East Midlands Strategic Health Authority, asked 'who's inefficient, and where's the failure?' when some PCTs in deficit were buying from acute trusts with large surpluses – but it was the latter that were classed as inefficient.
These, and other anomalies, point to the need for 'a more clearly articulated approach' said McKeon – something that will become still more imperative post-2008 when, as health finance specialist Noel Plumridge put it, 'the money runs out'.
Introducing the final session, Plumridge raised the spectre of how the health service will cope when, after all the years of plenty, it returns to single figure growth levels. Demand management and referral management could go only some way towards addressing the new financial circumstances, he said.
Similarly, there were many limitations on the self-management of long-term health conditions: part of Wanless's 'fully engaged' scenario. The real savings were likely to come through efficiency and productivity gains, 'a major theme for the next few years'. Plumridge also drew attention to the limitations of the PBR tariff, which he said was unlikely to be 'unbundled by clever commissioners, who together assemble a care pathway. It just won't happen.'
Chris Shapcott, director of health value for money audit at the National Audit Office, agreed that efficiency gains offered the most scope for savings, and pointed to the potential conflict between tighter expectation management and choice. Jon Restell, chief executive of the Managers in Partnership NHS trade union, wondered whether there would be a freer environment for NHS managers post-2008 – or just more command and control. He also emphasised that one of the best drivers for change is changing staff culture.
The post-2008 issue that provoked most debate though, was the prospect of a Bank of England or BBC-style 'independent board' to run the NHS. Webber thought people needed a 'sanity check' on this one, while Webb said it was 'just a reaction to Patricia meddling', and didn't make any sense. But British Medical Association director Dr Chris Spencer-Jones thought the idea could be a goer – 'precisely because people do care so much about the NHS, and governments can't be trusted to run it properly'.
A fitting comment on the national mood, perhaps – and on a range of issues troubling the NHS that is not about to go away.
Julian Le Grand
The former Number 10 health policy adviser said that, despite all the improvements to the NHS, 'the vast majority of the country appears to think everything is getting worse'.
There were three important challenges to the current direction of NHS reform, which fuelled this view.
The first was the belief that public service workers were concerned only with helping service users — rather than protecting their own self-interest — and should therefore 'be trusted to get on with it'. But that approach had been tried and failed. 'Completely untrammelled trust hasn't really worked.'
A second objection was the view that markets were necessarily exploitative and generated massive inequalities. This missed the fact that a major form of inequality in markets was different purchasing power, which did not apply to public services such as the NHS, which were free at the point of use. Inequality could still creep in if certain groups made poor choices, but initiatives such as 'choice advisers' could help overcome that.
A final challenge came from disgruntled public sector workers. The current government had substantially increased investment in public services yet had still managed to lose the support of the workforce. But that challenge would eventually wane, once professionals realised that market reforms could bolster, rather than curtail, their professional integrity.
Andy McKeon
The Audit Commission's managing director of health said he was 'quite positive that the NHS will recover financial balance and the right things are being done to achieve that'. These included improved leadership from the Department of Health, better financial skills and understanding across the service, and a growing acceptance that, if the NHS did stay in balance, the public would have to stop castigating it for occasionally 'under-spending'.
Many of the target areas for improving NHS efficiency, such as reducing hospital stays, had been highlighted a long time ago, yet there were no adequate mechanisms for addressing them. Payment by results could change that, but there were no guarantees. While there were good service reasons for many rationalisations, finance would still play a part in shaping change.
Services would inevitably become concentrated, creating possible conflicts with promoting choice and provider diversity. Local health economies might also opt to cross-subsidise financially unsustainable elements of their operations, rather than close them down.
Meeting local needs required better and more outcome-orientated commissioning — genuine payment 'by results' rather than 'by activity'. That meant grasping Sir Derek Wanless's 'fully engaged' option for the NHS and stepping up work on prevention. Many primary care and mental health trusts had made good progress, but the 'bottom line' return on investment was possibly too far off for the current financial system to warrant.
Noel Plumridge
After almost a decade of funding growth, the NHS now faces years of belt-tightening, warned health finance specialist Noel Plumridge. Yet GP practice-based commissioning, the Department of Health's mechanism to stem rising demand for expensive hospital-based activity, would not work.
'It's based on a folk-memory of GP-fundholding,' he said. Ageing white male GPs might have a nostalgic view of their fundholding days. But they are being replaced by young female GPs, whose desire for an acceptable work-life balance overrides their interest in the 'rationing' implications of PBC.
PCTs might instead try to borrow commissioning techniques and data management from the insurance sector, and local commissioning might be handed to supermarkets in return for a large share in the profits. 'At the moment, commissioning is not working. Were this evidence-based, we would have dropped it years ago as a technique and gone back to central planning.'
Real demand management — rather than rationing — meant investing in public health. But that required new and more sophisticated skills, as well as resources. Long-term condition management was also vital. LTCs were not just killer diseases such as diabetes, but also debilitating disorders such as lower-back pain and arthritis. The prospects for creating suitable care pathways for these conditions was simply too complicated and bedevilled by perverse incentives, he said. SG
Participants
Tony Travers (chair)
Director, Greater London Group, London School of Economics
Richard Brooks
Associate director, public services, Institute for Public Policy Research
Caroline Clarke
Director of finance, Homerton NHS Trust
Tim Crayford
President, Association of Directors of Public Health (UK)
Stephen Dorrell MP
Co-chair, Conservative Party Public Service Improvement Policy Group
James Fothergill
Senior policy adviser, CBI
Professor Rod Griffiths CBE
President, Faculty of Public Health
Professor Julian Le Grand
Former Number 10 health policy adviser, professor of social policy, LSE
Andy McKeon
Managing director of health, Audit Commission
Kevin Orford
Director of finance, East Midlands Strategic Health Authority
Michael Parker
Chair, King's College Hospital NHS Trust
Baroness Perry of Southwark
Co-chair, Conservative Party Public Service Improvement Policy Group
Noel Plumridge
Health finance specialist and consultant
Jon Restell
Chief executive, Managers in Partnership
Ann Rossiter
Director, Social Market Foundation
Chris Shapcott
Director of health value for money audit, National Audit Office
Dr Chris Spencer-Jones
Director, British Medical Association
John Sussex
Deputy director, Office of Health Economics
Steve Webb
Liberal Democrat health spokesman
Jo Webber
Deputy policy director, NHS Confederation
Elizabeth Wincott
Chair, Long-Term Medical Conditions Alliance
Malcolm Wing
National secretary, Unison
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