Is the NHS really untouchble?

New providers must be allowed to bring in fresh, disruptive ideas to improve health provision

By James Gubb

For the Conservatives, the National Health Service remains something of an untouchable.  Instead of looking outside the box for the alternative solutions that the current financial malaise requires, energy has been expended in attempting to grind out a position as the guardian of what David Cameron calls ‘one of the most precious gifts we enjoy as British citizens’.   

Any suggestion that is vaguely radical is thus out the window.  And to prove their worth, the party has even pledged to increase the real terms budget of the NHS after 2011 – a pledge that, according to the King’s Fund and the Institute for Fiscal Studies, would mean real reductions in other departments’ budgets of up to 16 per cent over six years.

All this is despite the Tories’ acknowledgement that large increases in funding in the NHS over the past ten years have not brought value for money: while services have got better, improvement has not been proportionate.  In fact, productivity across the NHS has fallen 4.3 per cent since 1997 and health outcomes, such as cancer survival rates, remain some of the worst in Europe. 

Of course, the Conservatives are quick to identify reasons – excessive bureaucracy; perverse effects of targets; ‘pointless’ reorganisations; in essence a centralised, politically-driven system. But in reality they propose little more than more of the same. 

An end to targets is pledged, yet policy has been littered with them: an increase in single rooms; an increase in midwives; an increase in the use of health visitors; a moratorium on hospital closures (when economics would suggest the reverse).  A ‘post-bureaucratic’ age is envisaged, yet so are increased and enhanced roles for the two biggest regulators, Monitor and the Care Quality Commission, alongside the creation of an ‘independent’ board to run the NHS and a new national patient body, Healthwatch.  There will be ‘no more politically-led reorganisations’, yet recent plans for an ‘organic’ reduction in the number of Primary Care Trusts, and possible mergers with Strategic Health Authorities, do not suggest this will be the reality.

Yes, the Conservatives are talking more about the importance of competition.  But the reality is many of their proposals, such as choice of hospital and GP, have already been taken up by Labour.  It is the centralised nature of the NHS that means no government has wanted to let competition rip for fear of political consequences (failing hospitals in marginal seats is not good news). 

Power resides where the money is raised.  If the NHS’s problems could be summed up in one sentence it would be this, found in the executive summary of the Conservative policy document Renewal: Plan for a Better NHS: ‘we want the next Conservative Government to be judged on how successful we are in making the NHS one of the best health systems in Europe’.  He who is judged will be compelled to intervene.

The NHS needs more of a revolution than a renewal.  Why?  Because despite Tory pledges, the reality is surely that the NHS will not be immune to budget cuts.  The NHS chief executive, David Nicholson, for one, has openly stated that the NHS needs to be looking at efficiency savings of £15bn-£20bn from 2011-14.  In order to deliver this in the face of rising demand and without quality suffering, the NHS will have to drive productivity like never before.  This is likely to be in the region of 20 per cent; a feat the service has never achieved in its 60-year history.

Yet it is entirely possible to do so.  A McKinsey report for the Department of Health identified £8.8bn of potential savings.  Doctors and nurses in the worst 10 per cent of trusts deal with less than a fifth of the volume of patients that those in the best 10 per cent handle, for example. 

But this is likely to be the tip of the iceberg.  At present, the NHS locks in inefficiencies due to two antiquated models: the general hospital and the general practice – both designed a century ago when medicine lacked evidence-base and was largely intuitive.  Far more productive, now that we can make definitive diagnoses in many cases, would be to integrate the diagnostic work across the two, and hive off many procedures that occur after a definitive diagnosis to specialist centres.  Focused eye surgery centres, heart health and orthopaedic hospitals, for example, can streamline processes and deliver far higher output and quality than the hotchpotch of services provided in general hospitals. 

The million-dollar question is how do we get there?  There is a widespread, and correct, belief (shared by the Conservatives) that this cannot be driven by the centre.  The result would be a salami-slicing, supply-driven approach, with negative impacts on quality.  The Tories constantly bang on about the fact that productivity and innovation has to be driven by local organisations re-engineering their processes in a locally sensitive way. 

What they don’t get – or don’t want to get – is that this is unlikely to come from existing incumbents alone.  NHS organisations remain monopoly providers in most areas; and there is not a bureaucracy in the world that has volunteered to transform itself.  An examination by the University of London of UK manufacturing plants in the 1980s concluded that much of the 50 per cent increase in productivity was driven by the entry of new providers and the exit of old ones.  So there must be a competitive impulse.  The door must be open to new entrants with new, disruptive, ideas. 

This is where a Conservative government should focus its energies:  on creating an environment that makes it as easy as possible for providers with new ideas to enter the market and provide a better service for patients; for inefficient ones to exit (or be decommissioned); and for the effect of this to drive performance across the board.  Primary Care Trusts – the geographically-defined organisations that are currently responsible for ‘commissioning’ (read buying) care from providers on behalf of patients – must at the very least be supported in making tough decisions and be encouraged to make them, even if they are politically difficult. 

But is this enough?  Probably not.  With politicians still controlling the purse strings and with the Conservatives having already staked their political life on transforming the NHS, PCTs will forever be conscious of the need to dance to the Government’s tune.  Too many, for example, are more concerned with meeting central targets and protecting existing providers than with the health and standard of health care received by their patients, their ‘customers’. 

Real reform should thus look at the demand side too; at breaking PCTs up into groups of competing social insurers, as already exists to great effect in many European states such as France, Germany, the Netherlands and Switzerland.  This is not a threat to universal and comprehensive ideals.  With the state paying for, or topping up, premiums for those that cannot afford health insurance or with chronic conditions, these ideals are preserved – just as Europe.  The difference is that healthcare premiums are paid direct to insurers, rather than to the state through taxation, and people are able to choose between them on the basis of quality and price.  If service is poor, or insurers fail to back innovative providers, declining custom gives a powerful incentive to improve.          

This is likely to be far too risqué for the Conservatives.  But five years down the line when the cuts really begin to bite... now that will be interesting.  

James Gubb is Director of the Health Unit at Civitas, an independent social policy think-tank

To find out more about this article, visit: http://www.civitas.org.uk/nhs

4 October 2009

James Gubb. Director of the Health Unit, Civitas