Affording the NHS

The British government has been talking darkly about the exploding demands on the National Health Service, which will rapidly make it unaffordable if it is not reformed.  This has recently been challenged by Professor John Appleby, at the health think tank King’s Fund.  This was in a recent article in the British Medical Journal, behind a paywall, but summarised by the BBC here.  This question goes to the heart of health policy in the UK, but politicians dare not discuss it – because it puts the very principles of the sacred NHS in question.  But the problem will not go away.

According to some figures on Wikipedia Britian spent an unremarkable 8% of its national income on health, compared to over 16% in the US, before the financial crisis struck.  Those figures will be higher now, since our income has shrunk, but the relativities will be much the same.  The comparison between the two countries is usually held up to show how ineffective US health spending is, since health outcomes look generally pretty poor there.  But the comparison can be looked at the other way.  The US can afford to spend more than 16% of its national income on health and still remain one of the most prosperous countries on the planet.  There is nothing mysterious about this.  Developed countries are long past the level where basic human needs of food and shelter are met; how we choose to spend the surplus is up to us, and there is no reason why we can’t choose health care over cars, designer clothes or big holidays.  It’s not as if it requires massive imports to sustain it.

You can take this line of reasoning further.  The basic proposition of health care is to reduce pain and prolong life; these are consumer propositions to, well, die for.  Suppose we lived in the economist’s free market utopia, where health spending was a matter of individual choice in a perfectly competitive free market with no information asymmetries.   There is no reason to think that health expenditure would not be higher than the 8% or so we currently spend in Britain, or indeed as high the US figure.  We can perfectly easily afford it.

That’s not the problem.  The problem is paying for it almost entirely through unspecific taxes, the core design principle of the NHS.  And here the government is on much stronger ground.  There is an upper limit to how much tax we can raise for health care.  Up to a certain point, of course, the NHS model works perfectly well.  Look on the taxes as an insurance premium and it helps spread risk in a way that people like.  But the more you spend, the more the weaknesses of the model are exposed.

  • There is no direct line of sight between what you pay and what you get.  How on earth are you supposed to decide whether you are getting value for money?
  • You have no choice in the level of service you get.  One size fits all.
  • People who are better off may feel that they are paying too much relative to what they get.  This may not be quite as strong an argument as it first appears, since the less well off pay a lot of tax through cigarettes, alcohol, petrol and VAT – but the perception is still a problem.
  • Taxes create a drag on the rest of the economy, reducing incentives to work and therefore shrinking the resources available.

America is able to get away with much higher levels of health expenditure because so much of it comes from private insurance premiums and direct private payments for treatment.  But even there a battle royal is developing over how to balance taxes and government support.

Of course, to some putting up taxes is the right way to go.  France and Sweden get away with higher tax burdens than the UK after all.  But this is very fraught.  Some think you can go after big companies and very rich people and leave everybody else.  This is not as easy as it sounds though, since this wealth is very mobile.  Property is not mobile, of course, but raising taxes on property is probably as politically toxic in Britain as taxing fuel is in the US.  There is also a problem if too much tax revenue comes from the very rich or corporations – these start to acquire more political weight.  Which leaves the not-so-rich.  But these people are under pressure and feel over-taxed – Ed Miliband’s “squeezed middle”.

So I think the government is right.  We have hit the limit of what the country can afford for tax-funded free-at-the-point-of-use health system.  But we have not hit the limit of what people are prepared to spend if it’s their own money and for their own benefit.  The risk to the NHS is that the more affluent middle classes start to opt out of NHS services, depriving them of critical mass and undermining the principle of social solidarity.  This has already happened to NHS dentistry.

Nasty.  In the last years of the previous government the issue of co-payments was quite high up the political agenda: the possibility of NHS patients topping up their treatments with their own money to get things not on the basic menu.  This had become politically charged because of the costs of some rather questionable cancer treatments which the NHS were denying but which people were prepared to pay for.  The Conservatives clearly considered the topic politically toxic, since they have fudged the issue of cancer treatments with a bit of extra funding.  Labour and the Lib Dems were inching towards accepting co-payments, though I expect both parties are now bouncing back.

But in my view co-payments is the best way to relieve the pressure.  The NHS should define a basic menu of treatments that everybody is entitled to, but accept payments for anything outside this.  This undermines one of the sacred founding ideas of the NHS, that everybody gets the same, no matter how wealthy.  But it is better than the alternatives.  It’s the debate we should be having.

Why are NHS managers so unpopular?

Health Service Journal (HSJ) was on its high horse last week.  Its front cover says “The Big Lie exposed: the truth about NHS management”.  The proximate cause is a report by the King’s Fund called The Future of Leadership and Management in the NHS.  This report suggests that the NHS doesn’t have too many managers, and that, if anything the service is under-managed.  The HSJ is directed at NHS managers, and it is easy to see why they are so fed up.  But the HSJ coverage has a blind spot.  It doesn’t ask how the NHS got itself into this situation, and why NHS managers have become politically toxic.  It’s no use waving around King’s Fund reports; if NHS managers don’t understand of this, they will struggle to reverse it.

But let’s clear the decks first.  The idea that the NHS has too many managers as opposed to those “front line” staff is silly, and the political target to reduce their number is at best unhelpful and at worst positively damaging.  In order to deploy those front-line resources most effectively, they need to be properly managed.  Huge strides have been made by the NHS through more and better management over the last couple of decades.  Furthermore, my impression of the quality of NHS management is that it is easily up to the same quality as the private sector.  That, of course, is not as much comfort as it might be, given that crass management is pretty rampant in the private sector.  So a lot of the political comments made about NHS management are unjust, unfair and often just plain untrue.

So what’s gone wrong?  Well a clue comes in the frequent use of the word “bureaucrat” by politicians.  This is a word thick with negative connotations, of insensitivity to people’s real needs and of the arbitrary exercise of power.  Many of the public’s interactions with NHS management have left just this sort of impression.

The NHS is a hierarchical organisation, with pretty much all accountability through a single man at the top, the Secretary of State.  To most people this is no accountability at all.  One man can’t possibly grasp the intricacies of any particular local situation.  So local NHS officials have huge amounts of effectively arbitrary power.  And they rub our noses in it.

When the local NHS where I live executed a 180 degree turn and decided to close a local hospital rather than develop it, they rode roughshod over local feeling.  A local official just told us the area was too posh to have a hospital.  After a kerfuffle involving the local Labour (at the time) MP, more facilities were promised nearby in an appropriately less posh place – but of course these were soon cut, even before last year’s election.

The problem for most NHS managers is, I think, that they don’t remotely get what the problem here is.  Tough decisions have to be made.  If we followed local opinion all the time the NHS would go bust in days; if we kept consulting nothing would get done.  We have clear mission and we execute it.  NHS managers seem to bristle at the idea of genuine local accountability.  HSJ itself opposed the Lib Dem proposal of directly elected health boards.  Chaos.  Postcode lotteries.  Working for people that don’t understand.  And so on.  NHS managers are all too happy with their hierarchies, allowing them to pass the blame upwards the whole time.

But the local NHS is taking political decisions all the time.  For example, reducing health inequalities, a key local NHS objective, is loaded with political judgements.  A key political objective is to maintain middle class consent for the service; without middle class users the NHS would collapse (and we already have the example of NHS dentistry to show that).  So treating them like muck because they are on the wrong side of the equality equation should be a no-no.  Politicians can see that easily; bureaucrats can’t – it’s just not their problem.

And once you are perceived as an insensitive bureaucrat, the rest follows pretty quickly.  An organisation as large as the NHS will always throw up examples of crass management, which will be gleefully reported by patients and clinical staff alike.  And if managers are overstretched, they are bound to drop some balls too.  Episodes such as the Mid-Staffs fiasco add grist to the mill (and incidentally I did not sense much outrage from other NHS managers in the HSJ coverage of that sorry affair).  Throw in the management consultant blather dropped on the NHS (World Class Commissioning and such), and you have a massive stock of ammunition.

So NHS managers need a lot more political sensitivity, and should welcome more genuine political accountability instead of resisting it.  The NHS reforms are meant to help this, though whether do, of course, is another matter.

NHS reform – the politics is a smokescreen

Ever since the NHS was formed over 60 years ago, politicians have struggled to manage it.  Assorted ministers and policy wonks have dreamed up elegant reform plans, while the NHS’s insiders have undermined them in a bid to carry on much as before.  The NHS does change, but never quite along the path that the politicians have in mind.  That is as true now as ever.  The difference is that NHS management is promoting reform rather than resisting it; but they are going about it in their own way.  The fire and fury of the current political debate is mostly irrelevant.

I have already posted some thoughts on the NHS.  I considered the question of the timing of the reforms, alongside the £20bn cost-saving challenge posed by NHS Chief Executive Sir David Nicholson (referred to alternatively as “the Nicholson challenge” or “the QIPP*programme”).  My conclusion was that the main organisational damage has already been done, so we do not have much choice but to follow through.  I left aside the question of whether the reforms are wrong-headed.  I would like to consider this, before coming to an equally pragmatic conclusion.

What is being proposed?  A continuation of the big idea of the last 20 years or so: to create a purchaser/provider split, and to use this to introduce market mechanisms, under the banner of improving choice, to help ensure that the NHS is effective and efficient.  The problem that these reforms are supposed to solve is that the NHS is too dominated by hospitals, and the doctors who run them, who do not have enough incentive to change to meet new needs or to become more efficient.

In this latest incarnation, the purchaser element (now usually referred to as commissioners) of this set-up will be a combination of consortia of general practitioners (GPs), and an arms-length NHS Commissioning Board operating at national level (i.e. for England – the reforms don’t cover the other parts of the UK).  The intermediate commissioners under the current system, regional Strategic Health Authorities (SHAs) and district Primary Care Trusts (PCTs), are to be phased out.  On the provider side (i.e. the hospitals and other facilities), the idea is that all NHS facilities should be run by more or less independent Foundation Trusts, but that the commissioners will be allowed to secure services from “any qualified provider”, which will not be restricted to these trusts.

These reforms are a natural, if rather accelerated, continuation of the previous government’s NHS reforms.  Commissioning by GPs was already being piloted, and the idea of moving all hospitals to Foundation Trusts was the previous government’s idea too.  What is newer, and perhaps more radical, is the proposed regime of accountability that is being imposed on this.  Previously the NHS was run by the Secretary of State for Health, with very little restraint or accountability.  Now a complex framework of powers and accountabilities is being imposed, giving both parliament and local authorities a greater role.

The government argues that this is just evolutionary change.  But there has been vehement opposition from people who think that the new regime will end the NHS as we know it.  One problem is the commendable desire by the government to establish much of the framework in parliamentary law, rather than simply letting the minister rearrange things by fiat.  People now have the opportunity to project all their worst fears into the legislation on the basis that it does not specifically ban them.  In fact we are still being asked to trust ministers to do the right thing, only with more accountability.

Two lines of criticism that I can see have some kind of traction.  First is that the framework will open up the health market to competition law (and specifically European law) in the same way as for gas and electricity.  This means that the NHS trusts and the private sector would have to compete on a level playing field – and this might literally drive some NHS trusts out of business.  A lot of what NHS hospitals do is a natural monopoly (accident and emergency work, complex surgery, etc) , like the railways.  The fixed costs are so high that the market cannot sustain competition in most localities.  However, so the argument goes, these fixed costs also support activities where private sector competitors could undercut the NHS; if these are competed away then many hospitals would cease to be viable, and so the service on core activities would deteriorate.

Frankly I’m not stressed by this.  If a train wreck is on the way, it will be in very slow motion, giving time to take corrective action if need be.  More to the point, NHS professionals are masters at keeping the private sector at bay (except for NHS doctors doing private work on the side…), and they will only be seriously vulnerable in places were the service offered is ludicrously bad.  And as for European competition law, judging by its impact (not) on the French and German energy markets, there shouldn’t be anything that the politicians can’t handle.

The second criticism is more cogent.  It is that the rules for setting up GP commissioning consortia are a bit vague.  They could be set up in such a way that makes them very difficult to hold to account, or to act in partnership with other agencies.  For example, they may not be geographically coherent, cross local authority boundaries, and so on.  This does need some more thought – though again the worry is the direction reforms could take, rather than what is actually likely.

Personally, I don’t place a huge amount of faith in the purchaser/provider split and the marvels of choice anyway in this context.  There are two big problems: that the buyers (you and me) don’t know enough about what they are buying, and have to rely on intermediaries, whose incentives distort the picture.  The second is that so many providers are natural monopolies.  After decades of reform, the NHS does not remotely resemble a market economy.  It reminds me of a large company trying to introduce market-style rules for internal transactions; these systems never achieve as much as their proposers hope, since everything is trumped by politics in the end.  There have been two big achievements of the NHS reform process.  First is that hospitals are gradually being forced to be more efficient and accountable; this has mainly been achieved by good old-fashioned management, of which the “Nicholson Challenge” is but the latest example.  The second is that commissioning processes have forced NHS managers to address the question of what society actually needs, and then try to reorganise the service to meet these needs.  This last development is the more recent, and the the reorganisation of PCTs has interrupted it – but the new arrangements will probably be more effective in the long run.

The big prize to be won from the current reforms is hardly spoken of at all.  It is that GPs will start to come under the same sort scrutiny as hospitals have.  The consortia themselves will do some of this; the NHS Commissioning Board, which must authorise the consortia, will also be on the case.  The PCTs were supposed to be doing this, but were mostly pretty ineffectual.  The important point is that we should be in no hurry to authorise the consortia, to allow this scrutiny process to have real bite.  This seems to be exactly what Sir David Nicholson (who will chair the NHS Commissioning Board) has in mind.

Meanwhile the over-large number of PCTs has been reorganised into a more manageable number of “clusters”; these and the SHAs will no doubt live on as embodiments of the Commissioning Board.  The NHS will become much more centralised in the short term.  With some very sharp minds at the centre, including Sir David, this doesn’t have to end badly.  But the politcal arguments are mostly a smokescreen.

*QIPP stands for Quality, Innovation, Productivity, Prevention

NHS: the net is tighteneing around hospitals

September 11, 2001 was a good day to bury bad news, a government spin doctor famously emailed on the day.  What about a royal wedding day?  Sure enough, via the Department of Health (DH) there was this announcement, saying that hospitals are expected to make an even higher rate of “efficiency” savings than before: from 4% per annum up to 6-7%.  This press release seems to have come out so late yesterday that neither the DH website nor that of Monitor (the regulatory body that made the announcement) have published it.  So I have been unable to access the details.  But make no mistake, this is a highly significant development.

What on earth is going on?  So far almost all the heat has been around the Coalition’s health reforms, and the dramatic changes to the commissioning side of the NHS, which are already in rapid progress, regardless of what is happening in Parliament.  This is the side beloved of politicians and policy wonks.  The idea is that the NHS will be shaped by more or less local organisations assessing their needs and then “commissioning” it from the supply side – mainly hospitals.  Hospitals, formerly in the driving seat of the NHS, would be put in their place.  It is a chaotic, market driven vision of change.  Under Labour commissioning was being led by the primary care trusts (PCTs); the coalition is moving this towards consortia of general practitioners (GPs).  This is all very well, but there is something else going on, and this is much more Stalinist, and which pre-dates the Coalition.

Or rather the model might be the Chinese leader Deng Xiaoping, who masterminded China’s recent astonishing growth.  Deng ensured the process was centrally directed, with no challenge to the Party’s authority; he worked by manipulating the incentives open to his underlings.  The centrepiece of this dynamic in the NHS is the £20bn of savings that I described in my last post.  This money isn’t being cut from the NHS budget; it is being “redeployed”, spent somewhere else, although it is very unclear where.  What today’s story suggests is that most of this pressure will be felt by hospitals.  The drive is to take 25% out of their budget over a mere four years.  Wow.

Regardless of where the chaotic process of commissioning takes us, the central leadership of the NHS (and it is not difficult to identify Sir David Nicholson as the driving force) has decided that hospitals are going to play a smaller role.  This is pretty conventional thinking in the medical field.  Hospitals are old-fashioned places where people are as likely to catch an illness as be cured.  The idea is to reduce them to a smaller number of centres of excellence, with the very best professionals supported by the very best technology.  Meanwhile more illnesses will be treated “in the community”.  I can’t express an opinion on how valid this view is, though I instinctively feel that it is missing something.

Never mind.  What it means is that many of the country’s hospitals will be closed.  Regardless of the chaos that has hit the commissioning side, the NHS bosses are turning up the heat.  I don’t know how ready our politicians are for it.  It has Labour’s fingerprints all over it, but it is the Coalition that will be in the firing line.  The only upside is that it should release money that can be spent on other things.  That and the knowledge that the government is doing the right thing.  Probably.

NHS reform: we’ve started so we’ll finish

The NHS, probably rightly, is one of the main controversies in current British, or rather English, politics.  The Coalition government has put it there after Labour, by dint of a massive increase in spending, had managed to take most of the heat out of the debate, bar a few controversial hospital closures.  Personally I am a bit perplexed.  From one side I am being constantly lobbied by the Social Liberal Forum, a Lib Dem pressure group, to express disapproval of what looks like almost the entire reform process.  On the other side is 18 years experience as a business services manager, reinforced by my regular reading of the Health Service Journal (HSJ), the weekly magazine aimed at NHS managers.  This takes the need for reform pretty much as read, almost on a continuous basis – and gives me an inbuilt suspicion of people who resist change.  Partly because I have been trying to get a management job there, I am better informed than most on the NHS; but I have found it very difficult to make up my mind.  Will writing a blog post help me?

First, let’s understand that there is something of a crisis in the NHS.  The figure of £20 billion of savings required by 2015 is widely accepted as a fact.  This is quite interesting.  The figure first emerged a couple of years ago from a leaked McKinsey report, which the government tried to deny.  But it is a now central theme of NHS Chief Executive Sir David Nicholson’s management.  But the NHS’s budget isn’t being cut: the Coalition is protecting it in real terms.  In response we get some rather airy stuff about the increased demands on the NHS from an ageing population, medical inflation and suchlike.  But if we are cutting £20bn, we must be adding the same sum back somewhere – but we aren’t being told where.  I have a dark suspicion that a lot of it is about large PFI rents coming back to haunt us from all the capital investment of the last decade, though I’m not sure if that quite adds up either.  I find it strange that so little is being said about this.  It has the signs of a manufactured crisis to inject a sense of urgency across the organisation.

If so, then I don’t particularly disapprove.  There is a massive inertia about the organisation, with almost any change proposal meeting outraged resistance.  When I reflect on my career as a manager in the private sector, we were in an almost continuous state of crisis.  As a result we pushed through change after change, so that after 18 years the business had been transformed out of recognition both in efficiency and business model.  This was the result of simple competitive pressure.  Such competitive pressure is largely absent from the NHS, so Sir David’s success in stoking up a comparable level of crisis is to be commended.  It is clearly helping him deal with the resisters and rally supporters of change.

There seem to be two main challenges to the government’s reform strategy.  First is along the lines of “we don’t need this” – it will disrupt the process of making the £20bn worth of savings.  The second is that the reforms themselves are wrong, because they will “privatise” the NHS.  The answer to the first depends to a great extent on how convinced you are that the previous government’s infrastructure was up to the job.  This rested on three levels of organisation to commission services from a series of notionally independent providers, in turn answerable to various parts of the bureaucracy.  It is easy to think that this was over-complicated, but the three levels (national, regional and district) have a resilience about them; the NHS seems to revert back to such a structure every time people try to cut a layer out.  A more valid criticism is that the system is accountable only upwards, to the Secretary of State, meaning that managers spend too much time managing their chain of command, and not enough on the patients.  Another criticism, which may follow from this, is the sheer volume of management blather that the system generated.  Heaps of guidance, toolkits, methodologies, procedures, silly names, acronyms, and such.  The commissioning framework was called “World Class Commissioning” and involved developing eleven competences, progress on which had to be reported up the system.  This sort of thing is a charter for mediocre management.  People who manufacture millions of words that somehow don’t get to the point.  A particular worry is the lack of management with any clinical experience, and a failure to integrate clinicians into management generally.

To many this management structure was incapable of driving through the change needed, except in a few lucky pockets.  The blather merchants would succeed in populating scorecards with green spots and burying their peers and seniors in verbiage, but be unable to deal effectively with entrenched resistance from clinicians, and politicians nervous about reactions to reconfigurations.  To these critics it was essential to tear this structure up, while trying to salvage some of the best bits.  I wasn’t so sure.  I would have opted for keeping most of the infrastructure intact but bringing local political accountability into the picture, while trying to cut back on some of the thickets of blather.

But it’s too late now.  Many managers have lost their jobs; many more face the prospect of their job disappearing an uncertain future.  The damage has been done.  Far reaching reform may not have been the best idea, but we must capitalise on the current fluid situation to create something that works better than the previous version.  This may well slow down the march towards the £20bn savings in the short term – but maybe these savings aren’t quite as urgent as it suits many to claim.

But are the reforms going in the right direction?  I’m nearly up to 1,000 words already.  this is a topic for another day.