How will the Tories reform the NHS?

Introduction

How will the Tories reform the NHS?

The answer to this simple question is difficult because the Tories, like their Labour predecessors in 1997, are being quite conservative about their intentions. While they have pledged ring-fencing of funding and made proposals about public health and hospital tariffs, moderation rather than radicalization has characterized their policy statements. This is a reflection of competing factions in the party wrestling for control of the agenda, the Blair-like policy of 1997, where they do not want to be committed to particular reforms. The policies offered by the Shadow Secretary of State Andrew Lansley are moderate and supportive of a public healthcare system. Lansley is reflecting Cameron's desire to maintain and improve the NHS. However, the ways in which this will be done are ultimately likely to be as radical as Thatcher's reforms of 1989–1991.

There are three strands to Tory policy, each reflecting the potentially radical nature of Tory policy if elected with a significant majority:

An ‘independent’ board to set strategy;

More information;

Competition.

An independent board

This proposal is reminiscent of the Griffiths reform in 1983 1 where the intention was to establish a board of independent-minded business men (e.g. Sir Len Peach of IBM in the 1980s) to determine strategy and monitor performance.

There is obviously a tension between such a proposal and the accountability of the Secretary of State to Parliament. However, it is consistent with the notion of ‘competition’, which is dealt with below, as the Board can be seen as the mechanism by which competition policy is applied nationally to alter the public–private mix in healthcare provision. The Board would be supported by the Competition Panel and a reformed and merged regulator Care Quality Commission-Monitor. The focus of these regulatory mechanisms would be to create a ‘level playing field’ between public NHS and private organizations competing for slices of NHS spending.

Initially it is likely that the local agents of the Board will be reincarnated GP-total fund holding (GPFH). Originally proposals to use GPFH were predicated on the idea that it was necessary to countervail the power of hospitals by turning erstwhile poachers into gamekeepers who would better control resource allocation. 2 Purchasers in the reformed NHS have been weak agents of patients and taxpayers for 20 years and catalytic change is clearly needed if the market model is retained. There is some evidence that GPFH had beneficial effects, particularly in controlling elective admissions to hospitals. 3 However, the effects of any GPFH reform will depend crucially on the powers and incentives given to doctors. Current programmes such as Practice Based Commissioning have had little effect other than to increase expenditure. 4

In time, and if some in the party are successful, the NHS might be reformed more radically to create effective competition in both insurance and provision. This could emulate the model of publicly financed healthcare in the Netherlands where both financial management and the provision of care are now privatized.

In the Netherlands, the finance side of the healthcare market is tightly regulated with private and public insurers competing for the patients, whose contributions are tax financed. The contributions are risk-adjusted so that high-risk patients are more financially attractive to the insurers, who are obliged to take anyone who wishes to join them. The insurers in competing for clients have an incentive to manage costs and seek more efficient patterns of care from providers.

In this system all providers are private and compete according to highly regulated rules governing prices, quality and access. There are clear rules regulating both market exit by failed providers and market entry by competing innovators.

The analogy for the English NHS would be that after some reorganization of PCTs, what the Conservatives call ‘organic mergers’, they could become competing organizations where citizens could freely join regardless of their area of residence. Thus, if the Hampshire PCT-insurer offered better value to NHS patients, they could join it even if they lived, for instance, in North Yorkshire. This model is called ‘managed competition’, has been debated internationally for two decades, particularly in the USA in the 1990s, and has been elaborated recently in the UK context. 5

The success of the Dutch model is debated vigorously. The focus of Dutch reform has been largely on creating the regulations for competition among insurers. Their policy focus is now creating competition on the supply side where provision has many of the characteristics of the UK NHS, i.e. large variations in clinical practice and an absence of transparency and accountability. 6

The Conservatives would find the adoption of the Dutch model challenging. On the one hand, the potential to privatize both funding delivery and provision of NHS care but maintains tax funding. On the other hand, it requires very high levels of complex regulation to design, implement and performance-manage such a system. As ever competition may be relatively easy to legislate, but its maintenance in the face of powerful monopolies is much more problematic. While privatization of financial management and provision would be attractive to the Tories, complex and costly regulation of the market would not.

More information

This pledge seems vague but is fundamental to making the healthcare market work more efficiently. The naïve deny the existence of a market in the NHS. A market is a network of buyers and sellers and the English NHS has had a well-articulated market mechanism since the creation of the purchaser–provider split in 1991.

The principle characteristic of the Thatcher market has been the weakness of the purchaser. Primary care trusts are ‘toothless bulldogs’ lacking the clinical expertise and the financial levers to engineer change in dominant, fragmented and often inefficient primary and secondary care providers. 4

Fundamental to market reform is the creation of better information, creating improved analytical capacity to review it and incentives to apply it. What is needed, with and without any Tory radical reforms, is comparative validated and realtime data at the level of the medical practitioner which demonstrates comparative costs, activity and outcomes. This would facilitate the timely rather than the retrospective identification of outliers such as the Mid Staffordshire Foundation Trust and rogue practitioners such Harold Shipman, the Bristol paediatric cardiac surgeon, and the deficient gynaecological surgeons Leeward and Neale and more timely intervention.

Ideally, such information would be used by the profession to inform better audit, College membership and GMC revalidation. In a Tory competitive market it would be an essential component for informing patients also. If the Dutch model was adopted, patients would use such information to choose an insurer and would expect their insurer to use such data to ensure the provision of safe and high quality patient care by rigorous contracting, transparency in performance and efficient accountability.

NHS data are improving. Hospital Episode Statistics are improving as clinicians and managers seek to maximize tariff (payment by results [PbR]) income. PbR and Monitor have incentivized hospitals to invest in patient level individual costing (PLICs) and soon many trusts will be able to identify cost outliers in the consultant performance. Mortality data are fraught with difficulty, not least the gaming of data as regulators begin to use it as a performance measure. But now there is investment in patient reported outcome measurement (PROMs) and, if successful, this will radically alter performance management audit and patient choices. 7, 8

Incentivizing the use of this information is no easy task. Currently there is much enthusiasm among policymakers for pay for performance (P4P), an example of which is the GP Quality Outcomes Framework (QOF). However, the evidence supporting these investments is weak both in quality and quantity and what is needed is more and better quantitative evaluation of these radical policies. 9

From 2011, up to 10% of a hospital's tariff income will be at risk if it fails to meet local ‘quality’ targets. This programme, Commissioning for Quality and Innovation (CQUIN) has the potential to transform PCTs from price and quality-takers to price and quality-makers, i.e. no longer bank clerks! However, if used over-zealously it has the potential to destabilize both financial and quality performance.

The balance between non-financial incentives such as trust and duty and financial incentives such as the GP-QOF and CQUIN is difficult to achieve. P4P and regulation is a statement that practitioners and institutions are not trusted to use society's resources wisely and efficiently. A focus on P4P drives out intrinsic incentives, in particular the inclination of workers to do a good job. 10

When using incentives of any sort, it is necessary to bear in mind four issues:

it is difficult to determine if employees make the right decision, e.g. the results of decisions may not be evident for years;

P4P attracts risk-takers rather than those workers who prefer steady employment;

employees can manipulate the system, e.g. ‘exemptions’ in the GP quality outcomes framework (QOF);

P4P crowds out intrinsic rewards, i.e. the natural inclination of workers to do a good job.

This said, such incentives may be unavoidable when inefficiency is significant, but they should be deployed with care and carefully evaluated.

Competition

Competition involves striving with rivals for a share of the market. Those who favour its use see in it the creation of uncertainty and the challenging of complacency among existing providers.

The advocates of competition in the NHS, be they Milburn-Blair or the Tories, assume that the NHS market is inefficient and that competition is a useful mechanism to challenge this inefficiency. For them inefficiency is epitomized by hospital failures in the delivery of safety and quality and the variations in clinical care demonstrated for decades in primary and secondary care, which means that patients of similar needs and personal characteristics get very different pattern of care. This creates a policy perspective which ranks highly the need to challenge both healthcare providers and the labour unions in the NHS.

Can private suppliers provide elective care more efficiently, i.e. at lower cost and of good quality? The ISTCs have creamed the good risks and been incentivized in the first five-year contracts with tariff plus a bonus. Their activity levels have been high but localized. The Parliamentary Select Committee on Health concludes that we lacked evidence to determine whether this expensive experiment has provided cheaper care. 11

But when did evidence slow reform in the NHS?! Privatization of primary care looks an attractive option, particularly if the potential of nurse substitution is exploited. Such potential substitution was first demonstrated in the literature over 30 years ago. 12 The Cochrane evidence indicates that nurse practitioners can provide what GPs provide. 13 Furthermore, patients like them better and they are cheaper!

Primary care practices with fewer GPs (e.g. a GP-population ration of 3500) and nurse provision, triage and prescribing looks an attractive notion in an era of acute financial problems. The attractive political way to do this would be to put such services out to tender. The challenge for all concerned would be to ensure that the substitution is real as there is a risk that merely hiring more nurses would result in improved provision for unmet need and cost inflation. Such investment has to be an effective substitution rather than an expensive complement to existing services.

Secondary care is likely to shrink after the election, as productivity pressures grow and patient flow is speeded up. This means that there will be significant closures and mergers of facilities, which if managed efficiently by the NHS Board may protect politicians from public protests about the closure of local facilities. However, such rationalization of the hospital capital stock should proceed with caution. It is not always clear that investment in primary and community care is good value for money. 14 Indeed for some activities where economies of scale exist, greater throughput at a lower cost may be achieved by hospitals. Instead of radical change favoured by some, a selective approach to hospital rationalization would seem wiser.

However, the recession and the scale of government indebtedness may make precipative change unavoidable. Those adhering to the mantra of ‘supply creates its own demand’ will seek to cut capacity vigorously. 15 Given the electoral cycle such ‘surgery’ will have to be carried out early during the period of ‘crisis’ to mitigate the inevitable storms of public protest when caused by closure of local facilities.

As hospital services are ‘reconfigured’ there will be skill mix changes, e.g. nurse anaesthetics, nurse endoscopy and possibly nurse surgery. Furthermore, with nurse retirements exceeding the production of new trainees there will need to be substitution of RNs by assistant practitioners (APs). Graduate nurses may be ‘too posh to wash’ patients so less well-trained but proficient APs may be needed to care for patients and also help reduce wage bills.

These ‘opportunities’ may be exploited efficiently by the NHS. If they are not, the Tories will ensure that private tendering will accelerate change by challenging both wage and levels and the employment of all NHS workers. The NHS is a very labour-intensive industry and financial control equals workforce pay and employment control.

All these changes will bring increased focus on NHS management. Management is about control of the allocation of resources and the primary managers in the NHS and all healthcare systems are doctors, who are leaders of their teams and therefore accountable for individual and collective performance. Increased focus on the enforcement of GP and consultant contracts is as unavoidable as is reform of pensions. The production of comparative activity, cost and outcome data at the level of each practitioner will enable clinical peers and management to determine whether job plans are being delivered.

In addition to wage controls, public sector pensions are likely to be capped soon after the election, with incomes over £100,000 being no longer pensionable. The major challenge to reforming the public services is the contracts of employment which any new government will find both too expensive and too inflexible. Reform is inevitable and will have to be swift with pay reductions as well as rigorous enforcement of contracts such as Agenda for Change and doctors' terms and conditions of employment. These policies will be accompanied by tight cash controls as the Tories (or Labour) manage the recession, while continually seeking to improve transparency, accountability and economy.

Conclusions

For decades NHS inefficiency has been dealt with by increased funding and the ‘redisorganization’ of NHS organizational structures.

The NHS has had a market (a network of buyers and sellers) since 1991 and this has been characterized by the weakness of purchasers/commissioners (PCTs) and the conservative dominance of providers in primary and secondary care.

The recession will induce radical new policies regardless of who is in power in the latter half of 2010. The Tory approach will favour competition, informed by improved information and an Independent Board that will be used to drive change nationally through competition and increased flexibility in the labour market.

Competition is about creating uncertainty among organizations and employees so that they innovate more speedily and efficiently. Competition will involve major changes to job roles, employment, pay and pensions. Radical reform in the way the NHS delivers healthcare is unavoidable given the macro-economic problems of the UK and the need to control public spending more efficiently.

Footnotes

DECLARATIONS

Competing interests None declared

Funding None

Ethical approval Not applicable

Guarantor AM

Contributorship AM is the sole contributor