NHS White Paper Part 5

Cutting bureaucracy and improving efficiency

All governments say they will cut bureaucracy and improve efficiency and all governments fail. The problem is that when the cuts are made the public (voters) complain that services are being implemented unfairly (for example "postcode lotteries") or unsafely, or are not being provided at all and then governments step in and apply regulation. You either have a regulated system with bureaucracy or a de-regulated free market. I wonder which the Conservatives will plumb for?

Cutting bureaucracy and improving efficiency

"The Government has guaranteed that health spending will increase in real terms in every year of this Parliament." (5.1)

The Conservatives promised this, but have already failed to deliver. The spending plans for 2010/11 set by New Labour froze the budget so that there would be no real term increase (indeed, it represented a cut at the rate of inflation). Lansley has rather conveniently forgotten to unfreeze this budget, so there has been no real term increase for the first year he is in charge of the NHS. What a major fail!

Cutting bureaucracy and administrative costs

"Over the next four years we will reduce the NHS's management costs by more than 45%." (5.2)

Is it wise to pick an arbitrary figure? The white paper does not say why a level of 45% was chosen nor how it would be achieved. The figure appears to be arbitrary, possibly it comes from a rather sloppy calculation of the proportion of management performed by SHAs and PCTs and assuming that if you abolish those organisations then you save the management costs (hint: no, someone else will have to be paid to do some or all of this management).

"PCTs – with administrative costs of over a billion pounds a year – and practice-based commissioners, will together be replaced by GP consortia. The Department will radically reduce its own NHS functions. Strategic health authorities will be abolished." (5.4)

There are no estimates of how much the GP commissioning consortia will cost. Since there will be three or four times more such consortia than PCTs it is reasonable to estimate that the total number of commissioners will increase and this could cost the NHS more.

"The Government will cut the bureaucracy involved in medical research. We have asked the Academy of Medical Sciences to conduct an independent review of the regulation and governance of medical research. In the light of this review we will consider the legislation affecting medical research, and the bureaucracy that flows from it, and bring forward plans for radical simplification." (5.8)

This is potentially explosive. The current regulation structure has been built up over many years and this has been a very careful piecemeal process. Different people have different views about what you can or cannot do. A "big bang" in de-regulation will upset someone and the problem is who. For example, will animal testing be de-regulated and will researchers be allowed to do whatever they like?

"We will therefore undertake a wide-ranging review of all health and social care regulation, with a view to making significant reductions." (5.10)

This is huge.

Increasing NHS productivity and quality

This can be summed up as: more for less. Every government pledges this, every government fails. Will this government succeed (answer: no, but they are shifting the blame onto someone else so it does not matter to them).

"Patients will be more involved in making decisions about their own health and care, improving outcomes and reducing costs." (5.12)

I interpret this as "patients will shoulder more responsibility". It will be your fault if you register with a GP practice that generates a deficit and so they cannot afford your care. It will be your fault if you choose to be treated by your local hospital and you get an infection.

"Patient choice will reward the most efficient, high quality services, reducing expenditure on less efficient care." (5.12)

"Prices will be calculated on the basis of the most efficient, high quality services rather than average cost." (5.12)

So every provider will be paid at the same rate as the most efficient provider. So what will be the "reward" for the most efficient provider? Since only the most efficient provider will have their costs met (and just met, there will be no incentive to being the best provider) it means that all but the best provider will generate deficits. These two statements simply say that the most efficient providers will survive and everyone else will close. That is frightening.

"Prices will be calculated on the basis of the most efficient, high quality services" is the same as the lowest price tendering in cleaning services that plagued the NHS in the 80s and lead to the dirty conditions that caused hospital infections like MRSA. This is seriously bad news.

"GP consortia will align clinical decisions in general practice with the financial consequences of those decisions." (5.12)

In other words the cost of treatment will guide the GP rather than clinical need.

"Local authorities' new functions will help unlock efficiencies across the NHS, social care and public health through stronger joint working." (5.12)

My local authority is about to close the local fire station to save money. Is it wise to put the responsibility for peoples' health in their hands too? I think not.

"Existing providers will be set free and will be in charge of their own destiny, without central or regional management or support. [...] Hidden bail-outs will end." (5.12)

Sink or swim. NHS hospitals will close.

Enhanced financial controls

Now here is an interesting statement:

"NHS services will continue to be funded by the taxpayer." (5.14)

The problem is that by 2014 there will be no NHS services because all former-NHS hospitals will be "social enterprises", and as (5.12) says they "will be set free and will be in charge of their own destiny". Further, "competition" and "any willing provider" will mean that other services will not be provided by NHS providers, they will be provided by private sector providers. So the only part of the NHS that will remain is the NHS Commissioning Board. It is reassuring for them that they will continue to be funded by the taxpayer.

"[GP commissioning consortia] will be accountable to the NHS Commissioning Board for managing public funds." (5.14)

So the GP commissioning consortia will not be accountable to the public? Whose money is it that they are spending? They had better be careful with it because:

"the Government will not bail out commissioners who fail" (5.14)

... so bad luck if you are a patient of such a consortium. This means in effect that your GP practice can go bankrupt and the government will do nothing about it. Nice, eh?

"Commissioners will be free to buy services from any willing provider; and providers will compete to provide services. Providers who wish to provide NHS-funded services must be licensed by Monitor, who will assess financial viability." (5.14)

See what I mean about services not being NHS? Also, what is this competing, some kind of doctor cage fight?

"Monitor will be able to allow transparent subsidies where these are objectively justified, and agreed by commissioners." (5.14)

This is very interesting because it is an admission that they will be able to apply subsidies. But for whom? Is this the private providers' subsidy that will have to exist for private providers to provide services at the NHS rate?

Making savings during the transition

It won't happen. The Nuffield Trust calculates that under GP commissioning every year there will be £1.7bn in deficits. No one knows who will provide this money, but paragraph 5.14 gives a chilling response.

The BMJ say that based on data from the National Audit Office of other government re-organisations, the cost of this re-organisation of the NHS will be between £2bn and £3bn. This is in addition to the £1.7bn a year of GP consortia deficits. However, the right-wing think tank Civitas are even more pessimistic:

"If the kind of performance drop seen with the merging of PCTs in 2006 – a comparatively minor change – is repeated with current government plans, the NHS will have a major problem. The bulk of proposed NHS efficiency savings rely on efficiencies driven by commissioning, yet the evidence presented suggests that these would not be made."

That's right, they reckon that the three year cost could be as high as £20bn. They continue:

"Ruling out the fiscally implausible possibility that large extra spending on the NHS would follow, this would mean only one thing for patients: a return to explicit rationing, either by increased waiting times or by reductions in services."

This is not good news. Further, Zack Cooper and John Van Reenen on the Public Finance website talking about the GP Fundholding experiment in the 1990s, say:

"In the long term, GP funding led to higher managerial and transaction costs. That's precisely because GPs had to spend vastly more of their time negotiating with hospitals, while hospitals had to spend more time and money negotiating with them.  In what also should be a very worrying factoid for David Cameron, GP fundholding led to a substantial drop in patient satisfaction.  One explanation for this unhappiness is that GPs were spending more time working as managers and less time dealing with patients."

In other words, make sure that doctors make clinical decisions and managers make managerial decisions, then the patients can hate the managers, not the doctors.

"We will implement the reforms in this White Paper as rapidly as is possible. But the NHS cannot wait for them all to be in place to begin to deliver improvements in quality and productivity. Patients are rightly demanding the former, and the national economic position requires the latter." (5.15)

The indications are that they will rush these changes through Parliament curtailing our democratic rights by preventing our representatives to scrutinise and amend these plans. The Conservative government are already doing this with the education bill. The Conservative government have to move fast because they know they have no mandate for such huge changes and the public will oppose them. They also know that their junior partners, the Liberal Democrats, are nervous because any unpopular policies are having a disproportionate effect on their support. These NHS plans could wipe out the Liberal Democrat party at the next local election.

"The Department will require SHAs and PCTs to have an increased focus on maintaining financial control during the transition period" (5.18)

SHAs and PCTs will soon stop functioning because if it becomes apparent that Lansley's plans have any chance of being implemented these organisations will haemorrhage staff. The same can be said about managers elsewhere in the NHS. The very people who will be needed to implement the efficiencies will not be there. It's a bit of a daft thing to do, isn't it, to tell managers that 45% of them will be sacked?

Conclusions

This section has wild claims about how much money they will save. £20bn in "efficiency savings" was difficult enough under the previous government's plans, but at the same time as this re-organisation it seems impossible for these savings to be made. Arbitrary values do not help (30% cut in administration costs, 45% cuts in management costs) and they do not say how much GP commissioning will cost.

There are huge problems for providers because the funding formula for the work they do is designed so that every provider, except the most efficient, will not be able to do the work for the price and therefore, all but a handful of hospitals will go into deficit. This will be back to the 80s level of "lowest tender" that resulted in dirty, unhygienic hospitals, but in the 80s "lowest tender" only applied to cleaning. In the 2010s the plan is to apply "lowest tender" principles to clinical care. Hospitals will go into deficit and there will be no bailouts: it will be sink or swim for both GPs and hospitals. Worst of all, GPs will be told that the cost of treatment will have to lead their judgement rather than clinical decisions.

Be very afraid.