Not-for-profit good?

The Conservatives are obsessed with legislating away our jobs. But one thing that few people realise is that they are also obsessed with legislating away their own jobs. Frankly, the reason is that they cannot be bothered to run public services, although it beggers belief why they were so desperate to get elected to do the job, if they really do not want to do it.

Look at Lansley's "Big Society" plan. Lansley is incompetent, he knows that he is incapable of running a healthcare service and the fiasco of the lack of publicity over the flu jab this winter shows this: for some reason he thought it was not necessary and now we are finding hospital resources are strained by the large number of people needing specialist respiratory care when it could have been avoided if they had been vaccinated. Lansley says that it is the fault of GPs for not telling their patients about the flu jab. This should be a heavy hint to GPs about what is in store for them in the future: they will be blamed for all of Lansley's legion of mistakes.

Lansley's "Big Society" big idea is to turn every hospital into a "social enterprise". What this means in practice is that the government (ie Lansley) will have no responsibility for hospitals. Your hospital is failing? Don't contact Lansley because he'll tell you that it is not his responsibility. He treats hospitals like supermarkets - if you do not like one supermarket you simply go to another one, it is called "choice" and you have no right of complaint or recourse to the government if your local supermarket fails. Your hospital will be a supermarket.

Hospitals will be "social enterprises". Social enterprises are private businesses.They are not owned by the public. Lansley tells us that he wants to create "the largest and most vibrant social enterprise sector in the world". Not only is he incompetent, but he does not do his homework. If he could be bothered to look over the Atlantic he would see that out of 5,795 hospitals in the US, half (2,918) are not-for-profit, non-government, social enterprises. There are about 450 hospitals in England, how Lansley thinks that 450 is larger than 2,918 is anyone's guess.

Let's look at just one aspect of US social enterprise hospitals: executive pay. The following is from the Nonprofit News website:

A survey of nonprofit hospitals in the Puget Sound [Washington state] area found that 19 top executives and doctors earned more than $1 million in 2008. Public radio station KUOW in Seattle reported Monday that an additional 59 employees at the hospitals earned at least $500,000 that year.

A salary of $1 million is a lot more than the Prime Minister earns. Remember that metric? Who earns more than the millionaire who draws a salary that he does not need? Well, nineteen of the not-for-profit hospital execs in Washington State earn more than him.

The report also says:

A hospital’s board of directors ultimately is responsible for executive compensation. MultiCare Health System, which runs three hospitals in Tacoma and Good Samaritan Hospital in Puyallup, paid CEO Diane Cecchettini $2 million in 2009 and more than $5 million in 2008.

Wow, that's a good salary, yet these are not-for-profit? Isn't that like a charity? No. While some social enterprises have charity arms, all of them are private businesses that simply do not make a profit. They are supposed to plough the "surplus" back into the business to improve the service, but they could equally plough the "surplus" back into the business as executive remuneration. Clearly in Washington state, this is what they are doing.

So who is there to restrain executive pay? It is the executive board. Since US social enterprise hospitals have no shareholders and have no public accountability the only restraining influence on executive pay is the executives themselves. They decide on the level of their salary. Remember when we had a similar situation in the UK with MPs' pay?

This situation is effectively what we will get if Lansley gets his way. A social enterprise hospital will be a private business, so presumably the executives will want to be paid private sector rates. According to the NHS Confederation:

NHS chief executives' counterparts in the private sector are paid, on average, £424,000 - around three times the average salary within the NHS

So when a hospital is newly "liberated" as a social enterprise, how long do you think it will be before the pay of the executive directors starts to creep upwards?

Complain? By all means try, but it will be pointless because a social enterprise is not a public body and so your elected representatives will have no responsibility over the hospital. Look at how spineless the government has been over bankers' bonuses, it'll be no different with hospitals. Welcome to to the world that Lansley is creating because he is too lazy to run the NHS!

Lansley fails

The main philosophy behind Lansley's policy is that he should have no responsibility at all. Nowt. The idea is that the NHS should run itself and Lansley spends his time in Richmond House with his feet upon his mahogany desk throwing paper airplanes made from prescription scripts across the room.

The problem is that the NHS is a very large, complex organisation and this means that someone must run it. And, sadly, that means Lansley must do something. Sometimes he has to make some decisions.

Before the election, when he was whoring as many votes as he could get, Cameron said that no A&E or maternity unit will close without the local community agreeing. Politicians often make such rash pledges but the Press usually challenge them. The Tory-compliant Press before the election chose not to ask Cameron to justify individual pledges and so now we are seeing the result: they were hollow promises.

After the election Lansley gave "four criteria" that must be applied to any NHS service re-configuration:

"First, there must be clarity about the clinical evidence base underpinning the proposals. Second, they must have the support of the GP commissioners involved. Third, they must genuinely promote choice for their patients. Fourth, the process must have genuinely engaged the public, patients and local authorities".

The second and fourth clearly indicate that there must be widespread consultation.

Lansley inherited such a service re-configuration in Kent, where there was a plan to down grade the  maternity unit at Maidstone Hospital and centralise consultant-led maternity services in a new hospital, Pembury. The policy has proven to be contentious. Local GPs are apparetly against the move (the local campaign group claims the figure is 97%) and more than 20,000 people have signed a petition against the move. While in opposition, the then shadow minister (now Minister of State for Health) Anne Milton expressed her opposition to the changes and the Conservative prospective parliamentary candidate (now the MP) Helen Grant actively campaigned against the move. 

Yet with all of this opposition it appears that Andrew Lansley has decided that the re-configuration will go ahead.

KentOnline revealed Health Secretary Andrew Lansley has given the go-ahead for Maidstone Hospital's unit to close. It means maternity services are set to be centralised 15 miles away at Pembury Hospital.

KentOnline quote a letter from Lansley announcing the decision, in it he says:

My conclusion does not prejudice any future decisions made by local commissioners. If in future GPs as commissioners assess that a need for services at Maidstone is unmet, then it will be their prerogative to seek to redesign and commission services on that basis.

This is the typical "have your cake and eat it" attitude that Lansley takes. He says that he is making a decision that clearly goes against his election pledges, and his four criteria (well, at least two of them) and yet he says "if you don't like what I have decided then at some unspecified time in the future, someone may decide to change it".

He really is a poor minister.

Train Crash

Earlier this week, before the operating framework or the responses to the white paper "consultation" were published Nicholas Timmins, Public Policy Editor of the Financial Times published a damning piece about what lies ahead for the NHS. It is worth repeating here.

A senior management consultant has been privately warning anyone in government who will listen of the risk of a train wreck.“They all hear the words, nod wisely, but give no outward sign that they are going to challenge what is going on,” he says. “It is going to be very messy.”

This is frightening, it appears that no one is willing to Lansley aside and tell him to stop. Timmins quotes the chief executive of one of Britain’s biggest private hospital groups:

“If I went to my board and said that I’d told my senior management that I was merging all their posts before making them redundant in two years’ time; that I’d told all my finance people they too will be going; and that I was going to get some other people to run the business; and that while I can’t yet define it precisely, it will involve the nurses – well, I think it would be me who was out of a job.”

Surely this should tell Letwin something?

Next Steps

Today has seen a flurry of publications from the Department of Health. First there is the response to the consultation on the NHS White Paper, which can be summed up as "we read the objections, but we are going ahead anyway". You have to admire the chutzpah of a document that says in one paragraph (1.14) that there was "widespread enthusiasm for the vision and principles" while in the next paragraph (1.15) it says that "a considerable number of respondents opposed the Government’s reforms altogether". This document suggests that there will be a Health bill in January, although the notable health service journalist Andy Cowper thinks that is optimistic.

The other two major publications are the Operating Framework for the NHS in England 2011/2012 and the PCT Allocations 2011-2012. The former gives the rules that GPs, hospital trusts and PCTs must follow from next April, and the later is the hard figures. The best analysis of this comes from Prof John Appleby on the Health Policy Insight website.

Prof Appleby says that the money for PCTs next year will be £89.1 billion, a 3% cash rise. He applies the "real terms increase" test using the OBR's forecast for inflation and concludes that this does  represent a real term increase of 0.3%. However, these are just raw figures. From the £89.1 billion the government will take £648 million and hand it to local authorities to pay for social care. Then, before the PCTs get their hands on the remaining cash the government will take more money (2% of the total) to pay for the re-organisation that "a considerable number of respondents opposed". Prof Appleby estimates this to be £1.8bn of money that should be spent on our healthcare.

So clearly when you have a barely "real terms increase" and then take £2.448bn out of it, that does not mean "real terms" at all. To echo Ed Miliband in the Commons this afternoon, this is yet another broken government promise.

Designed to Fail

Currently all Foundation Trust hospitals are rated according to their financial and clinical governance. An FT must balance its books and the reason why a trust is made an FT is because the regulator, Monitor, regards the trust to be capable of doing this. (In fact, Monitor has more stringent rules than this, a hospital trust has to make a surplus of at least 1% of income to make them happy.)

This is good for the taxpayer because it means that hospitals will improve efficiency and are less likely to ask the Treasury to bail them out. While an FT is less likely to go into debt than a non-FT NHS Trust, it does not mean that they won't. The following is from Monitor's web site for the quarterly report for the three months up to June 2010 (the latest available). This mentions is the Financial Risk Rating for the current FTs (rating of 5 reflects the lowest risk and a rating of 1 the highest):

• 58 NHS foundation trusts (45%) have an FRR of 4 or 5 (63% at quarter four 2009-10);
• 63 NHS foundation trusts (48%) have an FRR of 3 (32% at quarter four 2009-10);
• six NHS foundation trusts (all acute trusts) have an FRR of 2: Blackpool Fylde and Wyre Hospitals; Medway; Northern Lincolnshire and Goole Hospitals; Poole Hospital; Royal National Hospital for Rheumatic Diseases; Royal Brompton & Harefield (five at quarter four 2009-10); and
• three NHS foundation trusts (all acute trusts) have an FRR of 1: Mid Staffordshire; Heatherwood & Wexham Park Hospitals; and Dorset County Hospitals (two at quarter four 2009-10).

Basically this says that three FTs have financial problems.

Mid Staffordshire in 2008/09 had a surplus of £0.759m, which is 0.5% of income; Heatherwood & Wexham Park Hospitals in 2009/10 had a deficit of £9.9m, which is -4% of income, and Dorset County Hospitals in 2009/10 had a deficit of £5m, which is -3.5% of income.

Heatherwood and Wexham Park Hospitals have recently been loaned £18m by the Department of Health to help them continue to provide healthcare while they sort out their finances. The announcement of this loan was met with some derision since Andrew Lansley announced that there would be "no more bail outs" for hospitals that go into debt.

The NHS white paper is explicit about the "no bail-outs" threat. This policy means that there is a possibility that if a hospital goes into debt it will have to cut staff, or services, or (ultimately) close. It is vital, therefore, that trusts are monitored carefully so that they do not go into debt. Currently Monitor receives quarterly reports and has the power to intervene in an FT if they think that the trust is in a serious risk of going into debt. The intervention can be as extreme as replacing the management team.

However, we now find that Monitor may only perform financial checks for just the first two years of Foundation Trust status. Health Service Journal reports:

The government is understood to have decided the current compliance regime run by Monitor and its tough intervention powers will, from April 2012, only apply to foundation trusts still within the first two years of their authorisation.

Before April this year there were 129 authorised foundation trusts. Under the new approach to regulation  nearly all would be freed from many checks in April 2012. The only exceptions would be those with very poor risk ratings at that point. They would remain subject to the foundation trust regulator’s intervention powers so it could take steps to stabilise them before they were also put outside the regulation regime.

Assuming the April 2014 “drop dead” date for all trusts to become foundations is met, the change means the Monitor compliance regime would cease altogether in April 2016, with finance and governance oversight ending for all state providers.

The excuse given is that Monitor will soon have the responsibility for ensuring competition between healthcare providers (including private healthcare) and so their financial oversight of FT hospitals (publicly owned - for the time being) would be a conflict of interest.

However, it does seem as if the Department of Health is designing a system where hospitals will fail.

Lansley is Bullish

In a FT interview with the FT today Andrew Lansley is bullish about the scale and speed of the changes he proposes:

People, he argued, “woefully overestimate the scale of the change”. Practice-based commissioning, choice of provider, an NHS price list and foundation trusts already exist, he said.

Well, yes, but Lansley has already argued vociferously that GP Commissioning is not Practice Based Commissioning (since PBC had indicative budgets and GP Commissioning has real budgets); choice of provider at the moment is choice of NHS provider, not any private provider; NHS "price list" is set at average actual cost, not the minimum cost conjured up by Monitor as suggested by Lansley; and trusts become Foundation Trusts only when they are deemed to be capable, and not forced into the status by an artificial timetable suggested by Lansley. So yes, he's right, but he is also very wrong.

Mr Lansley acknowledged there would be some minor changes to the timetable. It is thought, for example, that the date by which all hospitals will be expected to have reached foundation trust status might be slightly extended.

The Foundation Trust programme under Labour was that an NHS Trust could become a Foundation Trust if it met certain criteria on financial, quality and governance. As with any such programme, those best able to meet the criteria will be the first to achieve the status. The following graph shows how many FTs were created in each year from 2004 to present (132 in total).

What is immediately obvious is that the rate of gaining status as an FT has slowed. This reflects the fact that those hospitals that had the best financial governance have already gained FT status - the low hanging fruit - and the remaining acute trusts (currently 74 of them) are the more difficult cases. Most of these remaining hospitals have financial issues (with some, the extent of the debt is hidden) and so achieving FT status will be a long, difficult process in the best of years.

The problem is that the NHS is being cut rather savagely. The "£20bn efficiency saving" is a 4% cut every year. Further, most hospital income comes from the National Tariff, which Lansley intends to cut from the average to the minimum value. Finally, in response to GP's objection to inheriting PCT debt Lansley is likely to cut the tariff further. All of these will make life extremely difficult for the best hospital trust, but they will mean that the weaker trusts have almost no chance of reaching balanced budgets and achieve the level of financial governance to become a Foundation Trust.

So when Lansley suggests "some minor changes to the timetable" it is likely to mean in the region of years rather than weeks.

Disposable sections of the White Paper

It is interesting that today the FT is reporting that Oliver Letwin has been asked to troubleshoot the government's health policy. There appears to be a lot of worry in the government that Lansley is pushing too hard on his re-organisation of the NHS and letting the day to day running of the service slip. This concerns everyone in the country since the government's cuts could push the NHS into crisis just at the time when the most vulnerable will need it most. That worries the government because they will be seen as being incompetent with the NHS, that the NHS is not safe in their hands. This will undo the careful detoxification of the Conservative party which was instrumental in gaining them the share of the vote that they did.

Further, there are concerns that no one quite knows what Lansley is doing, neither the government, nor the public:

One Number 10 insider said: "There is no change in the policy. But Oliver is starting to ask all the important questions that need answers." Another added: "Andrew [Lansley] has all the answers when he is asked the questions about how the implementation of all this will work. We are just not sure they are the right ones."

Interestingly, the strength of the opposition to these plans appear to have shaken Lansley, who the FT quotes:

"It does not mean that we will do everything in the way that we first suggested in the white paper. This is a major reform. There are aspects of implementation of the reform that people have made comments on, and we will take them on board."

The question is: what parts of the white paper is Lansley intending to drop?