New government – new health service reform: Health Service Review

Attempts at reforming and improving the NHS became one of the defining and persistent challenges of the last Labour government – despite it doubling funding in real terms.  While major advances were made, it remained unfinished business for Labour.  The big question is whether the coalition can do better.

Analysis by the King’s Fund concludes that one of Labour’s main achievements was a big fall in waiting times for treatment: another was that it became quicker and easier to see a GP.  NICE – the National Institute for Health and Clinical Excellence – is described as “a big step forward” in providing evidence-based guidance for health treatment.

Other advances include steady increases in patient satisfaction levels, better clinical management of chronic illnesses – with significant falls in mortality related to cancers and cardiovascular disease – and improved treatment of mental ill-health.  Praise is also given for the attention to historic health inequalities, with health outcomes improving faster in the most deprived parts of the population.

Public health proved more difficult to tackle.  While the ban on smoking in enclosed public places is beneficial, the King’s Fund says that obesity and alcohol misuse have not been reduced.  It also criticises the absence of productivity improvements.

“Back in 1997, the NHS was in intensive care,” says Professor Chris Ham, chief executive of The King’s Fund – and a special advisor to Labour health ministers. “As a result of investment and reform, it is now in active rehabilitation and is delivering more care to more people, more quickly.”

But further reform is needed, insists Ham.  “The NHS must now transform itself from a service that not only diagnoses and treats sickness, but also predicts and prevents it. If the same energy and innovation that went into reducing waiting times and hospital infections could be put into prevention and chronic care, the NHS could become truly world class.”

The willingness of the incoming government to take on that reform cannot be doubted.  This is despite the coalition’s Programme for Government promising: “We will stop the top-down reorganisations of the NHS that have got in the way of patient care”.  Yet the health white paper is potentially the most far-reaching and ambitious reform of the NHS since it was established.  What is now envisaged is a ‘bottom-up’ revolution.

The extent of the proposed changes can be judged by the fact that the NHS’s “main purpose” says incoming health secretary Andrew Lansley is now “improving the quality of care”, rather than itself being a provider of health care.

This new emphasis is reflected across much of the white paper.  In place of centralised targets come standards of care, plus competition between providers.  All NHS trusts will become foundation trusts, which are to be regarded as social enterprises, while primary care trusts and strategic health authorities will be abolished.

PCT functions that provide health care will transfer to new social enterprises, or existing foundation trusts.  The public health functions of PCTs will be taken on by local authorities – which also become responsible for integrating health and social care.  Consortia of GPs will take over PCTs’ commissioning responsibilities.

Behind these structural changes sit major reforms to the financial structure of the health service.  Monitor, the foundation trusts’ regulator, becomes an economic regulator, overseeing competition between provider trusts, regulating prices and safeguarding service continuity.  Drug companies will be paid according to the effectiveness of their medicines: health care providers will be paid according to results, not activity.  Greater use will be made of personal health budgets for patients receiving continuing care.

Efficiency and productivity savings of £15bn to £20bn are to be achieved by 2014 through the reforms, with management costs cut by 45%.  Data return obligations on trusts will be relaxed.  Health quangos that cannot prove themselves necessary will be abolished and the rest streamlined.  Staff pay and pensions face cuts: all trusts will be free to negotiate individual pay arrangements and regional pay variations may be encouraged.  Despite the reductions in operating costs, overall funding will rise in real terms for the duration of the current Parliament.

One of the most interesting questions is where the balance of power will reside after the reforms have been introduced and where this will leave finance professionals in the NHS.  The white paper talks of empowering health professionals, yet short-term reductions in central controls would risk excess spending.  Consequently, central controls relating to finance, quality and operations will strengthen for a two year period while new structures are introduced. 

Paul Assinder FCCA, president of HFMA, the Healthcare Financial Management Association, is cautious.  “The NHS finance function will not be immune from the management cost reduction targets and the changes to NHS organisations signalled in the white paper are significant,” he says. “It is too early to say what the impact will be on the size and skill mix in the NHS finance function as a whole. However, good financial management is the foundation for delivering high quality, cost-effective care in any publically funded healthcare system. Finance staff will be at the forefront of such change, setting up robust financial reporting, financial management and governance arrangements in the new structures.

“It will also be vital to keep a tight grip on NHS finances during the transition period when collective eyes might be expected to stray from the ball.  And of course maintaining momentum in the pursuit of significant efficiency savings is absolutely vital if core patient services are to be maintained. We need to see further detail on how the white paper proposals will be put into practice. But finance staff will continue to have a major role in supporting the delivery of improved outcomes and higher productivity.”  ACCA and HFMA must act to retain financial professionals in a difficult environment, adds Assinder.


Others worry whether the white paper will deliver the desired health care improvements.  Anna Dixon, director of policy at the King’s Fund, says: “If the proposals…. are implemented in full, the changes will have far-reaching and significant consequences for the NHS,” she says. “The result will be a health care system, unique internationally, that gives groups of general practitioners unprecedented control over public funding.”

But Dixon doubts whether the proposals will be implemented as intended, with many details unclear, consultation yet to take place and negotiations needed with trade unions.  Fresh legislation is necessary, which may prove difficult.  Andrew Lansley is said to be a man in a hurry, yet these issues suggest implementation could be slow,” says Dixon.

As with earlier reforms, warns Dixon, the very act of structural change may distract from achieving improvement – made worse by the public finances.  “There is a real danger that the financial squeeze on the NHS, which will start to show within 12 months, could derail implementation of the white paper,” she warns. “Many providers will become financially challenged, making their ability to go it alone as a social enterprise organisation difficult if not impossible. And any appetite that does exist among GPs to take on commissioning…. is likely to be dampened by the challenges of having to deliver huge productivity savings.”

It was often said that under Labour, the NHS became subject to permanent revolution.  That revolution, it seems, will speed-up with the change of government – with all the attendant problems that brings.

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