NHS changes: my twopenn’orth

Sorry, this is going to be a hugely long post.  If you’re one of those people who subscribes to the view that anything that can’t be said in fewer than 1,000 words isn’t worth saying then you’re going to hate this; probably best to go and read something else instead.  I’ve tried to edit it as much as I can without damaging readability, and without removing all the personality in the writing (which would make it even duller to read).  I have divided it into reasonably brief linked-but-separate sections, which hopefully might make it slightly more appetising.  Anyway, enough prefacing, let’s get on – some of what I think about the proposed NHS reforms, at a fairly superficial level.


Competition versus collaboration

The big idea behind these reforms is to introduce more competition into the NHS.  It’s my very strong suspicion that most patients don’t care whether the NHS is ‘competitive’ or not; we just want good quality treatment to be available when we need it, and as close as possible to where we live.  It’s my equally strong suspicion that this is what medical staff want as well.

I’m far from convinced that the best way to achieve this is via competition.  In fact, I think you could argue that the existing attempts to introduce competition have already damaged the NHS, by encouraging people working in one part of it to see their colleagues elsewhere as competitors, not collaborators.  Speaking as a patient who’s been made to feel like an unwanted sack of potatoes on several occasions (and keep in mind that my health problems may be treatment resistant, but they’re not complex or co-morbid like some people’s), I think there’s a very strong case to be made for increasing collaboration in the NHS, not competition.  I mean, do we want a system that encourages medics to see themselves in competition with other medics, because their ultimate goal is improving the financial bottom line of their employers, or encourages them to view themselves as collaborators, with a shared goal of making things better for their patients?

Competition in rural areas

It’s basic common sense, but in order to have competition in the NHS, you need to have more than one potential supplier of services.  This might be possible in the major cities where there’s more than one hospital (though see below), but what about a rural area where there’s, let’s say, only one hospital capable of carrying out radiotherapy within 60 miles?  It will make no difference giving the money to pay for radiotherapy to GPs and telling them to spend it where they choose; if there’s only one supplier they can commission it from, then there’s no decision to be made, and no competition.  In other words, this is not a free market but a monopoly, and as with any monopoly this means the supplier can charge what they like and the customer has no option but to pay.

Now, couple this with the fact that hospitals are going to be allowed to make as much money as they like privately.  Keep in mind that this is the only facility for 60 miles, and that private patients might very much prefer to have their radiotherapy done locally.  So now the hospital management has the choice of making their radiotherapy suite available for NHS work, or a more lucrative private contract.  Which are they going to choose, I wonder, given they’ve been warned that any failure to keep the hospital’s finances in the black will result in them being summarily fired by the new financial regulator?

We’ll end up with a situation where the private sector and the NHS are in competition with each other for the use of the same equipment.  The GP consortia will be left with two choices: match private prices, with all the knock-on effects that’ll have on funding for everything else, or send radiotherapy patients 60 miles to the next-nearest facility.  Under this system, it seems distinctly possible that NHS patients in rural parts of the country will have to travel even further to access treatment, while private treatment will be available closer to home.  Won’t that be a lovely gift for the companies flogging private health insurance?


Competition in urban areas

At first sight it looks as though competition ought to be more practical in urban areas, but there’s a fundamental problem here, too.  Let’s say that there are two radiotherapy suites in a particular city.  Other things being equal, GPs are of course going to want to get their patients into the better of the two treatment facilities, but what happens if it’s already running at (or close to) full capacity?  (This is a very real concern – there’s almost no spare capacity in any part of the NHS.)  No matter how keen GPs are to get their patients into the good facility, it won’t actually be able to handle more patients than it already is, so, inevitably, roughly the same number of patients will end up being sent to the good and bad facilities regardless.

This means there’s no incentive for the bad facility to improve – why go to the expense of re-training your staff, or upgrading your equipment, if your income stream is guaranteed no matter what you do?  But, if there’s more than one GP consortium commissioning services, there will be competition for the good facility, which will enable them to jack up their prices.  This means, of course, that the taxpayer will be paying more for the same service at the good facility, and getting a poor service for the same money at the bad one; it’s hard to see how this will help either to drive down costs or drive up standards.


What effects will this ‘competitive market’ have?

It’s possible, of course, that competition will stimulate good providers to invest their extra income in expanding their facilities, thus enabling them to handle more patients, but it’s by no means guaranteed.  It’s what one would generally expect to happen in a free market, but this isn’t going to be a free market: parts of it are going to be very tightly regulated.  For example, NHS hospital managers will be punished if their organisations slip into the red, something that’s a very real risk if they expand their capacity with no guarantee of new patients.

These same risks are experienced by many private sector companies, certainly, but the difference is that private sector investors understand that companies may not always run at a profit, especially when they’re expanding: that there are times when you have to spend money to make money.  Managers of organisations within the NHS, on the other hand, are going to be at risk of losing their jobs the moment they start to run a deficit, which means they’ll be faced with a simple choice: expand in order to improve the service to patients and run the risk of losing your job, or stick with the status quo and keep a roof over your kids’ heads.  I wonder which option they’ll choose…

It looks as though, even where competition is possible, the particular model the government are proposing will reward poorly performing institutions with continuity of income, and create powerful disincentives for well-performing institutions to expand.  In other words, this is a market carefully designed to strip away all the potential benefits of markets (meaningful competition) while preserving the negative consequences (opportunities for profiteering monopolies).


What about anti-competitive behaviour?

One of the fundamental principles of the reforms is that GP consortia will be able to purchase services from any provider: those within the  NHS; ‘third sector’ providers (i.e. charities and voluntary organisations); and private suppliers.  This is supposed to promote competition (though, as we’ve seen, it’s not especially likely to do so – or, at least, not beneficial competition).  But what’s to stop a private provider sweeping in and charging less than cost price for their services in order to capture market share?  This is obviously going to be very attractive to the GP consortia – a better service for less money, what’s not to love?  Organisations within the NHS literally won’t be able to compete – unlike the private providers, they’re not allowed to operate at a loss, even temporarily – with the result that they’ll be driven to the wall.  At this point, the private provider will have a monopoly, with all the scope that means for drastically increasing prices.

Looked at this way, these reforms will have the effect of taking a not-for-profit public service and turning it into a pipeline for transferring money direct from the taxpayer into the profits of private companies.  This was precisely what happened with rail privatisation – another attempt to create a pseudo-market – and look how well that worked out.


A fundamentally unfair, un-free market

It’s becoming clear quite how unbalanced and unfair this market is.  Private organisations will have substantial freedom of operation, while institutions within the NHS will have their hands tied in all sorts of significant ways.  This isn’t just a case of ‘opening up’ the NHS to private providers.  This creates a situation in which private providers are overwhelmingly more likely to prosper than not-for-profit, publicly-owned ones.  This may or may not be deliberate – but if you were looking for a stealthy way of turning the NHS from a publicly-owned, not-for-profit system into one in which the state uses private companies to provide free-at-the-point-of-delivery healthcare, this is probably the system you’d come up with.


What about this financial regulator that’s going to guarantee the provision of ‘essential services’?

I wonder if that’s only to apply in cases where a hospital – or other service provider – has gone bust, or if they’ll step in to ensure availability in circumstances where an NHS provider has decided they can make more money renting out some vital piece of kit to the private sector?  Or, better yet, have worked out that the financial yield per square foot is greater if they do away with that space-hogging geriatrics ward, and use the space for en-suite private rooms for people undergoing minor surgery instead?  This is a light-hearted way of raising a serious question – how is the new system going to guarantee the availability of a particular service if the service providers decide they don’t want to provide it?  GPs can’t commission services no-one is willing to provide.

I’d also love to know how the regulator is going to guarantee the provision of ‘essential services’ when hospitals and other service providers have gone bankrupt.  Typically, when an organisation goes bankrupt, an administrator steps in to take over the day-to-day running.  They usually try to keep the functions of the business running as best they can, but they also only preserve those parts of it that are financially viable.

So what if an essential service isn’t viable – i.e. the revenue it generates is less than the costs involved in providing it?  Or the service can only be made financially viable by stripping back staffing to a level the Care Quality Commission rules is unacceptable?  Or what if GP consortia pay for a service quarterly in advance, and that money’s been swallowed up servicing the hospital’s debt?  Who makes up the shortfall in those circumstances?

I mean, medical staff have to be paid, equipment and supplies paid for, and all of that takes money.  Are the financial regulators going to have the power to force GP consortia to pay for a hospital’s financial mismanagement (even, potentially, outright fraud)?  That doesn’t seem very fair on the patients who’ll lose access to other treatments the consortium can no longer afford to fund.  Or is the regulator going to pay for it directly?  Either way, the much-trumped ‘no bailouts’ clause of the new system looks like being a meaningless catchphrase.


And, anyway, aren’t all health services ‘essential’?

I was watching a Newsnight report on this, and some disconnected-from-reality policy wonk was speculating about what would be classed as ‘essential’ services.  She came up with accident and emergency and, after a bit of thought, maternity services.  You can add acute psychiatric services to that list as well, in that all three of those have to be available to admit people straight from the street.  But aren’t all medical services essential?  I mean, take A&E: yes, some of the people who arrive there can be patched up and sent home with an instruction to see their GP the next day, but some of them will need hospital admission, or emergency surgery.

So wouldn’t ‘essential services’ also have to include neurosurgery, and cardiac surgery, and orthopaedics, and ophthalmology, and ENT, and gastrointestinal, and – well, you get the picture.  And it’s not just a question of the surgery.  You also need intensive care units, and critical care units, and ordinary wards, and you need the nurses and doctors and others who staff them.  And a hospital with patients in it has to be cleaned, and the patients have to be fed; and there need to be phlebotomists to collect blood samples from patients, and lab staff to run the tests; and people to operate the various scanning devices, and interpret the results; and if the building’s open to patients and relatives of patients then you need porters, and administrative staff to maintain the notes, and security guards, and the people who run the car-parking; and – well, that’s near as dammit the hospital’s entire complement of staff accounted for.

And can you even discount outpatient services as inessential?  What about the patient referred to the dermatology clinic with what turns out to be melanoma?  She’s not presenting with an acute injury or illness, she won’t die during the 4-week period the clinic’s shut down, or the 12 weeks after that while the new staff try to get back on top of the backlog caused by the 4-week shut down – but every day’s delay harms her chances of long term survival.  Is her appointment ‘inessential’?  Would any politician from any party be willing to defend the principle that it was inessential, and take the electoral consequences?

In practice, and despite the explicit claims to the contrary, ‘maintaining essential services’ means bailing out hospitals and other service-providers if they fail.  In other words, we end up with a situation where hospitals will be given the freedom to make unwise or incompetent decisions, and the taxpayer will have no choice but to pick up the tab.  It would be like the banks all over again, but instead of being ‘too big to fail’ the hospitals would be ‘too essential to fail’.  And, as with the banks, if you take away the negative consequences of failure then you remove one of the key elements that keeps markets functioning as they should.  For a market to be a free market, there has to be meaningful competition, and the organisations that operate in it have to be free to fail – and neither of those conditions will apply to the market in health.


What about cherry-picking?

On the same episode of Newsnight, I saw a doctor raise the concern that private sector providers would simply cherry-pick patients.  That’s to say they would be keen to take on simple cases, but would decline to take on the more complex (and hence more expensive) ones, leaving them to be handled by NHS providers.  In other words, NHS providers will be left dealing with all the complex, expensive cases, but without the easy money from the simple ones that could have been used to subsidise that work.  It wouldn’t take long for an NHS hospital in such a situation to go bust – and it wouldn’t be through any fault of the managers or clinical staff that worked there.

There would be ways round this, of course.  The GP consortia could, for example, refuse to commission any provider who declined to handle the full range of cases.  But they’d need to have nerves of steel to stick to that in the face of rising waiting lists, and private providers eager to tell newspapers about their half-empty operating theatres, and their surgical teams just standing by to ‘help’ the NHS.  Alternatively, GPs and providers could negotiate a system of graduated fees that recognises varying levels of complexity, and sets prices accordingly – but doing that across the whole spectrum of medical conditions would be a huge undertaking, and would inevitably result in a lot of disputed invoices, when hospitals and GPs disagreed over how complex the management of a particular patient was.  In fact, that second solution would be almost guaranteed to overwhelm the system in litigation within a few months.  GPs will almost certainly go down the route of negotiating block contracts with NHS hospitals across the whole range of services they provide, and only using private providers for ‘overflow’ – which will make the kind of cherry-picking I describe above almost inevitable.


Why would GPs want to do this anyway?

It seems pretty clear to me that this offer to take on commissioning is one of the most obviously poisoned chalices in the history of the NHS.  I mean, think about it.  These consortia will have no power over the total size of their budget, only how they spend it.  They’re going to have to deal with patients who feel that their health problem – however minor, however non-urgent – deserves top priority, and they’ll be held personally accountable for every delay in a hospital providing treatment.  Those delays are going to be largely out of their control – unless they start micro-managing, they’ll only have the ‘nuclear option’ of de-funding a provider and switching the work elsewhere (assuming there’s somewhere else to switch it to) – but they’re still going to get the blame.  In fact, the same thing will apply to almost everything the NHS does in their area – they’ll have none of the control, and all of the blame.

Then there’s the fact that – even though they’ll be handling 80% of the NHS budget in their area – they’ll have very little discretion over where to spend most of it.  Nine times out of ten they’re going to spend the money in the exact same ways that the Primary Care Trust did, because it doesn’t matter who’s paying, all the essential services still have to be paid for.  But – and here’s the rub – patients for the most part won’t understand that part of the equation.  The only part they’ll understand is “my GP could pay for me to have this if she wanted to, but she won’t”.  The next time there isn’t money for some colossally expensive drug that offers terminally ill patients a few extra days of life, the local press won’t report it as “the NHS are trying to kill dad”, it’ll be “Dr X is trying to kill dad”.  I give it months before doctors start finding desperate relatives of terminal patients outside their houses with placards.

All of this is happening, of course, against the backdrop of the biggest squeeze in NHS funding there’s ever been.  The coalition have somehow been very successful at getting the idea that NHS funding is increasing in real terms to stick, even though that calculation was based on the assumption that inflation would be running at 2%, not the 3.7% it currently is.  That difference is more than enough to wipe out the real terms increase, and turn it into a real terms decrease.

Even if it weren’t, that’s to completely ignore the fact that, thanks to the constant development of new drugs and new techniques that keep people alive for longer, healthcare inflation drastically outstrips the general increase in prices.  This is true everywhere in the world – it’s not some UK-specific scourge of inefficiency, despite what the papers would have us believe – and it means that a small real terms increase is actually a cut, and the real terms cut the NHS is actually suffering is an even bigger cut.

This means, of course, that the GP consortia will be trying to do more with less – but the public won’t understand that.  They’ll remember “real terms increase”, and they’ll remember “GPs spending the money”, and they’ll look around and see the service getting worse, and assume it’s all the fault of the GPs.   Expect more of those Daily Mail stories about golf-playing GPs turning up for a 2 hour surgery, then travelling home in a gold-plated Rolls Royce to roll around naked on a big pile of money.  No, if I was a GP I wouldn’t want to touch this consortium proposal with a bargepole, even though it has been carefully designed to flatter my ego, and to make my bosom swell with pride.


In conclusion

It’s pretty clear these proposals are ideologically driven, and will function partly as a smokescreen to mask the huge funding cuts the NHS will be suffering, and partly as a means of allowing for-profit enterprises access to the large amount of taxpayer money that’s spent on health.  I’d guess it’s yet another largely pointless reorganisation, in that GPs will have very little scope for discretion in how most of the money they’ll be given is spent.  I’m even pretty doubtful that it will save on administrative costs.  Primary Care Trusts and Strategic Health Authorities may be going, but, what with the new super-powerful financial regulator and the day-to-day management of the new GP consortia, I count two new layers of administration to replace the two old ones that are being abolished.

I think these proposed reforms (and let’s hope the Lib Dems come to their senses, and much or all of this fails to pass) will very likely make the NHS more expensive, less efficient, and less responsive to patients’ needs.  I think they’ll have a bad effect on the people who work in the NHS, and that’ll translate directly into worse patient care.  I think they’re a very bad thing.  But I don’t think they spell the end of the NHS, at least not on their own.  David Cameron (or his speechwriter…) is right when he insists that, fundamentally, all that matters is that healthcare is available free at the point of need, and that all the rest are just organisational details.  I’m quite sure these reforms will make the NHS worse, but I don’t think they’ll kill it.

Are they the first step in a long-term plan to kill the NHS, or (more likely) turn it into a basic ‘safety net’ like the woefully inadequate public healthcare provision in the US?  Well, that’s a different question.

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3 Responses to NHS changes: my twopenn’orth

  1. gabbyjulie says:

    Great post, Athelread. Dread to think how long it must have taken to write, but you’ve got to the nub of what is wrong with the White Paper; it’s creating a market that encourages profiteering by the private sector and eliminates the public sector from the NHS. It’ s not going to benefit the NHS at all, but Care UK, which owns a lot of GP practices and which furnished Andrew Langsley’s office, stands to gain a lot from this.

  2. aethelreadtheunread says:

    Hi gabbyjulie, and thanks for commenting.

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