Wednesday, 11 November 2015

It's time that NHS management started earning those big bucks they get paid


It's a couple of weeks before the latest 'comprehensive spending review' so we can all understand the explosion of shroud waving, sorry tales of budget cuts and screams of 'crisis, crisis'. Indeed I've indulged (I think rightly) in a little bit of this myself.

However, we need to think very carefully about what we mean by 'crisis' - as in 'the NHS is facing financial ruin':

By next year, hospitals’ deficits may have escalated to such a degree that the NHS could face widespread financial collapse.

Now it's true that hospitals (and the writer is Chief Executive of a hospital trust) are facing something of a problem. We saw recently that the total deficit has reached over £800m and that most of them report continuing pressures on delivery. But Christopher Smallwood, the writer here, is just scaremongering as part of a timely lobby.

The inference in these arguments is in two parts - first that hospitals are the NHS and second that the problem is a consequence of cuts to the NHS budget. Neither of these two suggestions are right - hospitals are responsible for just about half of NHS spending and expenditure on the NHS is programmed to rise (funnily enough by the £8 billion the NHS said it needed and the government promised).

The problem here is that while the Department of Health has a specific amount of cash allocated though the national budget, this doesn't apply to hospitals - NHS Providers in the jargon - which operate on a tariff system and mostly get paid according to how many operations (or whatever) they undertake. As one consultant put it to me - 'each time a new patient arrives in hospital for an elective procedure it's "kerching, kerching".

The problems with this system are many and varied but the most egregious is the widespread belief in hospital management that fewer patients means less money for the NHS. The managers (who really should know better) think that because their hospital gets less money this means that the whole system has less money. And this gives rise to one of the more pernicious criticisms of extending the choice of providers in the health system - 'cherry-picking':

Around half of all NHS-funded hospital care – about £40bn a year – is paid for through a national tariff, where hospitals are paid a set rate for each patient, depending on the treatment given. As private hospitals generally do not treat complex or emergency patients, critics claim private contractors can profit by “cherry picking” easier patients.

What you need to understand here is that we're being told (by those same people complaining of inadequate funding) that the NHS should commission more expensive provision through general hospitals because otherwise those hospitals, in some way, would be less viable. Instead of purchasing elective surgery from the lowest cost provider meeting the necessary high standards, we are commissioning from general hospitals on the false premise that the more cost-efficient approach would cost the NHS more money.

The central issue for the NHS - and one of the reasons it has failed to meet (or even tried to meet, in truth) its efficiency targets - is that the dominance of general hospitals over the system has made it nigh on impossible to develop a market of specialised providers or to shift low-risk procedures into primary care. The moment these systems start to reach the point where their impact on the system is positive (ie releases more money for other NHS activity) the result is NHS Trust deficits giving the impression that there is some sort of crisis. This may or may not be the case but so long as the hospitals' budgets assume utter market dominance, we will continue to fail in making any meaningful efficiencies in the NHS. And there'll be this gun pointed at the government's head:

The choice is stark: more money every year or a sustained decline in the standards of healthcare and a financial collapse. How much more money? Even if the efficiency gains achieved in the next five years matched those of the past five, the government would need to increase annual budgets by £2bn-£3bn a year between now and 2020 to preserve standards. But since the NHS cannot continue to raise productivity at this rate, at least £4bn a year extra will be necessary, starting in April.

When I look at what local government - for all its faults and failings - has delivered over the past five or six years, I am forced to assume that these same opportunities exist in the NHS. But I - like the government and the public - would like the management of the NHS to make those changes without the blunt instrument of actual cash budget cuts. So far that management has avoided anything that requires structural changes and have resisted - to cries of "no privatisation" - any substantial attempts to use the private sector to help develop a significant and innovative delivery of high quality elective surgery and treatments.

I'm prepared to defend the high salaries of NHS management but that, I think, gives me the right to tell them that they need to up their game. If we're going to pay NHS Trust bosses £200,000 or more then those bosses need to start showing the creativity, innovation and invention those big bucks are paid to secure. And the message to people like Christopher Smallwood is to stop waving shrouds and start to make the case for a dynamic, flexible and responsive system - even if it means there are fewer huge general hospitals and more small, specialised and independent providers.


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