Lansley’s reforms fail to answer the exam question

A week on and, with the odd exception, no-one outside the government has a good word to say about Andrew Lansley’s NHS reform proposals. Criticism comes from right and left, ranging from the philosophical (Can you really liberate state-funding from the state?) to the specific (‘Arsington arsey McArse’ must surely be the most succinct summation yet of Mr Lansley’s white paper).

The most glaring flaw in the plan, though, is that, like a bad A-level essay, it completely misses the point of the exam question. Whatever else the white paper promises, it will not contribute to the government’s deficit reduction target. If anything, it will make things worse.

Re-structures don’t just happen; they have to be planned and organised. To do this, you either have to take people away from their day jobs or buy in help and expertise from outside. To implement Andrew Lansley’s proposals, 150 organisations will have to be dismantled and somewhere between 300 and 700 (no-one seems quite sure) new ones set up. Staff will need to be redeployed, relocated and regraded. Employment contracts and terms and conditions will need to be rewritten. Thousands of GPs, many of them reluctant conscripts, will have to be trained in the arts of financial analysis, contract negotiation, resource planning and supplier monitoring.

Add to this the cost of making people redundant and it all starts to get very expensive. Using data gathered by the National Audit Office, Manchester Business School’s Kieran Walshe estimates that the cost of this restructuring could be £2-3bn. This might even be a conservative estimate, given that the NHS has already put £1.7bn aside just to cover the severance costs. And, as Professor Walshe says, based on past experience there is no evidence that, even after all this money has been spent, the proposals will lead to a more efficient NHS:

The transitional costs of large scale NHS reorganisations are huge, although they are often discounted or ignored, and the intended or projected savings from abolishing or downsizing organisations are rarely realised.

The right-of-centre think-tank Civitas agrees. Its research found that, as with any major organisational change, restructures in the NHS are followed by a performance dip. Even after comparatively minor changes, it took NHS trusts three years for their performance to get back to where it was before the restructures.

Even in the most commercially focussed organisations, there is usually a performance dip after any major organisational change. People become inwardly focussed. Hours are spent in meeting rooms or standing around water coolers speculating about what will happen and, more importantly, who will get what. One firm I worked for experienced a sharp drop in revenue about 18 months after a big reorganisation. Keen to protect their positions, everyone became internally focussed. Instead of winning new business, their energy was spent on manoeuvering, politicking and gossip.

It will be no different in the NHS. A major re-structure like this will sap the organisation’s energy. Given the size and therefore the drawn out nature of the reforms, we will be lucky if the performance dip only takes three years to work through. Given that the proposed reforms will not be complete until 2013-14, a conservative estimate says that NHS performance will not get back to its current levels until well after the middle of the decade.

The promised financial payback runs over a similar time period. Although there is no evidence to back up the claims, let’s assume that these reforms really can achieve an annual saving of £850m by 2013-14. It would therefore take until sometime in 2016 before the initial £3bn outlay was paid off and the real savings started.

So, even though the government has said that it wants public services to deliver more for less, its health reform proposals will mean that the NHS delivers less for more, at least for the next few years. Crucially, this goes well beyond George Osborne’s 2015 target for eliminating the structural deficit. Other public spending plans might contribute to the deficit reduction but, even in 2015, we will still be paying for Andrew Lansley’s NHS reforms.

The Conservatives were elected on a platform of reducing the deficit more quickly than Labour yet their first major announcement will cost an extra £3bn and reduce NHS productivity for at least the next five years. None of this is necessary. As James Gubb of Civitas says,

…..there is significant potential within current commissioning frameworks to drive the productivity that is required.

There is a lot that could be done to save money in the NHS without restructuring it. As more trusts move to foundation status the SHAs could be wound down anyway and, with better management and more shared resources, the PCTs could be made much more efficient. All of this could be done without blowing £3bn on restructuring.

So, whatever else people might say about Andrew Lansley’s white paper, it fails the exam question. His proposals won’t help us reduce the deficit by 2015 and it won’t make the NHS more productive, at least, not for the next five years. More to the point, from a politician’s point of view, any benefits will not be realised until well after the next election. That alone might be enough to make his party think again.

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3 Responses to Lansley’s reforms fail to answer the exam question

  1. Pingback: Lansley’s reforms fail to answer the exam question - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. Karen Wise says:

    Couldn’t agree more, with the exception of one point: that no-one’s got any good words:

    1) Whilst many (acute / Foundation) Trusts may not agree with the restructure for many reasons, some are seeing the White Paper as an exciting opportunity to grow the “business”. They are going to take advantage of the situation to place their Trust into a position of strength. Watch this space.

    2)Circling like vultures are free-lance consultants. Those who have significant experience in large organisational change, down-sizing, and TUPE know how valuable their skills are going to be over the coming years. This is going to be a very busy and lucrative time for them. Just none of them will admit it (just yet).

  3. Rick says:

    At least the freelancers will be cheaper than the big consultancies, who, to stretch the analogy to breaking point, are probably laughing like hyenas. The vultures will merely swoop down and eat what the hyenas leave!

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