It’s become something of a cliché to say that 2011 will be a defining year for the NHS but it is, nevertheless, true. The health service faces the biggest shake up since its foundation. According to the Financial Times, the legislation to reform the NHS, currently being prepared by civil servants, will be far longer than the 1946 act that set up the service.
Almost everybody, apart from the government and its closest supporters, agrees that the whole thing will be a disaster. Even people on the right of the political spectrum have misgivings. Tory MP and former GP Sarah Wollaston’s Guardian article was an elegant example of how to criticise your bosses politely. She managed to say ‘This plan is a crock of shit‘ in a way that was measured, well argued and won’t get her fired.
Just before Christmas, the right-of-centre think-tank Civitas published its report A risky business: the White Paper and the NHS. The author, James Gubb, believes that more competition is needed in the NHS and welcomes the increased involvement of GPs. However, he believes that all this could have been achieved within the existing NHS structures and without the upheaval of a massive and highly disruptive NHS reform.
The report also contains an interesting discussion about NHS productivity. Even though the NHS budget is not being cut in real terms, the demands on the service will increase, largely due to demographics. To stay within its budget and maintain current levels of service, the King’s Fund estimates that the NHS will have to increase productivity by 4 percent per year for the next five years.
Now here’s the killer bit. According to ONS figures, private sector firms in the UK increased their productivity by an average of 2.3 percent per year in the decade to 2007. So to achieve 4 percent per year, the NHS will have to significantly outperform private sector efficiency gains for five consecutive years.
It is extremely unlikely that anything even close to this will happen. Outside the manufacturing sector, which has become very good at making year-on-year productivity improvements, gains of 4 percent per year are almost unknown. When it comes to making significant increases in productivity the NHS has almost no record at all. In recent years it has only ever known real-terms budget increases and few of its managers have experience of making savings during a period of ever reducing revenue.
Even if the NHS structure were to remain the same, the NHS is likely to fall well short of 4 percent annual productivity gains. What makes this a dead cert is that, at the same time as demanding graeter efficiency, the government plans to completely restructure the NHS. This will divert energy away from making productivity improvements. During a major restructure, people’s first priority is to protect their own jobs and power bases as far as they can. The restructure will be at the front of managers’ minds. Productivity and efficiency will take a back seat.
Organisational uncertainty bordering on chaos leaves little room for anything else. As James Gubb notes:
[W]ith such wholesale change, it is very unlikely that you’ll see too much of the new competitive impulse that Lansley has correctly identified as a big route out of the NHS’s productivity dilemma. Why? Because this requires strong commissioning, not the entire commissioning system being in flux. It is no accident that the number of tenders issued by PCTs has dropped off sharply since the publication of the White Paper.
What? Issue tenders? Are you mad? We’ve got a bloody restructure to think about!
Against this background, it is hardly surprising, that the Audit Commission reports zero progress on efficiency savings so far.
This state of flux is likely to persist for some time, even after the new commissioning bodies are set up. Organisations take time to settle down and become effective. Even after relatively minor restructures it has taken NHS trusts three years to get back to their previous performance levels. Given the size of this reorganisation, it will take the NHS much of this decade to recover from the shock. The reform process will extinguish what little hope the NHS has of making significant productivity gains over the next few years.
The reorganisation is also going to be expensive. Last month, the Commons Health Select Committee politely asked the government to stop pretending it will only cost £1.7 billion (See paragraph 92) and suggested that Professor Kieran Walshe’s £2-3 billion is closer to the mark.
There are few organisations anywhere on the planet that have managed to improve productivity by 4 percent annually over five consecutive years while, at the same time, restructuring the organisation from top to bottom and maintaining a consistent level of service to customers. At least one of these things will have to give.
The most likely outcome is that the reorganisation will be achieved at the expense of efficiency savings and patient care. At the moment, NHS management energy is going into the restructuring and that is likely to continue, at least in the short-term. At some time over the next few years, the health-service inflation identified by the King’s Fund will put pressure on budgets and the money will start to run out.
The NHS of 2015 will, almost certainly, be providing a worse level of service and have less money to spend. It will, however, have the government’s shiny new structure in place.
In writing this post I’m not trying to make a political point. At the risk of sounding pompous, these criticisms are based on my professional opinion. In my twenty plus years in management I have seen some crazy things imposed on organisations but this one reaches a new level of foolishness. If the NHS were a commercial organisation, these proposals would have shareholders running for cover.
The government’s NHS reform is unnecessary, has no evidence base to support it and runs counter to its other stated aims of improving patient care and the efficiency of the health service. If the Coalition is going to u-turn on anything during its time in power, it should be this.