Examination of Witnesses (Questions 40
- 59)
TUESDAY 28 JULY 1998
MR P GREGORY
AND MR
G WATKINS
Mr Paterson
40. What in your opinion is the optimum size
of an NHS trust?
(Mr Gregory) That rather depends on what the trust
is. A whole series of factors bears on that issue. I am not myself
convinced that size is the most important issue in terms of the
delivery of clinical services. The most important issue is organisational
fit. As you know, the Secretary of State published proposals for
reconfiguration which, for the most part, with only one exception
and even that is a temporary arrangement, go for an organisational
fit which is to bring secondary and tertiary hospital services
together with community health services. That produces quite a
significant range of sizes of trusts and that is appropriate,
given the very different circumstances they have. Some of our
trusts are in very sparse rural areas and are as a consequence
by UK standards very small, both in terms of the services they
provide, their financial viability and their management critical
mass. Without specific cases, it is an almost impossible question
to ask. The outcome of the reconfiguration, if it were to go ahead,
would be to produce for the most part very much larger trusts
both in financial terms, staffing terms, the services they provide,
the geographical areas they cover. It is organisational fit which
is the critical ingredient.
Mr Livsey
41. May I challenge you on the question of size?
Many of the trust sizes in England are very much smaller than
those in Wales. Certainly the NHS White Paper in England has said
that trusts of 100,000 are acceptable in certain rural circumstances.
(Mr Gregory) I am very happy to take questions on
Wales.
42. You made a statement about the UK and I
am just coming back at you.
(Mr Gregory) That is perfectly fair but if you look
at what is happening, for instance in urban areas in England,
it is not to produce small trusts: it is producing in many cases
very large trusts, substantially larger even than some of the
large trusts which Ministers are proposing to construct in some
of our urban areas.
43. I think I am putting to you that there are
horses for courses.
(Mr Gregory) I think that was the bottom line of my
answer.
Mr Caton
44. Why were there such significant delays in
the agreement of contracts between health authorities and NHS
trusts for 1997-98? What effect did this have in practice?
(Mr Gregory) The position in 1997-98 was, without
wishing to be facetious, actually an uncertain one. We had just
had a general election, we had a new government with radically
different policies for the NHS and inevitably it was desirable
to consider the implications of that for the way in which the
NHS operated. That is rather a side issue. The more important
issue is that we saw an increased number of trusts and health
authorities with financial difficulties. We had to consider whether
it was appropriate to require trusts to stick very rigidly to
the tight contracting timetables which we had set out and which
we set out every year. Candidly I came to a judgement that in
the circumstances it was better to allow a process of negotiation
between these trusts and health authorities to continue rather
than be draconian about the contracting process. As the C&AG
says, that has produced a profile which is well beyond the arrangements
which are set out in the guidance for the conclusion of contracts.
I think that was an appropriate step to take in what were difficult
circumstances and I think it was helpful in getting trusts and
health authorities into the proper relationship, but it is not
something we have repeated. It is fair to say that we have revisited
that decision and we now keep trusts and health authorities pretty
rigidly to the timescales we set out because there is an argument
that if you do not do that, there is an issue about drift.
45. Did you consider insisting upon interim
agreements being drawn up where no contracts were in place by
the end of July?
(Mr Gregory) It is important to take the Dyfed Powys
factor into account in all of this. That accounts for a proportion
of the contracts. We were going through a process of the health
authority producing a strategy to deal with all five trusts' problems.
If we had been very bureaucratic about the contracting process
that would have made it much more difficult to have gone through
that process successfully. As a consequence, the idea of interim
agreements was in that context not relevant. Yes, we did consider
it, but we thought that in the circumstances prevailing it was
better to be more flexible about these arrangements than we had
been and that was an appropriate response but we take a different
view now.
46. Some health authorities, North Wales for
example, were much quicker than others. Are there lessons of best
practice to be learnt from the experience of that year?
(Mr Gregory) The underlying issue is: how difficult
is it for trusts and health authorities to agree contracts? I
know that is a rather self-evident thing to say but it actually
reflects the facts of the matter. The health authority in North
Wales has a history of having good and close relations with its
trusts and it benefits relatively well through the operation of
the formula. As a consequence the circumstances in which it is
undergoing its contracting process are, although doubtless they
are robust and difficult, rather easier than some others.
47. You told the C&AG that contracting difficulties
reflect broader concerns about the sustainability of services.
What does this mean? That the system was unworkable? That there
was not enough money? What?
(Mr Gregory) It just reflects what the Chairman was
saying about the deterioration in the deficit position of health
authorities. In replying to the Chairman I think I should have
said that we have to deal with three time frames: the short-term
cash, the medium-term recovery plans and the longer term. There
is an issue for the NHS about long-term sustainability. If you
have seen a report published last December called the All-Wales
Service Review, which is a most exhaustive examination of the
state of the NHS, that raises issues about whether, given the
premium which is paid for the NHS in Wales, which is something
like 12 per cent per capita more than England, that difference
is sustainable in the longer term.
48. You have said that you do not want to see
a recurrence of the delays in negotiating contracts. What have
you done to make sure that that is not repeated in 1998-99 and
how many contracts were not in place by the May target date?
(Mr Gregory) To be blunt I have sent a number of threatening
letters to the appropriate people. I have spoken to all five of
the health authority chief executives collectively and told them
that we expect the guidance to be adhered to. They understand
and accept that. I have done the same with trust chief executives.
We monitor this very closely and where I have been told that there
are serious difficulties about bringing contracts to agreement,
we have stepped in and I have written my minatory letters. As
a consequence, broadly speaking, unless there are problems of
the kind that Bro Taf has with North Glamorgan, which I have already
mentioned, the conciliation, or where we are still going through
a recovery plan process, as we are with Llandough in Cardiff,
aside from that, my understanding is that in effect all contracts
are signed or the necessary agreements are in place. That excludes
some marginal issues. For instance there are one or two small
problems in North Wales and England but generally speaking contracts
are in place.
49. When you send a threatening letter what
do you threaten?
(Mr Gregory) That is a very interesting question.
In order to explain that I have to explain the relationship between
me and the chief executives. All NHS chief executives are personally
accountable to me as accountable officers to the accounting officer.
They sign an accountability agreement when they are appointed
and that accountability agreement requires them to do a number
of things in terms of their accountability to me. It includes
the need to meet financial duties, to keep me informed if things
are going awry and also to act on the instruction of the accounting
officer as necessary. All of this is couched within a corporate
governance framework which is very clear about what duty chief
executives owe to the Welsh Office. As a consequence, the truth
of the matter is that it is largely a matter of force of personality.
If I think that a chief executive is off line, then I will deal
with it personally with the chief executive. If I do not get any
joy there, I will have a word with the chairman. If I do not have
a satisfactory outcome to that conversation, then I have to have
a word with the Secretary of State. That usually solves it. That
has happened in one instance. Generally speaking chief executives
in the NHS are competent, professional, energetic and committed
people who know what is expected of them and do their best to
deliver it. Frankly, with most of them I do not need a conversation
of any kind, least of all threatening, but there are instances
where I think a chief executive is falling below that level of
application to a problem which is necessary and if so I shall
directly intervene. In the end, if there were a really serious
problem, for instance of the kind we had with the South East Wales
Ambulance Trust, then I could remove the accountable officer status
from that individual. That would mean they could no longer be
chief executive.
Mr Paterson
50. Do you have the power to hire and fire?
(Mr Gregory) No, I do not. That is vested quite properly
in the board of the trust. What we are talking about is an apocalyptic
situation which is almost off the scale. We are talking about
a serious failure of professional duty, for instance, withholding
information about the financial state of a trust, allowing a trust
to be run without proper financial systems, allowing members of
staff to commit frauds against the trust, that sort of thing,
in a way which reveals failure of systems or failure of accountability.
We are talking about an extreme situation which happens very,
very rarely, but it is the board which appoints the chief executive.
I am consulted about that. In fact I have made it my practice
of recent months to be involved in the appointment of chief executives
of trusts and I intend to do that for the future. What I was describing
was the escalating amount of pressure I can apply to a situation.
Frankly for the most part it does not come to that because I have
the trust chief executive in and I say this is the story, what
are you doing about it. If I do not get the right answer then
we work constructively to resolve it. It is not just about putting
pistols to people's heads, that is an unhelpful way of doing it.
There have been one or two occasions when that has been necessary.
51. Looking ahead, the White Paper Putting Patients
First envisages an end to the internal market. Do you think this
will have any effect in the current financial year?
(Mr Gregory) In the current financial year it is a
very difficult question to answer. I am pretty hopeless at predicting
the future, so I am not altogether clear how those inside the
system, in particular GP fundholders, will react, subject to parliamentary
approval, to the ending of GP fundholding. There is an issue there
about how that will work out. What we are trying to do with the
help of the NHS is to define very clearly what the long-term new
arrangements should be, substituting an individual invoice-driven
relationship with one which is more about a long-term agreement.
We are giving our attention to that. I do not think the White
Paper will make life more difficult this year other than perhaps
to raise the issue about how GP fundholders will react with the
savings they have or indeed the management of their budgets more
generally.
52. How will the long-term agreements differ
in practice from the current system of contracts?
(Mr Gregory) We are proposing to issue next month
a consultation paper on long-term agreements and I hope that will
set it out reasonably clearly. If you would like I can send a
copy to the Clerk and she can circulate it.[2]
Chairman
53. Yes, we would. Thank you.
(Mr Gregory) In terms of the long-term agreement,
first of all you have to see it within a context of an NHS which
the present government believes should be run on—I do not
wish to sound glib—a more collaborative and cooperative
basis than perhaps it has been in the past. There is an assumption
that the planning system should be operating in a way which focuses
on health need and tries to get all those involved, including
trusts, to focus their attention on responding to that health
need in the most appropriate way. We will do that by asking health
authorities to draft health improvement programmes, which are
a statement of all of that if you like, including primary care
and long-term agreements, which are intended to describe the relationship
between health authorities, or local health groups as they will
become, and trusts over about a three-year period for the provision
of services in their area.
Mr Paterson
54. That is interesting. In an earlier reply
you said that the current system had led to a helpful increase
in the transparency of the system. How will you ensure that these
long-term agreements keep the providers on their toes, both quality-wise
and price-wise?
(Mr Gregory) The financial imperatives remain unchanged,
do they not? The NHS will only be receiving whatever it receives
as a sealed sum, as a finite amount of money which is to be provided.
As a consequence, all the duties which currently bear on health
authorities and trusts will remain: they will still have to manage
their cash in the usual way. Inside the system there will be the
same imperatives to make sure that trusts articulate their costs—we
are not suggesting they should not do that—and that they
should be held to account for the comparisons between costs between
trusts. In addition to that the government at large is seeking
to put in place a strategy which promotes quality more effectively
than in the past. All the White Papers have articulated the way
in which that is to be done and we are to issue a consultation
paper very shortly on a quality strategy for Wales for the NHS.
To be candid, the consultation process we are going through will
help to articulate the detail of all of this and how we achieve
these outcomes. The commitment is quite clear. We want to maintain
the existing amount of rigour on the NHS in terms of its finances
and we want to beef up the rigour in terms of quality through
health improvement programmes in the first instance and long-term
agreements in the second.
55. Which under the current system means there
is a rigorous audit at the end of every year, both quality-wise
and price-wise, so the provider ensures he gets the contract for
the following year. If you extend it to three years you are shutting
out competition.
(Mr Gregory) I am sorry. I understand the point you
are making. We are not suggesting that they should sign up a contract
for three years and sit back and then wait for year three to come
and find out how it went. There will be the usual monitoring of
the process and I guess, if trusts underperform against the standards
and the objectives and the cost required of them, then the health
authority or the local health group will have to deal with that
and will ask the trust to account for it. I should be very surprised
if trusts felt under any less scrutiny, in fact if anything the
complaint I get from them is that they are going to find all of
this really rather too rigorous. I should be very doubtful if
the process would be less so. What it will do is give everyone
a longer term framework over time now within which that accountability
can be made and that should be helpful in making the long-term
investment decisions which are needed. Too often in the past trusts
have been able to make service developments at their own risk
without that general consensus on what is needed, rather than
coming to a view in an area about where the most effective investment
is to achieve the most direct effect in terms of health gain.
56. As a senior civil servant, is this not a
drift back towards central planning?
(Mr Gregory) I sincerely hope not. Despite your implied
suggestion, I am not actually looking to set up a whole series
of blueprints for the NHS. What we are looking to do is to make
sure that local communities, through things we are calling local
health groups, which are rather different from primary care groups
being set up in England, are able to establish the appropriate
relationship with their trust and with local government, the voluntary
sector and local communities, so they can articulate what they
believe is needed in concert with primary care and through that
long-term process they can make the changes they believe are in
the best interests of the health of their populations. There will
be a greater degree of planning of that, but we are not substituting
a competitive for a Stalinist planned approach. We are trying
to find a way of keeping the distinction between purchaser and
provider, commissioner and provider, whilst introducing a longer
term perspective within which those decisions can be taken.
Chairman
57. How does the Welsh Office follow up Audit
Commission reports on value for money issues within the various
health bodies and ensure that the recommendations they make are
implemented?
(Mr Gregory) We receive all the reports that the Audit
Commission undertakes, whether they are on Wales, England and
Wales or UK. We receive all of them. Andrew Foster sends me a
copy of each of the ones they are publishing. We receive them
and in each case I pass that on to Mr Watkins here with a request
that it be fed into the system, that we examine it for good practice
which is relevant to Wales and seek to promote that within the
system. I have to say I do not think we do that quite as rigorously
as we should and that is in part because frankly our resources
are limited. I should like to think that this is something which
over a period of time we could improve on. We do get the District
Audit to come and tell us about their management letter for Wales,
which includes issues around value for money and efficiency, and
the Audit Commission provide us with their reports and we seek
within our limited capacity to make sure that the service itself
takes them seriously. With one or two of them, for instance the
Coming of Age, which is about services for elderly people, we
believe that is such an important document that I have with my
colleague in the local government group, Bryan Mitchell, issued
that to local government and the NHS with an explicit requirement
that they account to us for how they deal with it. We are having
meetings next month with all the health authorities, individually
with their local government colleagues, social services directors,
at which we shall be asking them to tell us how they are implementing
this. That is at a bit of an extreme. I should like to do more
of that but there are a lot of reports. The Audit Commission produces
them at a rate of knots and adopting that approach in each case
would be beyond us. We are trying to give this more priority and
I should like to do more.
58. The Comptroller and Auditor General had
to qualify his opinion on the summarised accounts of funds held
on trust because he was unable to establish that all voluntary
donations had been properly recorded. What steps are you taking
to ensure that this is put right? Are you satisfied that there
will be no need for qualification of the audit opinions on both
the underlying and summarised accounts in the next financial year?
(Mr Gregory) May I ask Mr Watkins to deal with the
technical details as he is better placed than I am? Before he
does so, perhaps I could just say that we do take this seriously.
We actually believe that the sums of money at risk are very small.
We are not talking about large sums of money here; we believe
they are very small. Because of the pressure that the publication
of the summarised accounts has put on the system, I have good
reason to believe that when we get the audited accounts through,
which we will very shortly, they will show there has been a significant
improvement in practice. I shall of course have to wait and see,
but I believe it is going to look a great deal better. Perhaps
Mr Watkins could take you through the improvements we have introduced.
(Mr Watkins) The problem that the individual auditors
of the various trusts and health authorities, which had funds
held on trust, identified was actually at the very lower end of
the scale in terms of the various funds' income. The summarised
account shows that we had in the region of £10 million overall
income for the charitable funds. That is made up of a great variety
of types of income, legacies, donations, dividends from shares,
interest received on deposits and so on. Those items I have just
mentioned make up the very great part of the money which is coming
into these individual funds; almost £9.8 million is our estimate.
That leaves around £200,000 of donated cash. So £200,000
is sitting in the accounts as donated cash and the auditors' concerns
were whether there was more cash that individuals had said they
wished to donate to this organisation, more cash out there which
had not actually made it from the hands of the person making the
donation into the accounts, into the bank account of the trust
or health authority which was holding the funds. On that basis
the auditors said they did not know. Equally of course the trusts
and health authorities did not know either. On the grounds of
uncertainty the various auditors qualified their opinion. They
did this because the Charity Commissioners had indicated that
all income should be brought to account and the auditors were
saying they did not know whether all income had been brought to
account. However, in discussion with the auditors and the Charity
Commission, the various trusts and health authorities have looked
at their systems for dealing with such things as donated cash.
If, for example, a patient leaves the ward and upon leaving they
give some money to a nurse and say it is for charitable purposes,
there is now publicity that the staff should direct individuals
towards the cashier's office rather than take it themselves. Auditors
have suggested that posters should be made more prominently visible
throughout hospitals saying that if you do want to make a charitable
donation you should take it to the cashier's office. Those measures,
which came from the auditors themselves in terms of what they
felt would satisfy them for the future, have been put in place.
A great deal of publicity has taken place in terms of the conversations
which have gone on between auditors and trust staff about this
in dealing with it properly. In my conversations with the various
external auditors recently, asking whether they think they are
going to qualify this time or whether they have put the situation
right, as you might imagine because they have not yet signed off
they are a little bit cagey about what they say. However, my understanding
is that we are not going to get any qualifications this year.
Mr Livsey
59. We now come to the vexed question of clinical
negligence, which has implications for NHS expenditure. The C&AG
commends the steps you have taken to encourage better risk management
in the NHS but suggests that you should do more to identify incidents
incurred but not reported. In that context what has been done
to reduce the number of cases and keep costs down?
(Mr Gregory) A lot is the very short answer. There
is a very long answer which I will not give you but which would
have to encompass the steps which the last government started
to improve clinical effectiveness and which the present government
is taking further in the draft strategy on quality to which I
referred. That is an issue about making sure that all procedures
are necessary, that if they are necessary they are undertaken
with the most up-to-date information available to the clinician.
If one does that, then the chances, although there is still the
problem of difficulties arising in particular circumstances, the
unexpected happening and so on, if that is done then there is
a reduced risk of an untoward incident and therefore of a claim.
There is a strategy in place at the most strategic level in the
NHS to improve the quality of the care and treatment the NHS provides.
Coming down to the level of the operation of the risk pool, what
we are trying to do and I have to say the risk pool has significantly
improved its management of this issue, is essentially to provide
an incentive to the NHS not to incur claims of this kind. One
way of doing that is to make sure that those trusts who have in
place the risk management standards which are described in the
C&AG's report, pay less if something happens. In other words
you try to reduce it by having risk management standards in place,
but if nonetheless something goes wrong, then the trust which
is doing its level best to avoid this sort of problem, has the
incentive of having to pay less. We are gradually introducing
a system whereby trusts who pay a premium into the risk pool,
which bears most of the cost of these claims, the trusts which
are best at handling the risk management strategy, pay the lowest
proportion of the fee. There are also other measures which the
C&AG sets out about how the risk standards have been arrived
at and so on.
2 See pp 17-20. Back
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