Examination of Witnesses (Questions 80-99)
THE RT HON ALAN MILBURN, MP, MR ANDY MCKEON, MR RICHARD DOUGLAS AND MR ANDREW FOSTER
WEDNESDAY 12 JUNE 2002
80. They both have that freedom at the moment, do they not?
(Mr Milburn) Yes, they do. So what? That exists now.
81. So you accept that any benefit you give in terms of pay to a foundation hospital will be a disbenefit to the nearby non-foundation hospital.
(Mr Milburn) No, I do not really accept that. It may well be that on the narrow terms, if a foundation trust or a NHS trust decides to give £500 extra to its porters, its porters will be £500 better off than the porters next door, but it may well have £500 less to spend on its nurses.
82. Yes, but that is true at the moment.
(Mr Milburn) Absolutely, but nobody is arguing, as far as I know, unless you are, against some element of local flexibility.
83. I am arguing against one particular type of hospital having a flexibility that the neighbouring hospital, which necessarily by your performance ratings is already struggling more and you are necessarily giving it a disbenefit compared with another which could lead to more recruitment, more morale problems. What we want to do is level up performance in the NHS not make things harder.
(Mr Milburn) Absolutely and that is why we have all these levers in place; precisely why we have all these levers in place, why we have NSFs, why we have a modernisation agency, why we have an inspectorate, all of these things.
Julia Drown: That does not explain why you are giving extra levers to those already at the top.
84. I am not coming in on the Kidderminster issue because you know exactly where I stand on that and I do have quite a measure of agreement with a number of the reforms that you are making. I really very much want to follow up Julia's point because one of the huge benefits of the NHS when it came in in 1948 was that it established standard pay scales for consultants across the board so consultants had the same financial attraction to work in Darlington or Wakefield or a major teaching hospital. Are you going to undermine that and make it much more attractive for consultants to go to the best hospitals?
(Mr Milburn) No, I hope that we are not going to do that, but we are going to do what most NHS employers have long since recognised, which is to move beyond the fairly rigid arrangements for national pay bargaining which have prevailed since 1948 through the Whitley Council system. Why? Because they do not respect the difference between Leeds and Barnsley or for that matter between Lewisham and Darlington. They are different areas with different problems and the idea that somehow or other we can, in a committee, with a group of trade unions, determine accurately what the needs of Worcestershire are against the needs of Swindon or of Lewisham or of Essex
85. I am talking particularly about groups of staff who are prepared to move. It does not affect the people who live in an area and are going to work in that area in any case. I am talking particularly about highly qualified consultants and nurses to whom it makes a difference from the pay point of view if they work in a major teaching hospital or otherwise. I think it should be kept so that people of the top calibre find it just as attractive to work in Darlington as in the centre of London.
(Mr Milburn) Yes, and there are different and countervailing influences, are there not? Some would say that although there are major teaching institutions with high status and international reputations in a mile radius of where we are sitting, nonetheless they actually suffer the greatest problems. Why? Because they have a bigger labour and housing market problem. Lots of people increasingly, doctors and nurses, make lifestyle choices about where they want to be. They may want to be in the countryside, they may want to be in the North because it is cheaper rather than in the South which is more expensive. The idea that somehow there is a perfect set of systems at the moment is not quite right. That is not where we are at. It is true that what we cannot have is something which exacerbates those problems. That is why, back to this point, it is exactly the same on the performance front as the pay front, you have to get the relationship right between the national framework of standards and the local autonomy. That is what you have to do. Trying to drive the system, as our predecessors did, purely through one at the exclusion of the other or through the other at the exclusion of one, will not work. That is why all of these negotiations, including some element of flexibility within the consultant contract around some of these things, combines a national framework with the acceptance of local flexibility because there has to be. Otherwise the local NHS employer in my patch employing a couple of thousand people do not have the wherewithal to design their pay system, their job system, their job design system, to suit their special circumstances. I cannot design that. Nobody can. It is impossible to design from the centre. You have to get both and if we see the debate as either or, we have a real problem. That is how the debate is being posited and, Julia asked for evidence, that is not the evidence from elsewhere.
86. I was really interested in what you were saying about looking at models for diversity, which personally I find very interesting, particularly if you look at the whole housing association model where you have hundreds of organisations which bloom in all sorts of directions and they do not do damage to one another by being different or having different amounts of capital funding or different rules governing them depending upon their performance, where they all thrive by being a bit different. Would it not be fair to say and quite reasonable to say that for those hospitals which are struggling, particularly like my own, St Helier, the idea that you would give that organisation more freedom at a time when it could not do the basics, when it could not keep the hospital clean, is quite terrifying. There seems to be a framework of regulation that you do need for those hospitals who are having difficulties to make them concentrate on what they need to do as a very basic before you allow them to carry on to even more imaginative things.
(Mr Milburn) I think that is right; I do think that is right. If anybody thinks that somehow or other, if you have an organisation that on objective measures, on the basic things, on the really, really, really basic things, around waiting times or trolley waits or clean wards and you say to them, "By the way, off you go", that is going to improve things, I just do not see it. Personally I do not see it and that is why we tried to develop a graduated set of responses according to circumstances. To tell you the truth, what has bedevilled the whole NHS almost since its inception has been the policy makers at the centre who have said they were going to treat this lot as an undifferentiated mass when it is not undifferentiated. You know that and I know it, so let us have a more sophisticated, targeted response.
87. And yet the reasons for choosing who are going to be foundation hospitals have nothing to do with the problems and the special arrangements which are going to be made for them. Let us just look at the four which are talked about, Norfolk and Norwich, Addenbrooke's in Cambridge, Peterborough and Northumbria. They are all in completely different labour markets and they might not be the ones who most need this assistance and the freedom to develop what you are suggesting.
(Mr Milburn) Interesting is it not? I do not know what is going to happen because we have not done any run of the star ratings yet that I have seen, so I am not in a position to comment on this year's. What struck me about last year's was that people said it was all going to be terribly unfair because those parts of the country which have higher mortality or less morbidity were going to come out naturally worse. So Tyneside, which has one of the highest mortality rates in the country, came out as a three-star organisation. Then people said that it was all to do with labour markets and this is going to disadvantage the South-East. Then you got two trusts in Surrey, Epsom on the one hand and Frimley Park which is not a million miles away, very similar labour market, one a three and one a zero. That is about the performance of the individual organisations.
88. That is not the question I am asking. What I am saying is that you are giving these hospitals special privileges, that they can do things and be less lightly managed than others.
(Mr Milburn) Yes, and as performance improves your two star becomes
89. Some of them do not need these extra freedoms because they can get staff easily anyway and it is not something they need to worry about.
(Mr Milburn) I am not sure that is true. I cannot remember which ones you quoted but I am sure it is not true in Cambridge. Incidentally those on the list are just the ones which have expressed an interest.
90. They have expressed an interest and they have three stars.
(Mr Milburn) I do not know what the labour market is in Norwich but I am sure it is not straightforward. I am sure the labour market in Cambridge is not straightforward. I have no doubt that all the time trust will be coming forward in difficult labour market areas which are nonetheless three star and want foundation trust status because it gives them the ability to move forward and crack more of their problems. Great. We welcome that.
91. Just remembering that sometimes we sit here and someone tells us they have no nursing recruitment problem because they can get nurses quite easily. We have them on record. What you want to do then is focus in on that problem rather than giving hospitals freedoms to do things they do not really need in terms of improving things. You and I have had this argument before about the star system and what is really measures. In Bristol, which you and I know and have talked about before, one of the hospitals which did not do too well on the star system has had some brilliant reviews recently in terms of clinical achievements and other things.
(Mr Milburn) Absolutely. As I said to you before, so in a sense we are rehearsing an old argument, the star ratings and the performance measures will in my view only ever get better at the point at which you actually have the courage to apply them. The truth is that there has never been any science around this, not in this country. There probably is more in the States but it is guided by a different set of values there frankly from the ones we have here. You have to start measuring in order to improve the measures. I hope what you will see with this year's criteria for the star ratings is an improvement in the sort of measures we have used over the last year. I have no doubt that next year it will be even better. It is only by use that you get improvement.
92. I should like to understand a little better how money is going to move round the system. Delivering the NHS Plan said that all providers will be contracted for a minimum volume of cases to achieve waiting time reductions. Will that take place at their own agreed prices or is that at regionally decided prices?
(Mr Milburn) It is going to change over time. We shall have a transition.
93. Next year?
(Mr Milburn) Next year.
(Mr Douglas) For next year our plan would be that the marginal increases required would be priced at agreed tariffs.
94. Marginal increases?
(Mr Douglas) The increase for next year, moving on then over the medium term to pricing all activity at the regionally agreed tariffs. Next year we would shift just at the margin and then gradually work our way through into all activity.
95. Even next year for everything else they can negotiate what price it will be.
(Mr Douglas) There would have to be base volume and price agreed for the base and then a change at the margin, whether we can price all the marginal activity on standard tariffs or whether we will just have to take the top 50 procedures and maybe get 70 per cent of it from that.
96. So within a region you are going to have to have very variable costs depending on whether it is a new hospital, an older hospital, particular capital values or particular area. How are you going to deal with the obvious fact that some people will be making a clear profit, others might be struggling to cover costs once it is all done on regional tariffs?
(Mr Douglas) A couple of points, one on the shorter term and one on the longer term. On the short term, we will be dealing with the marginal change, so we shall be looking at a smaller sub-set of activity. On the longer term, what we have to do is make a transition path towards this full system. There is a number of ways of doing this. We can start moving from a position at the start where we have, as we do, the price equals the cost, to moving maybe then to some ranges of cost before we get the specific regionally agreed tariff. We could gradually move through the proportion of procedures that we cover to give people time to adjust. We could split prices in some ways, the price which is paid for the activity delivered and some sort of ownership payment or some access payment for the difference. All of these would be strategies we could use over a three- or four-year period.
97. In the short term at least, why should some providers make profits on patients and others not make so much profit or make no profit?
(Mr Douglas) I think we should get back to what we are really trying to do here. There are two things. One is that we are trying to link incentives to the targets we have. We are trying to link incentives to activity and to waiting. The other is to make sure that those efficient providers actually benefit from that and the less efficient providers are given an incentive to become more efficient. There are clearly issues about the factors which are outside their control which they cannot adjust. We talked about regional tariffs, but whether regional tariffs are actually regions as you might know and love them now, or whether they are smaller areas, we still have to think about. We have to make sure we have identified those factors which at least in the short- and medium-term are outside people's control and adjust prices for that. Most of these elements within a defined geographical area should be controllable within the medium- to long-term for people.
98. Is this not just trying to re-create the internal market?
(Mr Douglas) No.
99. Why not?
(Mr Douglas) The Secretary of State has already mentioned a number of differences on the overall systems for the market which are primarily around the setting of very clear quality standards and also that we shall be fixing prices here. The discussions we had in the market were a lot of discussions about price. What we really want to get in here is discussion about quality and volume and that is the reason we are trying to go for a fixed price for this.