Impact on commissioning
87. According to the Government, the main benefit
of PCT reconfiguration is that it will strengthen the NHS's ability
to commission services. As explained previously, commissioning
organisations have existed in the NHS in various guises for the
past fifteen years. Although little research evidence exists to
verify this, their poor performance has often been blamed for
the failure of the commissioning process to yield significant
improvements in provider services. Commissioning organisations
have also been subject to more frequent reorganisations than provider
organisations. The need for stronger commissioning is now greater
than it has ever been. This is because reforms in the acute hospital
sector, in particular the introduction of Payment by Results,
mean that the hospital sector now has increased in power relative
to primary care and is likely, in the words of the Department
of Health to 'suck resources towards it, unless it is counter-balanced
by an equally strong commissioning function'.[67]
These concerns are borne out by research evidence.
88. While the need to strengthen commissioning is
in little doubt, our evidence argued that it would have been more
effective to introduce reforms to strengthen commissioning before,
or at least at the same time as Payment by Results and other provider-side
reforms.[68] The Government
has described the reconfiguration of PCTs and the strengthening
of commissioning as the 'next phase of the reform' after working
to improve hospital services.[69]
However, given that powerful new financial incentives such as
Payment by Results and new freedoms for hospitals through foundation
status are already being implemented, turning the focus to commissioning
now may prove too late, as demand for and cost of hospital services
could begin to rise before PCT and practice based commissioners
have developed the skills and capacity to counter this, leaving
commissioners forever struggling to catch up with the more well
established power of the provider sector.
89. When we put this to Lord Warner, he argued that
the Government's priority had been to respond to the public's
concerns about the NHS which were largely to do with improving
capacity in the acute sector.[70]
While we do not question the need to respond to these concerns
as a priority, it is not clear why commissioning reforms could
not have been developed in tandem with provider-side reforms.
John Bacon of the Department of Health gave, in our view, a more
considered and refreshingly honest answer to this question:
My personal view is that we have taken insufficient
action since 1990 to strengthen the commissioning side, and you
can debate why that is but what we are now saying is that the
way in which we want the system to work absolutely demands that
the commissioning function is as equally strong as the provider
function. You could criticise us over many years for being tardy
in that, what we are now doing is addressing it in a meaningful
way … You can argue that we should have got all this in place
first, and in an ideal world we would have, but we are trying
to be very careful to ensure that we incentivise the right things
and we have the right control mechanisms as we move the system
into other areas.[71]
90. We strongly support the Government's desire
to improve commissioning in the NHS, but believe that this should
have been addressed before, or at least at the same time as powerful
incentives were being introduced which strengthened the provider
sector. The fact that it was not has given rise to an uneven balance
of power in the NHS that may now prove difficult to redress. We
are pleased that the Department of Health has acknowledged this,
and we hope that in future it will make efforts to ensure that
the wider impacts of its policies are considered at a system level
to avoid such a situation arising again.
91. It is clear that reforms to strengthen commissioning
are both necessary and overdue. The key question, then, is whether
the Government's proposed structural reforms are the best way
of strengthening commissioning. We were concerned to note that,
according to the King's Fund, these structural reforms will in
fact "do very little to strengthen commissioning, which is
their ultimate goal".[72]
To examine the potential impact of these reforms on commissioning
in greater detail, this section considers benefits and risks of
larger PCT structures, before considering whether any of the hoped
for benefits could be achieved without large scale organisational
change.
Increased size of PCTs
92. The Government argues that merging PCTs into
larger organisations, many very similar in size to the Health
Authorities they replaced only three years ago, will enable them
to strengthen their bargaining power and counterbalance the acute
sector more effectively.[73]
Larger budgets may put organisations in a stronger position to
negotiate contracts. However, an analysis of recent research evidence
suggests that increases in PCT size beyond populations of 100,000
patients will not automatically generate substantial improvements
in overall performance or economies of scale, and that one size
will not suit all—bigger may be better for some functions,
but worse for others. Optimal population size for commissioning,
according to the authors, varies widely depending on the services
being commissioned.[74]
93. Supplementary information from the Department
of Health cited eight separate pieces of research on commissioning,
but stated that there was no clear consensus amongst them about
ideal population size for commissioning. The Department's decision
to move to larger commissioning structures seems to be based on
a single study commissioned by them from PA consulting, which
suggested that after the implementation of Practice Based Commissioning,
commissioning could function effectively at population levels
of 1 million people or more.[75]
94. It should also be remembered that new PCTs will
be same size as old Health Authorities that were themselves larger
organisations focussing solely on commissioning. However, despite
their larger size Health Authorities were not able to demonstrate
highly effective commissioning, suggesting that 'weak' commissioning
may not be a structural issue at all, and that in fact other types
of intervention might achieve greater improvements in commissioning
than simply increasing organisations' size.
95. With the introduction of Payment by Results,
it is clear that commissioners now need tools and incentives to
help them keep care local and balance the incentives of the acute
sector to draw resources towards them. However, while the need
for good commissioning, and alternatives to the acute sector is
not in question, arguably Payment by Results in fact reduces the
need for commissioning organisations to be as large as possible.
Traditionally, 'commissioning clout' through increased organisational
size was seen as helpful because, before the introduction of Payment
by Results, acute hospitals would only reduce minimal marginal
costs if activity was moved away from them, on the grounds that
commissioners were not dealing in sufficient activity to allow
the hospital to restructure its care. However, the introduction
of Payment by Results allows PCTs, as commissioners, a new flexibility
to withdraw money at will, and at full cost, from hospital providers,
reducing the need for large commissioning arrangements. According
to John McIvor, Payment by Results is already enabling his PCT
to wield more commissioning power:
I think a lot of the context in the NHS has changed
over the last year or so, particularly this thing called Payment
by Results, which has meant that, from my PCT's point of view,
we feel we have a much greater ability to commission services
in the right place and see the money move, if that is appropriate,
from the acute sector into the primary care sector.[76]
96. While larger PCTs may be able to wield greater
bargaining power over the acute sector, research evidence demonstrates
that increases in PCT size beyond populations of 100,000 patients
do not necessarily generate substantial improvements in overall
performance, and that optimal size for commissioning varies widely
according to services being commissioned. Health Authorities were
large commissioning organisations, and their size does not seem
to have made them effective commissioners. Arguably, the introduction
of Payment by Results may already be giving PCTs the levers they
need to commission effectively from the acute sector, without
the need for restructuring.
Retrenching commissioning expertise
97. Another argument for increasing the size of PCTs
was put to us by Dame Gill Morgan who claimed that it would enable
the NHS to "retrench" its commissioning expertise by
concentrating it in larger centres. In Dame Gill's view, the move
from 100 Health Authorities to 300 PCTs meant that management
expertise was currently "spread very thinly".[77]
98. To move back to a smaller number of PCTs may
seem a logical move, as locating commissioners together in larger
organisations may increase the opportunity for sharing experience.
However, restructuring may not be the only way in which this consolidation
of expertise could be achieved. The Modernisation Agency has had
considerable success in developing acute management skills in
the last few years, with a programme of visits and workshops designed
to spread best practice. A similar change agency approach to building
commissioning skills might be an alternative way to improve performance
without large scale organisational change.
99. Equally, it is important to bear in mind that
concentrating commissioning skills in fewer, larger organisations
is not the same as actually increasing commissioning capacity,
in terms of the number of managers involved in commissioning,
their ability, and the resource devoted to this. The NHS clearly
needs experienced and talented managers to manage its commissioning
function, which is currently responsible for spending £76
billion of public money. However, a considerable body of evidence,
including two reviews by the Audit Commission, suggests that the
NHS has currently far fewer managers than other health systems
or comparable sectors, and that it is in fact undermanaged: Caro
Millington, Chair of North West London SHA, was one of several
witnesses to express this view, voicing concern about the risks
of cutting management numbers at this time of major change:
I think you are right and that it is a risk.
What you are capturing here is a snapshot of major change in the
NHS. It is a huge change and it is a huge organisation, as you
know. To cut the number of managers in particular—and managers
do need administration as well—at a time of major change
is a risky thing to do … It is something to be aware of.
It always distresses me, coming from outside the NHS, that the
NHS is under-managed rather than over-managed.[78]
100. The Government hopes that as a result of these
reforms, £250 million less will be spent on PCTs, which currently
provide the NHS commissioning function. However, given importance
of commissioning, and the fact that even under existing funding
PCTs have experienced difficulties in recruiting appropriate staff,
it is possible to argue that the NHS should in face be spending
more rather than less on its commissioning function.
101. We recognise the need to improve commissioning
skills within PCTs. However, we remain unconvinced that instigating
large-scale structural reform in order to 'retrench' commissioning
expertise in larger centres is the only, or indeed the best, way
to achieve this. Equally, it seems illogical that, at precisely
the time the Government has committed to improving NHS commissioning,
it is currently planning to spend £250 million less per year
on this crucial function, further depleting management expertise
from an already under-managed health system. This is more likely
to weaken rather than strengthen NHS commissioning.
Improving co-terminosity
102. According to the Government, another reason
for these reforms is to align PCT boundaries to social care boundaries.
Many of our witnesses were in favour of improving co-terminosity:
One of the great strengths and successes of PCTs
over the last few years has been the development of a whole set
of new community services, intermediate care services, with social
services. We think the opportunity to get the boundaries more
closely aligned is an important opportunity we should be taking.[79]
103. However, Dr Reader, Medical Director of Islington
PCT, argued that although this might bring benefits, it was not
a "panacea",[80]
and Basildon PCT pointed out that this may not be as straightforward
as it appears:
Achieving co-terminosity with social services
authorities in a large shire County like Essex sacrifices District
Council or Borough co-terminosity where most of the partnership
work actually happens, and where true public sector integration
around community strategy/LSP priorities is possible. In addition
the factor of two smaller unitary councils in the south of Essex
needs to be considered.[81]
104. Although re-aligning PCTs with social services
departments may remove some organisational boundaries, it is likely
to create others. Links forged with providers of services at a
district council level, such as housing, may founder if there
is a return to larger, county-based structures, and several unitary
councils, including Luton, Milton Keynes and Reading, have argued
that moving back to large county-based structures would be a retrograde
step, undoing much good work that has been done locally to address
health inequalities.[82]
105. In principle, we support the aim of improving
joint working between the NHS and local authorities, both in respect
of social services, and other crucial local functions including
housing, regeneration and education services. However, we are
concerned that these reforms, while offering an opportunity to
better align some boundaries, may risk setting up new barriers
in other areas, and may threaten existing joint working arrangements.
Loss of local focus, clinical engagement and patient
involvement
106. The Government argues that reconfiguring PCTs
will bring benefits through creating larger organisations which
will be better at commissioning, which will be cheaper, and which
will bring the benefit of co-terminosity of local authorities.
We remain unconvinced that increasing the size of PCTs will necessarily
strengthen their commissioning function. Clearly reducing the
number of PCTs has the potential for cost savings, which we discuss
in greater detail later in the chapter. Our evidence suggests
that co-terminosity may bring benefits, but there will be new
risks to be managed. However, setting aside these potential although
uncertain benefits, there are a number of significant risks that
will also arise from the dismantling of local PCTs, in particular
the loss of local focus.
107. In support of the Government's proposals, we
were told by John de Braux, Chief Executive of Bedfordshire and
Hertfordshire SHA, that it was perfectly possible for a larger
central organisation to receive intelligence from its periphery.[83]
This was arguably how old Health Authorities operated before 2002,
with local Primary Care Groups reporting to a central board. However,
the Primary Care Trusts which evolved from PCGs and eventually
replaced Health Authorities were introduced precisely because
it was hoped that this would strengthen the local focus of the
NHS, and introduce improved clinician and patient engagement into
the planning and commissioning of healthcare.
108. Therefore, merging PCTs back into larger organisations,
similar in size to those they replaced, could risk undoing much
of the local focus that PCTs have achieved. According to Nigel
Edwards, the Director of Policy at the NHS Confederation, "if
we end up with county-wide Health Authorities they will really
struggle to get clinical engagement—exactly the problem
that killed them off in the first place".[84]
Mr Barrett told us that in his view, the proposed programme of
reform "has significant dangers in terms of losing the benefit
of local focus",[85]
an argument echoed by Mr Hollins:
The big strength of the PCT has been the locality
and focus, really getting down to the health needs of the local
population. For the first time we have been able to get genuine
clinical engagement right at the coal face. If we lose that then
we have potentially lost the benefit of the PCTs for the last
four years.[86]
109. Robert Sloane, of the NHS Alliance, added that
the process through which PCG boundaries were developed, from
which PCTs grew, was in fact a unique process designed to established
'natural' health communities, and that this risked being lost:
Reference was made to the establishment of primary
care groups in 1999. That was a process that was quite unique
in the history of the NHS because it required the organisation
to identify what were then termed natural communities, and natural
communities were known to the people who lived there, whether
that was in Bristol, Birmingham or anywhere else beginning with
B. It was actually a process of identifying where people lived,
where people worked, where people related and where people felt
they belonged. We managed to carry some of that sense of localness
through into the evolution that constituted primary care trusts.[87]
110. There is currently local involvement in PCTs
at three levels—the Board, which has a majority of Non-Executive
Directors (NEDs) drawn from the local community; the Professional
Executive Committee (PEC), a powerful committee made up of key
local clinicians; and the PPIF, which is supposed to represent
the views of patients and the local population. Under current
proposals, local involvement at each of these levels risks being
reduced.
111. According to the Government, putting patients'
views and wishes first is at the heart of all current NHS reforms.
However, the proposed restructuring of PCTs looks set to weaken
patient involvement in the NHS. Currently, all 302 PCTs have a
PPIF. Although all acute hospital trusts also have one, the PCT
PPIFs provide the only forum for patients to express views on
primary and community care as well as secondary care. Under current
proposals, PPIFs are likely to be absorbed into one large PPIF,
potentially serving a population of over a million people.[88]
112. Our witnesses were unanimous in their view that
NEDs added considerable value to the NHS. Larger, merged PCTs
will result in fewer Non-Executive Directors to take accountability
for the commissioning of healthcare for their local populations.
When it was suggested that by reducing the number of NEDs in the
NHS this might leave a 'democratic deficit', the Minister argued
that this would not be the case, as NEDs would still have to be
in a majority on every board, thus retaining their influence.[89]
Some of our witnesses argued that although there will be fewer
NEDs in the NHS, they will perhaps be "of better quality".[90]
113. However, besides their corporate governance
role, a key element of the NEDs' role is to bring local opinion
and flavour to decision making—hence all NEDs of local organisations
must live within that local area. All of our evidence acknowledged
the risk that the linkages with local communities that PCT NEDs
have helped foster could be destroyed. Colchester PCT described
the potential impacts of this:
There is also a concern that with a geographically
remote and very large PCT the Non Executive Directors (NEDs) will
be remote—this was the case with the former North South
HAs. We have since the inception of the PCT had the benefit of
NEDs who are local and County Councillors and NEDs who "live
on the patch" and know the issues through living and breathing
them locally. This will be a significant loss in a remote PCT
model, with a locality structure without NEDs who hold the PCT
to account but also have useful other roles or experience.[91]
114. Strong clinical engagement in health service
planning is also seen as essential to all PCTs' functions, and
our evidence suggested that this was an area in which many PCTs
had achieved significant improvements on previous structures,
as Mr Barrett described:
We have the PEC in place which includes GP representatives,
representatives from allied health professions and other clinical
groups and that is one of the key ways. We also have at the PCT
level a whole number of subgroups, things like prescribing subgroups,
primary care subgroups, which GPs particularly attend. In our
PCT over half our GPs take some part in either the PEC or some
of the subgroups and that is the sort of clinical engagement that
is so vital.[92]
115. An enduring concern in debate about these reconfigurations
is how to prevent a return to previous large structures which
were too remote to have good clinical engagement:
I am also concerned that we do not lose any of
the clinical engagement that we have got set up within the structures
that are currently around because I think it would be very sad
if we did. I think there is the potential with Practice Based
Commissioning for us to develop that further with GPs, but I think
there is a risk that the other healthcare professionals, if they
are moved out to other providers, might get lost in that process.[93]
116. As the current more locally focussed PCTs merge
to form larger organisations, individual Professional Executive
Committees (PECs) within those PCTs may be replaced by one overarching
PEC, leading to less, rather than more, formal clinical engagement
in PCT structures. The NHS Alliance argued that if these big PCTs
come into existence, a number of locality-based, PEC-like structures
will be needed in each PCT, linking up into the PEC as well as
down into more local Practice Based Commissioning structures.[94]
117. PCTs were established to ensure that decisions
about the NHS were made locally. By reverting back to the more
remote structures that were abolished only three years ago, this
localism will be lost. At the moment, each of the 302 PCTs in
England has several Non-Executive Directors; a Patient and Public
Involvement Forum; and a Professional Executive Committee of key
local clinicians. While these structures clearly have a cost,
they were introduced to add value. It is not clear why the Government
is now unwilling to meet the cost of securing an enhanced level
of local input into the NHS, only four years after this was identified
as a key aim of Government health policy in Shifting the Balance
of Power. Whatever the size of future PCTs, it is essential
that structures to ensure clinical engagement and, most crucially,
patient and public engagement are retained at their current levels,
covering each natural community.
Practice Based Commissioning—a means of
overcoming the risks?
118. Practice Based Commissioning is a key policy
underpinning proposals to restructure PCTs. It is possible that
the introduction of Practice Based Commissioning will make PCTs,
as currently configured, redundant as commissioners. Although
under Practice Based Commissioning PCTs will retain a key management
role, it is hoped that the majority of commissioning will be carried
out at a local, practice level, meaning that if PCTs were left
in their current configuration, in some places there would be
an unnecessarily high number of people commissioning services
within a small area. Equally, it is hoped that in devolving commissioning
decisions down to an even more local level, clinical and patient
engagement will be enhanced.
119. While it may well have the potential to enhance
clinical engagement, we strongly dispute the Minister's view that
Practice Based Commissioning will improve patient and public engagement,
unless there is a specific requirement on practice based commissioners
to establish local patient and public involvement forums.
120. Also, according to our evidence, there are number
of important issues that need to be urgently resolved if Practice
Based Commissioning is to be successfully implemented. The King's
Fund argued that:
The need to engage practices and GPs is critical
and urgent if there is to be effective demand management rather
than cosmetic responsibility for managing a budget. But again
our work in this area has shown that much stronger incentives
are required if this to be a reality—perhaps even going
so far as linking GP income with effective management of a commissioning
budget. In particular, practices that operate in areas that are
already financially challenged will face few incentives to take
a budget. At present few practices across the country are actively
engaged.[95]
121. Dr Tony Stanton complained about a "woeful
lack of information from the Department of Health" about
Practice Based commissioning.[96]
According to Dr Stanton, technical guidance about Practice Based
Commissioning was promised earlier this year, but "when it
eventually came was not worth the paper it was written on".
A new edition was expected in October, but has still not been
published. He detailed some of the major unanswered questions:
If we take Bexley … the PCT is in deficit,
the hospital is in deficit. If groups of practices take overall
responsibility for the commissioning budget, who is going to be
responsible for that budget? There is the pump-priming money to
help practices get involved, but where are the promises of adequate
management costs, where are the promises about size of and purposes
to which savings made can be put? They are totally absent.[97]
In his view, the Government must:
- Provide clear guidance as to
what they mean by Practice Based Commissioning
- Make the provision of adequate preparation funds
compulsory
- Very clearly define a range of management costs
- Give clear guidance about the use to which savings
can be put, and
- Deal with the problem of inherited deficits.[98]
122. Dr Reader also raised the issue of commissioning
skills for GPs, arguing that "the small localist is not going
to be able to instantly be effectively a good commissioner at
any level", and that an intensive developmental process will
need to go on to equip GPs with these skills.[99]
He anticipated that it would take two to three years to get Practice
Based Commissioning up to an effective level and develop those
people with those skills, a considerably longer timetable than
the Government's proposals which assume full implementation across
all practices in a year's time.
123. The Minister, when questioned, was not able
to give us any indication of the number of practices currently
involved in Practice Based Commissioning, which was surprising,
given that in a little over a year he expects all GP practices
in England to be actively involved.[100]
Supplementary information from the Department of Health revealed
that according to a survey of 30 PCTs conducted in June 2005,
only 20% of practices were actually participating in Practice
Based Commissioning. The Department has also confirmed that Practice
Based Commissioning remains a voluntary activity for practices,
and suggested that additional financial incentives to encourage
GPs to participate would form part of the Government's current
GMS contract negotiations.[101]
Given that major questions about this policy remain unresolved,
and that according to the NHS Alliance fewer than 50% of their
practices will be involved in Practice Based Commissioning by
the end of 2006, it seems highly unlikely that this ambitious
target will be met.[102]
124. Getting Practice Based Commissioning to work
successfully is crucial to plans to have fewer PCTs: without Practice
Based Commissioning, there will be limited clinician engagement
and weaker, more distanced commissioning. However, many witnesses
have argued that, ironically, the disruption of reforming PCTs
at the current time is threatening the successful implementation
of Practice Based Commissioning. Dr Reader told us:
There is at least one example I know of where
there has been a very large buy-in to Practice Based Commissioning
prior to the Commissioning a Patient-Led NHS document came
out and, subsequent to it, an awful lot of cold feet and back-pedalling
from the local GPs because it is going to destroy their local
clinical leadership that they know and trust and have actually
been building up over three years; they just do not know who they
are going to be working with.[103]
125. In addition to the practical problems surrounding
implementation, there are also concerns about the unintended consequences
of this policy that the Government has not addressed. Under Practice
Based Commissioning, GPs will have clear incentives to provide
services 'in house', that they would otherwise have commissioned
from elsewhere. They could bring health services 'in house' either
by expanding the role of their GPs or nurses, or through employing
outside specialists. The Government hopes that this will bring
many advantages—GPs can design services to meet patients'
needs, patients can be treated closer to home, and, crucially,
costs will be saved if GPs can treat patients more quickly and
cheaply 'in-house'.
126. However, GPs will also have incentives to direct
patients to their own in-house services rather than to those offered
by other providers. This is particularly the case if practices
have invested new capital (e.g. in new operating facilities or
diagnostic suites). This has the potential to compromise patient
choice, as GPs are often closely involved in patients' decision
making about where to have treatment. Interestingly, separating
the provider and commissioner functions is one of the key reasons
given by Government for the divestment of provider services, which
is discussed in more detail later in this report. If the need
to separate these two functions to avoid perverse incentives applies
to PCTs, it is difficult to see why it does not apply to GP practices.
127. When we raised the problem of choice with the
Minister, he told us that "patients will certainly not have
their choices limited in areas like elective surgery, they will
make their own judgments with their GPs about where they go".[104]
However, despite his confidence on this point, Lord Warner did
not actually address the key issue. In fact, his evidence re-emphasises
the conflict of the issues, which is that patients will make their
choices with their GPs. At present, many patients
rely heavily on their GP's recommendation when making choices.
Solutions to the potential conflicts of interest might include
an increased role for PCTs in ensuring that GPs are offering their
patients genuine choice. However, while technical guidance published
by the Department in February 2005 stated that GPs should ensure
that "patients should be given a choice of other providers
and not feel pressured to choose the practice as provider",
the Department does not seem to have taken any further steps to
guarantee that patient choice will be preserved.[105]
128. Practice Based Commissioning may also give GP
practices a perverse incentive to save money by selecting healthier
patients onto their lists, a process known as 'cream skimming'.
As GPs determine their own practice lists, it is difficult to
see how this can be practically prevented, particularly if reconfigured
PCTs are having to work with large numbers of general practices.
129. As with any type of devolution to a local level,
Practice Based Commissioning also has the potential to lead to
inequities between patients living within the same PCT area. For
example, one practice based commissioner might negotiate access
to a better range of services for their patients than others.
A potential solution to inequities might be to allow competition
between different groups of practice based commissioners, allowing
patients to move and register with a different group of commissioners
if they were dissatisfied with their own. However, current developments
of locality clusters of Practice Based Commissioning meant that
in many localities there may be only one group of practice based
commissioners for patients to choose from, and therefore this
form of consumer protection will not apply. Equally, patients
may want to move to a different commissioning group, but be reluctant
to actually change their general practitioner. On this point,
the Minister replied that 'it is a possibility but it is probably
no different from where we are now'.[106]
130. Practice Based Commissioning is a crucial
policy which underpins the Government's proposals for restructuring
PCTs, which the Government hopes will both strengthen commissioning
and secure greater local engagement. However GPs, who will be
responsible for implementing Practice Based Commissioning, have
described a 'woeful lack of information' about the scheme, with
key questions still unanswered. We therefore consider it highly
unlikely that this system will be functioning effectively in all
areas by the end of next year, and are concerned at the Government's
complacency and unwarranted optimism over the implementation of
Practice Based Commissioning. We urge the Government to address
this lack of information immediately.
131. The Minister's view that Practice Based Commissioning
as it is currently conceived will improve patient and public involvement
in health care is not firmly based on any evidence. In fact, there
is a significant gap in this area. We recommend that the Government
places a specific requirement on all practice based commissioners
to establish regular, formal arrangements for securing the input
of their patients and local populations in the commissioning and
provision of local services, just as PCTs and other NHS trusts
are obliged to.
132. We are also concerned at the complacent attitude
that the Government is displaying towards the very real possibility
of Practice Based Commissioning introducing perverse incentives
that could threaten patient choice and access to health care.
It seems to us that these problems have not yet been fully anticipated
or considered by the Government, which is worrying given that
they hope Practice Based Commissioning will be universally implemented
within a year. These potential problems need to be addressed before
they arise, and to this end we recommend that the Government publish
details of what actions it intends to take to counter these risks
before Practice Based Commissioning is universally implemented
next December.
Other ways to improve commissioning
133. As discussed previously, organisational restructurings
are hugely disruptive and distract organisations from their core
functions. It is striking that, despite the considerable attention
these proposals have attracted in Parliament and elsewhere, debate
has focused almost exclusively on the shape of future organisations,
the morale of staff, and the consultation process. While these
are important issues, they arguably distract the focus of managers
and policy-makers from the critical issue of how commissioning
can actually be improved in the NHS.
134. As we have already mentioned, measures to improve
commissioning are long overdue. The King's Fund provided a helpful
analysis of the specific areas in which improvements to commissioning
are needed, but was amongst many to seriously question whether
large-scale structural reform of PCTs was likely to achieve these
improvements. Rather it stressed the need for better skills and
information systems:
PCTs need to develop skills in [commissioning]
(for example, in analysing likely demand for care and how unnecessary
hospital admissions could be prevented). They also need to sort
out currently poor information systems. PCTs have always needed
to do this, but they have been very slow in developing these skills.
The answer in our view is not structural reform, but more that
there need to be far stronger incentives designed to prompt commissioners
to develop the skills they need, in particular to manage patient
demand effectively.[107]
Is restructuring the best solution to improve
commissioning?
135. David Nicholson, Chief Executive of Birmingham
and the Black Country SHA, argued very eloquently that the "holy
grail" of the perfect sized commissioning organisation does
not exist:
I have been in the NHS now for nearly 30 years
and this is my eighth or ninth major structural change.
We have got to judge what sort of arrangements
we have against those sorts of criteria to make sure that whatever
we do set up is fit for purpose. I think Liz [Railton] is absolutely
right, whichever geography you go for there are a variety of levels
of function we need to operate at and it is a matter of judgment
as to where you set the statutory board.
What I know is that the pursuit of the Holy Grail
or the perfect geographical organisation for health services does
not exist. Whatever you do is some kind of compromise in relation
to what the local circumstances are.[108]
136. As we have seen, restructuring is always a highly
distracting and time-consuming process and, given the challenges
currently facing PCTs, it would be difficult to find a less opportune
time at which to place this additional burden on them. And although
increased critical mass may be helpful for some PCT functions
and improved partnership arrangements with local authorities would
bring benefits, it is also clear that moving back to more remote
commissioning structures will reduce local engagement, undoing
the very benefits PCTs were intended to bring, and potentially
threatening the implementation of Practice Based Commissioning.
In the light of this, and recognising the fact that no perfect
geographical organisation for health services exists, we would
suggest that wholesale restructuring should only be considered
as an option of last resort, particularly if there are other ways
of achieving the perceived benefits of larger organisations.
137. In fact, much of our evidence from managers
and clinicians working in the NHS suggests that many of the anticipated
advantages of this reorganisation could be achieved simply by
better joined-up working between PCTs and between PCTs and local
authorities. Some witnesses felt that mergers might be appropriate
at some point in the future, and others did not. However, there
was agreement that a centrally imposed reorganisation to a tight
timescale driven by financial considerations would not yield the
best results for their local populations. Basildon PCT was amongst
many to articulate this view:
Although we have no argument with the overall
policy direction we do not believe this required the wholesale
reconfiguration of PCTs. In our case, which is not uncommon in
the NHS, we have already set up strong partnerships with neighbouring
PCTs for commissioning, modernisation of services, risk sharing,
and the implementation of PbC and capability is being strengthened
daily.
As a group the PCTs in this area have almost
two years experience of being a commissioner of a first wave Foundation
Trust (Basildon and Thurrock University Hospitals NHS Foundation
Trust) within the enhanced Payment by Results (PbR) financial
regimen.
We believe we would have achieved fitness for
purpose ourselves over a relatively short period of time, bringing
local stakeholders with us, rather than being 'victim' of what
is now perceived as a top down process.[109]
138. Philip Barrett told us that prior to 28 July
2005, "the process of consolidation of PCTs was happening
at a fairly sensible pace and PCTs from the 'bottom up' were coming
together and deciding that they could do things better in partnership
and we were seeing, where it was appropriate, that joint working
was being developed often through common management teams".[110]
Karen Rhodes of North Lincolnshire PCT echoed this, asking "why
is the Government making these changes when PCTs' efforts to improve
services are only just taking effect?"[111]
Indeed, according to the NHS Confederation, there is not a single
PCT that is not already working with another in some sort of collaborative
arrangement.[112]
139. Far from portraying failing organisations in
urgent need of wholesale reform, our witnesses described PCTs
delivering genuine improvements, particularly in the last year,
in terms of clinician engagement, increased bargaining power with
the acute sector, and the development of innovative community
services to rival secondary care. According to John McIvor, Chief
Executive of Rotherham PCT:
I know the GPs, nurses and allied health professionals
who are part of my PCT have seen real investment in out-of-hospital
services … I know that the majority of PCTs feel that there
is much better clinical engagement than there ever has been.[113]
140. Dianne Jeffreys gave a similarly optimistic
view:
What has happened since the development of the
primary care-led NHS has been a coming together of community and
primary care and, most of all, clinical engagement in both the
commissioning and the management of the NHS by GPs. What we have
seen, in terms of trying to prevent, if you like, over-activity
in the acute sector has been a range of initiatives, really innovative
initiatives, in both primary and community care to prevent people
needing non-elective or emergency or urgent admission in the first
place.[114]
141. Dame Gill Morgan of the NHS Confederation told
us that according to research in industry, it takes at least three
years after reorganisations for their benefits to become visible.[115]
As the majority of PCTs were introduced a little over three years
ago, in April 2002, this may explain why their benefits are now
becoming apparent.
142. When we put these arguments to Lord Warner,
he replied that there had been "a certain patchiness"
in terms of the quality of PCTs, suggesting that the improved
joint working we received evidence of was perhaps not happening
across the country.[116]
However, in a health system with responsibility devolved to a
very local level, a degree of variability in approach as well
as in performance is to be expected. It is perhaps worth noting
that the performance of Foundation Trusts could also be described
as "patchy", given that half of the first wave of 31
Foundation Trusts are in deficit, and four have significant deficits.
143. Evidence from those working in the NHS suggests
that PCTs are collaborating with one and other and, as a result,
bringing about improvements without the need for large-scale reorganization.
In our view, Lord Warner's suggestion that improvements in PCTs
have been "patchy" does not constitute a valid argument
for imposing radical structural reform across the board, dismantling
organisations that are performing well as well as those that are
performing badly. A more rational, constructive approach would
be to support the evolutionary changes that are already taking
place.
Conclusion
144. As a senior NHS chief executive told us,
there is no such thing as a 'holy grail' of a perfect size for
a commissioning organisation. There is a clear trade-off between
the increased bargaining power and better co-terminosity of larger
organisations, and the enhanced local engagement of smaller PCTs.
Practice Based Commissioning may achieve local clinical engagement,
but will leave serious gaps in terms of patient involvement. In
order to improve commissioning, PCTs need better skills and information
systems. Restructuring is not necessary to achieve this.
145. Given our evidence that the majority of PCTs
are already involved in successful collaborative working, we believe
that the most effective way to improve commissioning is to allow
PCTs to develop organically, enabling them to evolve into larger
organizations where this clearly best meets local needs. A managed
approach to sharing best practice should be adopted to ensure
that the poorest performers learn from the expertise of the best
performers, and support should be specifically targeted towards
developing commissioning in the poorest performing PCTs.
IMPACT ON PUBLIC HEALTH
146. The potential impact of proposed reconfigurations
on PCTs' public health role has not featured strongly in debate
on this subject, but is a vital consideration. We were very concerned
to learn from the Faculty of Public Health Medicine (FPHM) that
prior to the publication of Commissioning a Patient-Led NHS
on 28 July 2005 there had been no consultation with senior public
health experts about the likely impact of these announcements
on PCTs' public health role. [117]
147. In fact, the FPHM's evidence suggested that
there may be advantages to introducing larger PCTs aligned with
local authority boundaries. The organisation argues that "this
could really strengthen joint working and might even lead to shared
public health teams with Local Authorities".[118]
Moreover if PCT public health departments get bigger, there would
be an opportunity to "restore critical mass" to PCTs'
public health functions, and might improve support for newly accredited
public health consultants, as larger departments could enable
them to be mentored by more senior figures, rather than having
to work alone. [119]
148. However, alongside these advantages, reorganisation
poses several potential risks to PCTs' public health functions.
The FPHM told us that in their view the achievement of the public
health aims set out by the Government in its public health white
paper, Choosing Health, was "a potential vulnerability
through this change".[120]
Although they were reassured by the Department of Health's statement
that public health departments would be excluded from the £250
million cost saving, they felt more needed to be done to preserve
the funding which has been allocated for Choosing Health.
They told us that although in certain 'spearhead' PCTs in particularly
deprived areas of the country funds have been allocated for public
health, in the context of other financial pressures, including
managing deficits and achieving management savings, that money
could be siphoned away from public health. The FPHM pointed out
that where public health initiatives take years or even decades
to bring about measurable improvements, they are a very easy opportunity
for cost savings if other targets have to be met within a single
financial year and financial balance has to be produced within
a single financial year.[121]
149. Concerns have also been raised that larger PCTs
may lose local focus and become too remote from local communities
for public health teams to engage successfully with them and deliver
public health initiatives closely matched to local needs. Equally,
reorganisation may destroy partnerships established with other
local organisations, and may undo good work already initiated,
as Basildon PCT suggested:
It is unclear what has happened to the 'Choosing
Health' White Paper and delivery plan in this debate about the
size and shape of PCTs. There is a risk that unless mechanisms
to implement this vital part of policy are explicit, the very
thing that can have the most impact on health, especially in a
deprived community like Basildon Town, is lost in an organisation
that is too large to relate to local communities and too involved
in strategic commissioning to really put in the investment that
is needed to promote healthy living.[122]
150. Dr Reader supported the arguments for continued
localism in PCTs from a public health point of view:
Within very close proximities to each other you
can have huge differences in health needs of the population. The
bigger those get the more difficult it is to focus on those. What
PCTs have increasingly been getting into over the last year or
so is ways of focusing down on their communities and because of
the close links that they have with the practice and the other
services around that they are able to set up schemes which will
address those health needs in a small localised way. I would be
quite concerned that the enlarging would actually lose that focus
and you would go back to the more sweeping, larger public health-type
approach that we had in the health authorities.[123]
151. The FPHM also suggested that if, through these
reconfigurations, PCTs end up solely as brokers of health services,
the public health function, which includes health improvement,
health protection and health services, could end up being fragmented.
A FPHM discussion paper went on to ask:
How will PCTs succeed in improving health and
reducing inequalities when they are simply managing the commissioning
process for GPs? This reconfiguration could be a major risk to
the whole delivery agenda, such as health improvement and reducing
inequalities and health protection services.[124]
152. Fewer PCTs will inevitably mean fewer Directors
of Public Health. While this may offer an opportunity to consolidate
the public health workforce currently dispersed amongst 302 PCTs,
it obviously raises important issues concerning staffing. In their
discussion paper, the Faculty of Public Health Medicine concluded
that "this reconfiguration will probably affect retention,
with specialists taking early retirement, rather than relocating
or re-applying for positions. It may also result in de-motivation
amongst those that stay."[125]
Training programmes would also be affected by the reconfigurations
and the loss of staff.
153. In oral evidence, the Faculty of Public Health
Medicine argued that local strategic partnerships must continue
to have senior public health leadership.[126]
This, they suggested, could be through two levels of director
of public health support: one to PCTs which will be more focused
on NHS commissioning; and the second to local strategic partnerships
which will be more focused on public health delivery and working
closely with local authorities.
154. However, even if appropriate public health leadership
can be maintained, it takes more than directors of public health
to actually deliver good public health services. Lynne Young of
the RCN pointed out that community health professionals, including
amongst others school nurses, health visitors and community midwives,
currently have a major public health role.[127]
However following the Government's announcements about the divestment
of provider services, this role is in danger of being fragmented.
155. We were very concerned to learn that, prior
to the publication of Commissioning a Patient-Led NHS,
there was no consultation with public health professionals at
all about its potential impact on PCTs' crucial public health
function. In our view, debate about Commissioning a Patient-Led
NHS has also given insufficient prominence to this. In order
to safeguard local public health initiatives, we recommend that
where PCTs merge leaving only one Director of Public Health, other
consultants in Public Health are retained with responsibility
for public health delivery, working with local authorities and
local strategic partnerships. Further to this, steps must be taken
to provide continuing support to community health professionals
who play an equally important part in securing public health improvements.
FINANCIAL IMPACTS
156. The Government's election manifesto set out
a commitment to reduce NHS management costs by £250 million
and, as previously discussed, the 15% savings specified by Commissioning
a Patient-Led NHS have been a prime factor in dictating the
new PCT structures that are now being proposed.
Are PCT cost-savings desirable?
157. In looking for ways to rein in NHS budgets,
'management overheads' are often an obvious first target, as they
are not seen as directly affecting patient care, although they
may have important indirect impacts. All management structures
have a financial cost, which means that they should only be introduced
and maintained if their benefits justify their cost. While some
of our evidence questioned whether or not 302 PCTs were ever affordable
in the first place, Philip Barrett helpfully made the point that
these management costs together with their associated benefits
must have been considered before they were established:
When PCTs were established it must have been
recognised at that time that there would be some financial costs
in exchange for the benefits of a local focus and therefore there
possibly is an argument that there is some sort of premium that
is worth paying for those benefits.[128]
158. Our evidence suggests that PCTs have been able
to secure local engagement more effectively than their predecessor
organisations. According to the Government, retaining clinician
and patient engagement in the NHS is more important than ever.
It has also emphasised repeatedly that strengthening commissioning
is now its key aim for the NHS, in order to improve services for
patients and to control healthcare spending. It is therefore unclear
on what basis the Government has now decided that local PCTs are
no longer worth the level of investment of public funds that was
seen to be justified only three years ago. It is similarly unclear
why it has decided to disinvest £250 million from this very
sector.
Are PCT cost-savings achievable?
159. Another key question is whether or not the reforms
will achieve the level of savings the Government anticipates.
Savings will undoubtedly be made by abolishing many SHAs and PCTs.
Practice Based Commissioning may also, in time, yield savings
by offering cheaper alternatives to hospital-based services. However,
as previously discussed, the costs of mergers are high, and research
evidence suggests that they do not usually deliver the savings
hoped for.[129] The
economic benefits of merger are typically modest and these savings
may be outweighed by a combination of unanticipated costs. These
include the direct costs of merger, as well as the unintended
negative consequences such as loss of morale and productivity
resulting from disrupted relationships and communication patterns.
160. As a starting point, the NHS will have to bear
costs of redundancy payouts arising from mergers of SHAs and PCTs,
which could result in a net loss of as many as 200 NHS organisations,
each with their own Chief Executive and executive management team.
On 20 October 2005 the Health Service Journal reported
that the Department will not have a central fund for redundancies,
and that SHAs will be expected to finance redundancy costs' where
possible from in-year management cost savings'.[130]
This is in contrast to the changes of three years ago when a 'transition
fund' was made available. More recent reports suggest that as
many as 6,000 jobs may be lost from PCTs and SHAs, with a total
cost of at least £320 million.[131]
This could conceivably result in a vicious cycle where more job
cuts are continuously required to fund the redundancy costs of
the first round of job cuts.
161. In addition to this, further investment will
be required to establish and sustain Practice Based Commissioning,
although the level of investment is not yet clear. This is a significant
gap in information regarding costs savings. Supplementary information
from the Department suggests that PCTs are currently planning
to pay GPs between 50p-£2 for each patient on their list.[132]
We presume that this will be a recurring cost rather than a one-off
start-up cost. Assuming that approximately 52 million people in
England are registered with a GP, the total costs could therefore
range from £26 million-£104 million per annum.[133]
Equally, if locality structures are established at a sub-PCT level
to maintain local clinical and patient engagement, these will
also have costs, as Karen Rhodes explained:
I think we are going to have to set up locality
structures to maintain the local focus and clinical engagement
and that is not going to be done without funding. Some of the
savings that we will make by reorganising PCTs, taking out a board,
taking out a PEC, taking out directors, will have to be reinvested
at locality level in order to get the engagement and the structures
that we need so we do not lose our integrated services and our
engagement with our GPs.[134]
162. Basing his calculations on data extrapolated
from his own PCT, Philip Barrett told us that, worryingly, he
did not think that the proposed savings of £250 million could
be achieved:
I have some concerns in terms of whether the
scale of savings that have been discussed can be achieved. In
my own particular PCT, when I look at the costs of my own board
and PEC and the two senior executives who are most at risk out
of this process, which is the director of finance and the chief
executive, we are probably looking at a total cost of £400,000.
If you multiply that by 150 PCTs that might disappear out of this
process, the most we are looking at could be £60 million.
There is not yet published an HR policy for this process. In order
to save that full £60 million there would have to be redundancies,
which are costly and not built into those numbers.[135]
163. Basildon PCT gave us a slightly higher figure
of £900,000 worth of savings per PCT, but even that more
generous estimate only produces a total saving of £135 million,
well short of the intended £250 million.[136]
And, as Karen Rhodes pointed out, whether or not financial savings
of that order are achievable may depend largely on the existing
financial position of an organisation.[137]
She told us that, as her own PCT was in deficit, these savings
might not be possible. In London, where the existing number of
PCTs is set to remain the same (31) or perhaps even increase to
32, savings of 15% are likely to be very difficult to realise,
as they will have to be achieved without being able to save on
Board, PEC and back-of-house costs.
164. The Government has downplayed the financial
motivation for these reforms, concentrating instead on its aim
of strengthening commissioning. However, our witnesses were clear
that this was the key consideration in drawing up plans for reform,
to the extent that plans which would better meet local needs were
discounted because they did not yield sufficient savings. While
achieving efficiency savings is a legitimate aim, this needs to
be stated explicitly so that it can be subject to proper scrutiny.
165. In fact, the evidence to date suggests that
this reconfiguration is unlikely to yield the savings the Government
is hoping for. Figures put to us by PCT officials suggested that
current proposals for reconfiguration might save between £60
and £135 million, well short of the target figure of £250
million. If proper clinical and patient involvement is to be retained,
further local structures will need to be put in place at a sub-PCT
level, which will generate additional costs. Equally, the costs
of Practice Based Commissioning, which are at present unclear,
will need to be taken into account. The NHS will also have to
bear costs associated with redundancies, as well as the cost of
reduced productivity over the next 18 months.
166. It is vital that NHS organisations deliver
value for money. However, while the enhanced local perspective
PCTs have brought to the NHS clearly has a cost, the benefits
they have brought may well justify this cost. In addition to this,
PCTs are currently responsible for spending 80% of the NHS's £76
billion budget. At a time when PCTs' commissioning role is crucial
to the success of the NHS, it is a false economy to deplete the
NHS's managerial resources still further in an attempt to save
only a fraction of that total amount.
56 Appendix 28 Back
57
Q 144 Back
58
Q 100 Back
59
Appendix 4 Back
60
Q 144 Back
61
Q 11 Back
62
Appendix 6 Back
63
Q 68 Back
64
Fulup et al, Process and impact of mergers of NHS trusts: multicentre
case study and management cost analysis, BMJ; 2002; 325:246-253. Back
65
Q 170 Back
66
ibid. Back
67
Appendix 1 Back
68
Appendix 28 Back
69
Appendix 1 Back
70
Q 279 Back
71
Q 280 Back
72
Appendix 28 Back
73
Appendix 1 Back
74
Is bigger better for Primary Care Groups and Trusts? BMJ 2001;
322 Back
75
Appendix 1 Back
76
Q 17 Back
77
Qq 42, 43 Back
78
Q 44 Back
79
Q 6 Back
80
Q 97 Back
81
Appendix 3 Back
82
Health Service Journal, 20 October 2005 Back
83
Q 36 Back
84
Health Service Journal, 13 October 2005 Back
85
Q 139 Back
86
Q 147 Back
87
Q 95 Back
88
Q 163 Back
89
Q 270 Back
90
Q 54 Back
91
Appendix 4 Back
92
Q 153 Back
93
Q 139 Back
94
Appendix 36 Back
95
Appendix 28 Back
96
Q 100 Back
97
Q 101 Back
98
Q 104 Back
99
Q 112 Back
100
Q 282 Back
101
Appendix 1 Back
102
Appendix 36 Back
103
Q 98 Back
104
Q 290 Back
105
Department of Health, Making Practice-based Commissioning a reality-technical
guidance, February 2005. Back
106
Q 285 Back
107
Appendix 28 Back
108
Q 183 Back
109
Appendix 3 Back
110
Appendix 6 Back
111
Appendix 7 Back
112
Q 6 Back
113
Q 18 Back
114
Q 22 Back
115
Q 65 Back
116
Q 218 Back
117
Qq 214-215 Back
118
www.fphm.org.uk Back
119
ibid. Back
120
Q 207 Back
121
www.fphm.org.uk Back
122
Appendix 3 Back
123
Q 133 Back
124
www.fphm.org.uk Back
125
ibid. Back
126
Q 210 Back
127
Q 213 Back
128
Q 159 Back
129
Fulup et al, Process and impact of mergers of NHS trusts: multicentre
case study and management cost analysis, BMJ; 2002; 325; 246-253 Back
130
Health Service Journal, 20 October 2005 Back
131
Health Service Journal, 24 November 2005 Back
132
Appendix 1 Back
133
Department of Health, General Personal and Medical Services Statistics,
www.dh.gov.uk Back
134
Q 147 Back
135
ibid. Back
136
Q 154 Back
137
Q 157 Back
