7 THE WAY FORWARD
178. In this inquiry we have found that while there
are undoubtedly some examples of good practice, after 20 years
of the purchaser/provider split commissioning remains a weak link
in the English NHS. PCTs are too often passive, ineffectual players
in the health economy. They have failed to adequately challenge
providers and have accepted services of an inadequate quality.
As we have seen, these weaknesses are partly due to structural
imbalances in the system, but also to PCTs' staffs' lack of skills,
knowledge and talent and the failure of successive governments
to remedy these deficiencies. PCTs are expensive and employ large
numbers of staff, but too often not the right staff. In particular,
they need people who are better at collecting data and at making
use of the large amount of data they already have to inform decision
making. PCTs have not been helped by constant reorganisations
and high levels of turnover of personnel. Too many of the best
managers have been attracted to work in hospitals where pay is
higher and the work environment is more rewarding, having been
the focus of two decades of reform to improve patient care and
ensure value for money. This compares with PCT work which is traditionally
undervalued and of marginal immediate impact on patient welfare.
179. The DH recognises the problem and has introduced
a number of initiatives to try and improve the situation, including
the absurdly named World Class Commissioning. However, as we noted
in our report on Lord Darzi's review, it is not clear that PCTs
have the talent to support their aim of getting commissioners
to do a better job and bring about the radical improvements which
are clearly needed.
180. We received several suggestions as to how to
improve the situation. Witnesses' proposals can be roughly divided
into five groups:
i. Abolish PCTs and re-introduce health authorities;
i.e. replace the quasi-market system with a planned one
ii. Retain PCTs but introduce more integrated
iii. Retain PCTs, but introduce "local clinical
partnerships", under which GPs would directly control commissioning
iv. Retain PCTs but commission services from
v. Retain and strengthen PCTs
The two main choices are to give PCTs more power
or give them up as a bad job.
Abolition of PCTs
181. The most radical option would be to abolish
the purchaser-provider split, as Wales and New Zealand have. The
BMA argued that the split between purchaser and provider had been
expensive, inhibited clinician involvement in planning services,
and fostered a system which is dominated by cost containment by
PCTs and income generation by providers.
182. The current health system with the purchaser/provider
split is expensive to run with high administrative and management
costs. As we have seen in chapter 2, we have tried rather unsuccessfully
over the years to extract information about these costs from the
Department and have received a variety of figures ranging from
3-8%; academic research has concluded that the costs are much
higher amounting to 20-25% of total staff costs or 14% of the
total cost of the NHS, i.e. the staggering sum of £13 bn
183. The Medical Practitioners Union agreed with
the BMA that the purchaser-provider split had limited the scope
for clinicians to cooperate in the planning of care:
The creation of a market nexus between commissioners
and providers is not an essential part of commissioning. Nor is
it particularly useful. The p-p separation has limited the scope
for clinicians to cooperate in the planning of care across the
184. The abolition of PCTs would generate significant
financial savings in a period of considerable financial pressure,
would also involve another major reorganisation with all the attendant
disadvantages. The successor system would be likely to be even
more dominated by providers and act in their interests.
Keep PCTs but do more to integrate
185. The Royal College of Physicians
and others thought PCTs should be retained but hospital clinicians
and GPs should work more closely together. Professor Ham argued
There should be progressive migration towards
clinically integrated systems building on the most promising aspects
of current reforms and drawing on evidence that shows the benefits
of integration and the challenges of making a commissioner/provider
split system function effectively.
186. Professor Ham sees integrated systems in the
US (Kaiser Permanente and Veterans Health Administration) as potential
models for integrating care in England. Such systems perform well
by engaging clinicians in the quest for improvement, ensuring
that the incentives that face the organisation align with those
of key front-line decision makers.
187. Moreover, integrated care requires the component
parts of the NHS to work together rather than remain fragmented
as now with hospitals, primary care and community care/social
care each defending their incomes and their empires. Kaiser and
the US-Veterans Health Administration are single systems. Thus
retaining PCTs and integrating care seems inconsistent with the
development of CQUIN which seeks to increase the leverage PCTs
have in respect of hospitals and other providers.
Retain PCTs, but introduce "local
188. The Nuffield Trust informed us that "there
are key changes to the policy environment that are required if
commissioning is to stand a chance of becoming effective in the
way that was originally intended." These included:
Finding ways of incentiving and motivating GPs
"beyond practice-based commissioning", with an opportunity
to hold hard capitated budgets..[and]
Extending the concept of PBC to enable integrated
care organisations or multispeciality clinical groups to take
responsibility for funding and providing a wide range of care
for their registered population.
The memorandum added that the Trust was to publish
a report in November 2009. This report has been published and
proposed local clinical partnerships with real budgets.
189. Local clinical partnerships look very like the
system of GP-fund-holding and might be expected to have the advantages
and disadvantages of that system.
The Department of Health commissions
services from hospitals
190. Professor Street proposed that PCTs should cease
to commission services from hospitals. Instead, this would be
done centrally by the DH. Freed from having to deal with hospitals
directly, PCTs could then concentrate on improving care in the
primary and community care sectors.
|Professor Street's proposal|
The more radical option would involve the Department of Health funding hospitals directly instead of having payments pass through PCTs. This is typical of PbR-type arrangements that operate in other countries, where "local commissioning" does not feature.
The arrangement combines the best feature of block contractingcertainty of expenditurewith the incentive properties of PbR since an individual hospital will receive more money if it treats more patients.
Again hospitals might be paid the national tariff up to a planned level, with a marginal price applying thereafter. Crucially, though, the planned level need not be negotiated between hospitals and PCTs but can be specified for the hospital as a whole.
The transfer of responsibility would allow the Department of Health to sharpen the incentives of PbR, using the tariff more effectively to control volume, and it would better facilitate free patient choice of hospital.
Freed from having to deal with hospitals directly, PCTs could then concentrate on improving care in the primary and community care sectors.
The arrangement requires a change to resource allocation, with PCTs receiving funds to pay for primary and community care only, with payments for hospital care made directly to hospitals by the Department of Health.
PCTs that are successful at keeping patients out of hospital would receive a proportionately greater budget for primary and community care. This proportion would increase over time if strategies to reduce referrals and to substitute hospital care for primary or community services prove successful.
Professor Andrew Street: COM 113
191. While this option has attractions, it would move the commissioner
away from the provider. Other witnesses have argued that effective
commissioning requires commissioners to develop long term relationships.
While this does not currently happen as much as it should, Professor
Street's option would make it more difficult, although a similar
system does work for major retailers and supermarkets.
Retain and strengthen PCTs
192. Despite their failings there are strong arguments for retaining
PCTs. There have been too many reorganisations in recent decades
and there would need to be very strong arguments for another upheaval.
193. On the other hand, the system of PCTs cannot
continue as it is. Moreover, the Government's proposals for improvement
by themselves are unlikely to bring about the improvements required.
If we are going to keep PCTs they need to be given more teeth
and more talent.
194. PCTs employ large numbers of staff, but too
many are not of the required calibre. PCTs need to become better
at collecting data, for example of the needs of their population,
and at analysing it. In particular, it is essential to exploit
existing and developing data sources to provide comparative performance
information in terms of cost, activity and outcomes. This would
facilitate the early identification of "outliers" such
as Mid Staffs, Bristol and Shipman. As we noted in our report
on the "Next Stage Review" PCTs lack the analytical
skills or motivation to handle and interpret performance and routine
administrative data. With the introduction of PROMs and other
quality related measures this issue is becoming ever more important.
There is little evidence that WCC has yet brought about improvements
in these areas.
195. There is also an urgent need to improve the
quality of management. Research undertaken under the auspices
of the NHS Institute for Innovation and Improvement in 2008 into
improving the quality of care concluded:
a significant investment of time, resources and
leadership effort will be required to create the capability for
large-scale change across the whole of the NHS.
196. In our report on the Next Stage Review,
the Committee pointed to the potential of the National Training
The National Training Programme has attracted
graduates of great ability. They should be encouraged to take
appropriate academic qualifications and be given sustained career
support to ensure that their talent is exploited to the full throughout
The NHS should make far better use of the Graduate
Management Training Scheme to provide highly able managers.
197. As we have discussed CQUIN, PROMs and Quality
are potentially important levers to enable PCTs to provide financial
incentives to hospitals to improve their services. As we noted
we are alarmed that they have not been properly evaluated. The
CEO of the NHS, David Nicholson, said the NHS would learn from
local experiments. This approach has all the failings we condemned
in our report on Health Inequalities.
CQUIN is important and must be properly evaluated. As we have
noted above, the list of Never Events is very conservative.
198. It has been argued that the power of PCTs should
also be increased by increasing the number of providers; thus
PCTs would have a greater choice of provider and could cease to
purchase from those who were providing an unsatisfactory service.
This would in theory provide incentives to established providers
to improve their performance.
199. The Government did take steps in this direction,
for example by introducing ISTCs, but seems subsequently to have
changed direction. The ISTC programme has been curtailed and the
Secretary of State has announced that NHS organisations are the
"preferred providers" of NHS care.
200. The Government has announced a 30% reduction
in management costs in PCTs and SHAs from 2010 to 2013.
While some PCTs do a good job with low overheads, we are not convinced
that taking money away from weaker PCTs will automatically encourage
them to improve their performance. At a time when we are expecting
so much of PCTs, it seems risky to be cutting their management
costs by 30% when they need better skills and more talent. We
note that the Minister indicated the potential to make savings
from SHAs; we agree that they should bear the brunt of any cuts.
201. If we are to keep PCTs they need to strengthened.
In particular, they require a more capable workforce, with people
able to analyse and use data better to commission services. They
also need to improve the quality of management, attracting and
developing talent. As we have argued in previous reports, the
NHS Graduate Management Training Scheme could play a major role
in achieving this. However, commissioning cannot be improved in
isolation from the rest of the health service. PCTs will need
to have more power in dealing with providers. It needs to be able
to offer more evidence-based financial incentives to providers
to improve its relationship with providers. We trust our successors
will follow the CQUIN initiative carefully. It must, however,
be properly evaluated. If successful it should be expanded significantly.
At the moment the Government has proposed some sort of qualitative
analysis, which amounts to little more than asking participants
how they feel about it. We recommend the Government institute
a rigorous quantitative assessment.
202. A number of witnesses argued that we have
had the disadvantages of an adversarial system without as yet
seeing many benefits from the purchaser/provider split. If reliable
figures for the costs of commissioning prove that it is uneconomic
and if it does not begin to improve soon, after 20 years of costly
failure, the purchaser/provider split may need to be abolished.
201 Ev 210 Back
Ev 82 Back
Ev 123 Back
Ev 332 Back
Ev 261 Back
The Nuffield Trust, Beyond Practice-based commissioning: the local
clinical partnership. November 2009 Back
NHS Institute for Innovation and Improvement ,The next leg of
the journey: How do we make High Quality for All a reality? H,
Bevan, C, Ham and P, Plsek., 2008. Back
Health Committee, First Report of the Session 2008-9, NHS Next
Stage Review, HC 53-1 Back
Quality Accounts legislation comes into effect in April 2010.
Outlined in High Quality Care for All, 2008, Quality Accounts
aim to enhance accountability to the public and engage the leaders
of an organisation in their quality improvement agenda. From April
2010, all providers of acute, mental health, learning disability
and ambulance services will be required to produce a Quality Account.
Further work is underway to develop Quality Accounts for primary
care and community services providers with the aim to bring these
providers into the requirement by June 2011 subject to a testing
and evaluation exercise. Back
Health Committee, Third Report of 2008-09, Health Inequalities,
HC 286-I Back
In its publication, NHS 2010-2015: from good to great. preventative,
people-centred, productive, Cm 7775, December 2009, the Department
of Health stated: "We will significantly reduce management
costs in PCTs and strategic health authorities (SHAs) by setting
a clear goal of reducing costs by 30% over the next four years"
(para 4.35). Back