Value for money in the NHS - Health Committee Contents

Examination of Witnesses (Questions 1-141)

MR ANDREW HALDENBY, PROFESSOR JOHN APPLEBY AND PROFESSOR BERNARD CRUMP

25 MARCH 2010

  Q1 Chair: Good morning, gentlemen. Could I welcome you to our one-off session in relation to value for money in the NHS? I wonder if I could ask you, for the record, to give us your name and the current position that you hold.

  Mr Haldenby: Andrew Haldenby, Director of Reform.

  Professor Appleby: John Appleby, Chief Economist of The King's Fund.

  Professor Crump: I am Bernard Crump. I am Chief Executive of the NHS Institute for Innovation and Improvement.

  Q2  Chair: Thank you and welcome. A general question, but I will direct it to you to start with, John. How tough do you expect the financial position in the NHS to be over the next Parliament, and (directly to you, John) can you tell us about your work with the Institute of Fiscal Studies on this issue?

  Professor Appleby: Yes; thanks. I do not think it is a big secret now that the NHS is going to face essentially no real growth in its funding. At the end of this month we start the new financial year 2010-11. I think evidence from the Department to this Committee earlier this year showed that the real rise in total NHS budget in England is going to be about 1.6%, small relative to previous years' real rises. The indications from Alistair Darling in his Pre-Budget Report last year was that for 2011-12 and then 2012-13 (so beyond next year) essentially there would be a real freeze in funding for the NHS in England. That seems to be the situation: no real rise in NHS funding, a small rise this coming year and then two years of a real freeze—at least two years. This really is in line with work that The King's Fund did with the Institute of Fiscal Studies, which you referred to, which we produced last summer, where we looked at the future prospects for funding for the NHS and concluded that, given the macro-economic situation, given the state of public finances, the structural debt in the system, the prospects of giving the NHS anything more than a real freeze looked unlikely given the impact on other spending departments, given the potential impact on taxes and so on. So our conclusion was what seems to have turned out to be the case, which is a real freeze in NHS resources.

  Q3  Chair: David Nicholson said to us in January of this year that it was going to be £15-20 billion, which is the real freeze scenario. Do these sums add up and what would have been the e-factor we have in the National Health Service (the efficiency factor) that has been there since the National Health Service has been there? How would that add up to £15-20 billion? Would it equate? Does that go away? What happens?

  Professor Appleby: This 15-20 billion, I think, needs some clarification. There has been, I think, some misunderstanding, not just outside the NHS but also within the Service actually, as to what we are talking about here and what the Department of Health really mean by this. It is not £15-20 billion worth of cuts. As I say, the budget looks like it will be frozen in real terms. The 15-20 billion is really an estimated difference between no real rise in funding for the NHS and what the NHS perhaps needs to meet various demand pressures and cost pressures. The Department's estimate is between £15-20 billion. That money is not going to be forthcoming, so the big thrust in policy from the Department is how can the NHS use its existing resources more efficiently to the value of something like £15-20 billion to meet various demands? That is the big policy push at the moment.

  Q4  Chair: The efficiency factor has always been in NHS expenditure. Does that differ greatly from what has happened in the last decade to these expected three years' efficiency gains?

  Professor Appleby: It is a huge step up.

  Q5  Chair: It is more than what has normally happened in the system?

  Professor Appleby: Massively so. That 15-20 billion is over three years, so roughly five billion plus a year value in productivity gains. The ONS produced some productivity figures yesterday showing that productivity in the NHS in 2008-09 went down again; so over the last decade productivity has fallen in the NHS, crudely measured, I should say.

  Q6  Chair: Would you both agree that this is a huge change, if it is 15-20 billion on efficiency, from what has happened in the last decade or more?

  Professor Crump: Yes. None of us in our professional lifetime have seen a change like the change that is coming in terms of the greater emphasis on efficiency. John is quite right that some of this needs to be cash that is fully released to be reinvested in new products, new drugs, new approaches, some of it needs to make the resources stretch further, but historically lots of the efficiency gains that you have mentioned have been efficiency gains in which we have not had to release cash. We have done more for less than we would have done had we not operated at a certain greater level of efficiency. I have looked briefly at the ONS's publication from yesterday and, frankly, there is a fiendishly difficult challenge of putting a value on the outputs of health and healthcare. Certainly, as John says, using their current best practice, productivity is not moving in anything like the direction that would be needed by this.

  Q7  Chair: Do you concur with that, Andrew?

  Mr Haldenby: Yes, but, perhaps to be even more depressing than John, I am not sure that these numbers which we have currently got will be the last word on the subject. The question is: is the current projection of public finances within which the NHS budget sits going to hold water, or are we going to discover the public finance position is even worse than it looks now, which will lead to further pressure on all public sector budgets? I fear that that is what I would expect to happen, and the reason for that is that there are risks to the level of economic growth going forward. I do not think the financial services sector is settled, so there is the risk of another problem in that sector. In general, and perhaps a more arguable point, I think the proposals put forward in the Budget yesterday for improving the efficiency of the whole public sector are still looking at efficiencies on the border of public spending rather than actually dealing with the real problems that lead to inefficiency in the public sector. If you put those three things together, I think that there will be increased pressure on public spending budgets in the next Parliament, which perhaps will lead to an even tougher spending environment than John set out.

  Chair: We are going to have a look at some of the areas of productivity to start with. Peter.

  Q8  Mr Bone: I should say at the start, for the record, that I know Mr Haldenby personally, but I have not discussed this session with him. When I grew up the NHS was the best health service in Europe, but recently the Health Consumer Powerhouse showed the UK seventeenth out of 29 European countries, and the ones below it were the poorest in Europe. We have seen a doubling of the amount of money, in real terms, going into the NHS since the Government came to power, but we have only seen a 23% increase in consultant-finished case episodes. You could argue: double the amount of money, double the cost to the taxpayer now each household pays more than £5,000 a year for the NHS, but you have seen a 23% increase in productivity. No other organisation in the world would have been allowed to get away with that. What I would like to know from our witnesses is in what three areas could productivity be massively improved in the Health Service and, in relation to that, would any of those measures be, in fact, a system that does not fund the NHS from direct taxation?

  Mr Haldenby: Where does the NHS spend its money? It spends it predominantly on people. If, according to the best statistics we have got, 50% of the cost goes on the workforce—I must say that feels a bit low to me but let us say 50% goes on the workforce—that has to be the first priority. If the NHS is going to become more productive, it has to employ its people more productively and in different ways. Then one has to look at the capital infrastructure, and that is the other big thing that the NHS spends its money on. The Chancellor in his Budget yesterday was talking about the recent history of NHS spending, and he said that the NHS has delivered the largest hospital building programme in its history, with 118 new hospital schemes open and a further 18 under construction. The other major thing that the NHS does is build and run buildings. You suggested three things. I think those two are the two clearest examples to go after. As for the question of whether a more efficient service would be one that is not funded from general taxation, I think it is arguable. It is something that I happen to believe, because I think that an increased level of user charges for medical treatment will ameliorate the demand, it will make more efficient the demand for medical services, and, also, when one looks at countries like France and Germany, their systems have a greater level of competition between health providers, which you would normally expect to increase efficiency. I do not think a cast-iron piece of research has proved that fact, but it is something that I would put forward as a hypothesis.

  Q9  Mr Bone: There is President Obama and his legacy in history and all the fanfares, and we were all in the House of Commons amazed by the ability of President Obama. If that is such a good system, why do we not switch to that?

  Professor Crump: It is not a good system. You can look at different measures of the comparative performance of health systems. If you look at the analysis by the Commonwealth Fund, it showed that actually under that analysis the NHS was one of the strongest systems, in fact the strongest system in that particular analysis, with the US regularly at the bottom of the list, and we have a system which is envied around the world. We are visited in my Institute frequently by people from all parts of the world, and I do not think we should beat up our system too much; it has great strengths. Important aspects of the quality of care and the quality of outcomes have improved over the period you have described. I would not regard it as the most important measure of the effectiveness of the system that we increase the number of finished consultant episodes—there is avoiding admissions to hospital—particularly when most people would argue that around 30% of the occupied bed days on any one day are not strictly necessary for the patients' health outcome. I do not think is a great measure of output. I think the issue about the different approaches to how you resource a public health service are more religious questions than they are questions of policy. I think really one's prejudices get into this. What I would say is that I have seen examples of dramatic and rapid improvements in health services in both publicly funded and privately funded systems. I think competition has a really important part to play because of the incredibly natural competitiveness of people who work in healthcare—I am a medic—particularly the medical profession, but that does not necessarily only have to happen through organisations which are competing. Competing against the standard, knowing where you sit compared to your colleagues, is a really potent way of improving.

  Q10  Mr Bone: I am grateful to hear that our system is better than President Obama's proposal, which I think most people would, hopefully, accept, but there has been such a fanfare about it, so I am glad that the NHS have said that he has got it wrong. You said "finished consultant episodes" was not a measure that is really very good, but it is about one of the only ones we have got at the moment. How are we actually really going to measure productivity so we can see whether we are doing better or worse than other countries?

  Professor Crump: It really is a challenge for health services to find the right way of valuing the outcomes from healthcare. We never from the outset, even in 1948, really sold the NHS to the population as being about improving their health status and health outcomes. We quite understandably at that point sold the NHS as providing them with a safety net, which would mean that they would not find themselves in a situation where if they suffered ill health they would become destitute or be unable to get access to services. The equity that we deliver, in contra-distinction to the US, for example, in our system is really valuable, but we have to find better ways of being able to put a value on the quality, the societal impact, the outcomes as well as the processes and day-to-day activities of the NHS. I do not think yet we have got a satisfactory measure of that. Indeed, what I can say is quite a lot of the changes one would want to happen will lead to deterioration in productivity by the measures that we currently use.

  Professor Appleby: Perhaps I can add quickly to that that the NHS is absolutely not unique in having difficulty measuring what it produces. The financial services industry also has trouble over this. If you look at the ONS, their work on productivity is almost across the board, public and private, healthcare and non-health care. There are real difficulties in measuring what industries do and produce and then measuring what the inputs are and the outputs and then getting a measure of productivity. I think the NHS has made some real strides over the last few years in trying to cover properly the activity that it does. There is a prospect soon, because the NHS is now collecting something called "patient-reported outcome measures" from patients, that this could act as a measure of changing quality which will improve our measures of productivity. We are not there yet, as Bernard says, but I think we are getting there.

  Q11  Mr Bone: Would it be better to look at things like European outcomes of how long people survive from cancer and compare them to how long it is in this country? Is that a helpful measure, because you would think that the two are linked?

  Professor Appleby: Yes, it is known as triangulation. The ONS have their measures and then they look at other indications of how the health system is performing, one of which is to do with survival, life expectancy, satisfaction that people have with their health system, and so on. There is a range of measures you can use, but no single measure really captures the whole thing perfectly, and I think that is the difficulty.

  Q12  Mr Bone: Do you agree with the Powerhouse analysis, which tried to do all those things and ranked us at number 17?

  Professor Appleby: I do not rate that survey as a very good survey actually, if you look at the detail of how they collect the information.

  Q13  Mr Bone: But something like that would be a good idea.

  Professor Appleby: It has been done. The World Health Organisation in 2000 produced a ranking of all health systems in the world. I think the UK came eighteenth overall, which may not sound good. That is out of 191 countries.

  Q14  Mr Bone: We should be doing better than that, should we not? Eighteenth in the world is not very good for a country of our standing, the fifth or sixth biggest economy in the world.

  Professor Appleby: You have to then look at things like how much money we were spending per head then on healthcare. We were way down the ranking. A lot of these differences you see internationally can be attributed simply to the fact that in France they spend nearly a third more per head on healthcare. It is not so much the design of the system, and so on. Quite often it simply comes down to the amount of resources going in.

  Q15  Dr Naysmith: We are going to go on talking about the fact that there is quite a difference, quite a variation, in clinical practice in different parts of the country. Some people say that a lot of money could be saved if we got clinical practice more standardised and moved more into the efficient end. Do you think there are big savings to be made in standardising clinical practice around the best?

  Professor Crump: I think there are big opportunities from trying to deal with unwarranted variation. I do regard some variation as a function of the fact that the population differs from place to place, sometimes quite substantially, so we have created a set of indicators called the Better Care, Better Value indicators, and if everybody moved to the best quartile of performance on those indicators, if that were appropriate, there would be a contribution of about £3 billion a year of released resources. An example is the proportion of patients who come into hospital for an elective operation who come in on the day of the operation, which generally patients prefer and which generally is associated with avoidance of risks associated with infection, et cetera. It varies enormously. Of course there are some clinical conditions where it is important the patient is in hospital the day before, and there are parts of the country where the rurality and the travelling times mean it would be unrealistic, so it is important not to use these indicators in a crude way, but they are a very important way of allowing organisations to shine a light on their performance and explain why they are so different.

  Q16  Dr Naysmith: I seem to recall on this Committee, I cannot remember which inquiry it was, that there was wide variation between surgeons performing operations for cataract. Some surgeons could get through lots more in a day than other surgeons.

  Professor Crump: Yes.

  Q17  Dr Naysmith: Why is that allowed to continue?

  Professor Crump: Firstly, it is true that there is wide variation in the number of cases done on a list. We have worked with the highest performing organisations and the poorer performing organisations, and we have pulled out the factors that determine high performance and we have made that information widely available, not just through managerial channels but also through professional channels, working with the Royal Colleges, the British Association of Day Care Surgery and others.

  Q18  Dr Naysmith: Why is it taking so long to change?

  Professor Crump: It is a good question, and I think it is true that in a period where we have had quite steep growth in resources the focus on those elements that are about productivity has probably taken something of a back seat to quality and safety issues of other sorts, and I think we need to be much better at making these materials and tools available and used. Frankly, what is coming is going to make it essential that they are used.

  Q19  Dr Naysmith: How can the NHS actually do it? Let me give you another example. When I was a lad lots of people had tonsillectomies. Now it is a much rarer operation. That is partly, possibly, due to antibiotics being a bit better, but it is also fashionable, is it not?

  Professor Crump: Yes.

  Q20  Dr Naysmith: It has also been the fact that people have discovered that removing tonsils can actually be deleterious in terms of the removal of lymphoid tissue.

  Professor Crump: Yes.

  Q21  Dr Naysmith: All these things add up. Why cannot the NHS just insist on it? How about your organisation? Why cannot you kick backsides a bit more?

  Professor Crump: I would say two things. There are fairly few things where it is universally the case that this particular procedure should never be used; it is never appropriate. What we do have are circumstances where currently things are used outside their most high impact indications. We have tried to shine a light on that by giving people comparative information, not just the organisation that does that operation, but the commissioning organisations, the primary care trusts. Both for emergency admissions and for exactly the things you describe—low back pain surgery, D&C surgery for women, et cetera, relatively low value, commonly used procedures—we have shown the PCTs what proportion of their resource they spend on this and we are working with them to turn that into changes in the care pathway that affect clinical practice. It is a slow process, but I agree that it is an essential process and we have not made enough progress.

  Q22  Dr Naysmith: Are we making enough use of evidence-based clinical guidelines and insisting that places abide by the evidence and things like rigorous audit and improved incentives systems?

  Professor Crump: These are all important. The quality of the development of the guidelines has improved a lot. It is still the case that we do not always have systems in place to remind practitioners, particularly practitioners who are not specialists in that particular area, of the current guidance at the point at which they need it because they are with a patient, where that guidance would be relevant. Improvements in IT will help that. We rely and we will always rely on professionalism. I do not think I can imagine a world in which external regulation will be able to become more significant than the professionalism of services. We are going to have to improve all of that, and the challenge of the productivity improvements that we are going to see, I think you will see these things move up the agenda extremely quickly, but I can understand the frustration about why it is slow to happen.

  Q23  Dr Naysmith: John, you must have done a few studies in this area.

  Professor Appleby: Going back to the first question, what are the three productivity areas? Variations, I think, is one that I would have said. Everywhere you look in the Health Service, whatever you look at—prescribing, admissions, techniques that are used, and so on, types of treatment given—there are huge variations and, again, not just in the NHS and not just in this country but in other countries as well. The US, for example, has been working on this through something called the Dartmouth Atlas for years and they find big variations. You mentioned cataracts, nearly the most popular operation now on the NHS; we easily do enough cataracts overall. But when you look at the numbers of admissions at a PCT level, it varies three or fourfold across the country, and there is no real explanation as to why that is except, perhaps, the pattern of where ophthalmologists practise. There is an issue here. There is a sort of supply-induced demand type of thing going on—where you have got ophthalmologists, they will do cataracts, as it were. Just one example of where action has been taken. In a sense Bernard talks a bit top-down on the issued guidelines and so on. I think there is a big onus on PCTs to work on this and to actually work with their providers, and not just the provider hospitals but with the consultants in those hospitals, to do something about the thresholds that consultants operate in terms of admitting people from the list into the theatre. There are plenty of examples of that. The Suffolk PCTs some years ago worked on this in a very interesting way on hips, knees and cataracts. They got their consultants together that they were buying care from, they discovered that consultants even within the same hospital were using different criteria to admit people for a cataract and, through agreement, they got some sort of more consistent uniform threshold for admission of patients. It was not just an efficiency thing, it was also an equity thing. There were patients who could get into hospital quicker in certain areas than others simply because of the decisions of consultants. I think there are examples, but it is remarkably the system; variations just persist and persist and it does seem to take a long time to deal with them.

  Q24  Dr Naysmith: Have the NICE guidelines made a difference?

  Professor Appleby: Yes, there is evidence that NICE have made a difference. Perhaps not as big as one would wish, but it does go back to something that Bernard said, which is that quite often there is never a never situation with some of these things. There are clinical decisions to be made at the level of individuals, so even when NICE says, generally, "Do not do this thing", whatever it is, there will often be a case where the clinical decision is that actually it could be appropriate here.

  Q25  Dr Stoate: In fact, John, supply-induced demand is not a new concept; it has been around for probably 30 or 40 years. I remember seeing some very interesting papers from America that showed that emergency surgery was directly proportional to the number of surgeons in the local area. The number of appendectomies went up if you had more surgeons in an area compared with fewer, which is quite difficult to explain. You can explain elective surgery, but even emergency surgery varies. So it is an engrained subject which has been around for a long time. What the Government did four or five years ago was to introduce new contracts for GPs and consultants in order to try and address some of these issues. Is there any evidence that this has improved productivity at all?

  Professor Appleby: No.

  Q26  Dr Stoate: I thought you would say that!

  Professor Appleby: The King's Fund have produced some initial work on this a year and half or so ago, so we have done some work on this. It seems that the consultants' contract, productivity per consultant, has been going down for a number of years, again, not just in this country, I should add. It is not just the NHS. There are interesting factors at work to explain that, but it appears not, no.

  Q27  Dr Stoate: The interesting thing is the consultants' contract was designed effectively to give hospitals a bit more flexibility and control over what surgeons in particular did and what consultants in general did, but Jonathan Fielden told us in his evidence that employers were simply under-using those contract flexibilities. Is that the problem?

  Professor Appleby: I think that is largely the problem, yes. It is going to be down to individual human resource departments in trusts.

  Professor Crump: And medical directors.

  Professor Appleby: And medical directors as well.

  Q28  Dr Stoate: So why are we not getting a handle on this? If we need to increase productivity (and, as you have already said, the need is going to get far more huge in the next few years), why are they not pulling these levers?

  Mr Haldenby: Without wanting to lift it right up to the highest level, what are the factors within the Health Service that would lead managers to do those difficult things (and they would be difficult things) about changing?

  Q29  Dr Stoate: The need is very obvious, because we are going to be in financial difficulties. The managers are now even more tightly controlled on their financial management than before. Here is a lever to pull and they are not pulling it.

  Mr Haldenby: Looking back in time, why has this not happened? One of the common findings of Reform's work across the public service is that actually the public sector is not this Stalinist monolith that some people describe it as. It is a very flexible and centralised thing. There is a lot of flexibility within contracts typically, whether teachers and so on. Police officers are the great exception, but otherwise public sector employment is quite flexible. It is just that managers do not use that.

  Q30  Dr Stoate: We know they do not use it—we have heard that—but why do they not use it and what can be done to encourage them to use it?

  Professor Crump: In the year that we are just coming to the end of now, I think the NHS is going to actually be in a surplus of about £1.4 billion. There are within that some organisations that are in financial difficulty now and will be using those sorts of measures, but it has not to date been the thing that has been their greatest priority. Their priorities have been things like maintaining the remarkable improvements there have been in waiting times in all sorts of different ways. Engaging your consultants on that agenda has been a real priority and the productivity improvements have been a little way in the future. Most of us medics are very concerned that this golden opportunity to make changes now, to anticipate what is coming, may be being wasted, and we do need to raise the profile of productivity with people now, but the reality is that that is not what has been their priority this year.

  Q31  Dr Stoate: John has already told us that productivity in the last ten years, if anything, has fallen. We have got new contracts in place in order to address that and nobody seems to have taken the slightest bit of notice. I still find it very difficult to understand.

  Professor Crump: I do not think that those contracts principally were introduced to improve productivity and in the case of primary care, I would agree with John, there is no evidence that it has improved productivity. There is evidence, as I am sure you will be aware, of a significant attention to those aspects of anticipatory care, preventive care with a focus on the Quality and Outcomes Framework, and I think history will say that the implementation of the Quality and Outcomes Framework was one of the best international examples of a pay-for-performance system getting clinical attention to focus on important issues. At the same time, for reasons partly of the worries we had about recruiting and retaining a primary care workforce, we paid GPs a lot more when we were introducing the QOF. So productivity has not improved, but the focus on important aspects of the delivery of primary care has improved substantially by all measures. In fact, GPs moved extremely quickly, far more quickly than, as you will recall, the people who invented that contract thought would be the case, onto the focus that was set for them.

  Q32  Dr Stoate: As a GP I could have told them that long ago.

  Professor Crump: Yes, so could I.

  Professor Appleby: This apparent paradox that there were these mechanisms in place but they have not been used in the past over the last five, ten years: I think part of the explanation is there was a lot of money in the system and the NHS did meet mostly all of its targets by spending that money—so employing more people to do more work, not necessarily to do more work per unit of hour or per pound, but they did do more work and the NHS met its targets. That was an easier route to doing the job than, as Andrew was saying, the difficult thing of starting to negotiate at a local level on contracts, starting to discover new ways of delivering care and so on. That is happening now, and you could argue it should have happened, but I am just saying there is a potential cause, or reason, why it did not happen in the last five or ten years.

  Q33  Dr Stoate: Finally, I want to bring Andrew in. Assuming all these levers were pulled, what is the potential for savings in the NHS by making these contracts work to maximum efficiency?

  Mr Haldenby: I am not sure about the contracts, but recently speaking to a chief executive of the PCT, recently speaking to a chief executive of the trust, recently speaking to a chief fire officer, all of them just said one should expect to be able to achieve a 20% actual reduction in spend—that is how they would express it—but a 20% efficiency gain. I am very struck by the fact (and I would take those as serious people with very strong professional judgment) that that was a figure that was repeated.

  Q34  Dr Stoate: If you can save 20% just by tweaking these efficiencies, then we have got no problem, have we?

  Mr Haldenby: When you say "tweaking efficiencies", what are the reasons that managers have not taken the tough decisions that we are talking about? I think that it is actually about some of the structures of the service. The levels of competition within the service, the degree of central direction were the two obvious things, but those are major system reform changes which are not tweaked.

  Q35  Dr Stoate: So you are advocating a more Stalinist approach then?

  Mr Haldenby: No. Good managers are already doing this up and down the country, but I do think that the Health Service is politicised in the sense that I think that lots of health managers look up to the Department for a lead, and for most years now the lead has been, as the other witnesses are saying, to increase activity rather than to increase productivity. Even now there is a division, it seems to me that there is not a single voice. The Opposition party is saying that it will always guarantee health spending forever, which feels like a continuation of the fact there will always be money. The current Government is saying that it will, in NHS competition, prioritise the public sector against other kinds of providers. Even now, despite everything, I do not feel that there is a clear focus on productivity from the centre.

  Q36  Mr Scott: Professor Crump, it was said that the Agenda for Change would bring improvements in productivity. Has it, or has it been a complete waste of money?

  Professor Crump: I think Agenda for Change is not very dissimilar to the consultant and GP contract discussion. What Agenda for Change did, remarkably really, was move us from 30 or 40 different pay systems for different types of healthcare profession within the NHS to a single set of spines which make it much more straightforward to be able to work flexibly with staff—help staff, for example, to progress within their career without having to leave the institution in which they work. Having said that, again I do not think that the tools that have been given to people through Agenda for Change have been used for the purpose of improving productivity, and I do think that there is, not an inevitability, but there is a tendency within Agenda for Change for it to lead to an increase in pay on a natural progression basis unless managers manage the Agenda for Change agenda very actively. I think, rather like the discussion about the other two contracts, there is more scope in many organisations to manage that programme more actively.

  Q37  Mr Scott: John, would you agree with that?

  Professor Appleby: Yes, I generally agree with what Bernard has said there. It was an amazing achievement, by the way, Agenda for Change, because I think it was one of the biggest renegotiations and re-designs of a pay system in the world in terms of the numbers of people it affected and so on, and it took years to get into place. It was not about productivity so much as simplifying the pay system and getting some consistency between different types of jobs, for example, and between men and women. There is a whole range of objectives within Agenda for Change that need to be recognised, perhaps not wholly solving, but dealing with.

  Q38  Mr Scott: Perhaps I can start with you on this one, Andrew. What opportunities do you think there are for improvements in productivity through changes in the skills mix in both primary and acute care? Would there perhaps be any undermining of clinical standards because of that?

  Mr Haldenby: I think that one of the most important things we should talk about is the idea of reducing levels of care in secondary care and increasing primary care services, which is something that we have written about. That would mean a transfer of workforce resources and skills from secondary care to primary care, and the doctors that we have spoken to whilst doing that research are very clear that advances in both clinical skill and technology allow transfers of care out of the secondary care. To take a few examples, it is now possible to have renal dialysis at home; it is now possible to have a gall bladder removed via a laparoscopy rather than through opening up a patient and in that case you can now have your gall bladder removed and spend one day in hospital, whereas previously it would have been seven days: in obstetrics, after a caesarean ten years ago you would have been in hospital for seven days; now it is two or three days. Very great opportunities have emerged to shift care from secondary care to primary care and the cost saving opportunity there is in the reduction of the hospital estate, which would be a major financial saving.

  Q39  Mr Scott: It may be a financial saving, Andrew, but do you think it is to the benefit of the patients, which, after all, should be the primary concern?

  Mr Haldenby: I think it would clearly be a benefit to a patient if they have to spend less time in hospital, if that is the care that they need. I am sure the Committee read the very good survey in the BMJ this week—the BMJ title was something like "How to save money in the NHS", which is very timely to this discussion—where there were a number of doctors writing, saying that in some cases the delay of discharging patients from hospital was worsening their care. One (and I will try and find it) was pointing out—I think it was a psychiatric doctor—that often his patients had to wait for social workers to assess them before they were able to move out of hospital into the home, and that would typically take two to four weeks. His simple suggestion was, why not have that assessment at home so the person can just go home? Clearly, you are then not going to catch hospital-acquired infections but also there are all the other psychological benefits of being at home. I would say the ability to shift care in hospitals is being driven by improvements in clinical skill and technology, and those are not bad things from a patient's point of view.

  Professor Crump: I would say there are many, many examples of adjustments in skill mix so that now things which, when I was in clinical practice 20 years ago, had to be done by a doctor or done by a nurse, things that had to be done by a nurse in general practice, are now being done by a specially trained receptionist. I think we really have a very positive record. In international comparison terms, if I visit Australia or the USA, I commonly will find that they are amazed at the extent to which we have matched the skills needed for the job to the delivery as opposed to keeping within professional silos. I think more could be done. I know of instances where physiotherapists do make quite significant surgery on carpel tunnel, for example, or where podiatrists have taken on roles that were commonly done by orthopaedic surgeons. I think we have got quite a good record in this respect.

  Q40  Dr Taylor: Bernard, I am going to come to you and delve a bit more deeply into the Better Care, Better Value indicators. When they came out I think we were all struck with the tremendous potential, but I am not at all clear that they have actually reached their potential. You have already mentioned the variation in surgical thresholds with tonsils, D&Cs, hysterectomies, back surgery and grommets. Have you any measures of the lessening of these? Can you prove that in that particular instance there have been savings?

  Professor Crump: The answer is, yes, but it is modest and less substantial than one would have hoped and anticipated.

  Q41  Dr Taylor: I think you forecast something like a £2 billion saving of the first tranche, of the first ten?

  Professor Crump: Across all of the indicators in the first tranche there was the potential to save around £2.1 billion. We have increased the number of indicators, and activity across the service has also increased substantially, so in some of the indicators there are far more cases. To move to best quartile performance paradoxically you can save even more, and we have not got most organisations to best quartile performance yet; they have not moved to best quartile performance yet.

  Q42  Dr Taylor: Do you have any powers to make them move to this?

  Professor Crump: No, we as an organisational do not.

  Q43  Dr Taylor: So who should?

  Professor Crump: The performance management route within the system is through strategic health authorities working with their primary care trusts as commissioners of the service. We believe that the Institute's role is best, not as a performance management organisation, as an organisation that the service sees is there to help them find the ideas that are the ones that they can use, but I agree that now, with the challenge that is coming, this is going to have to become much more of a performance management target for strategic health authorities. Indeed, what you can see is that in areas which had substantial in-year financial difficulty in the first years of the Better Care, Better Value indicators, those SHAs made real progress on them, but SHAs where there was not the pressure to balance the books tended to make less good progress. The one indicator that has improved most substantially is in relation to medications, as it happens—GP medications, the use of the NICE-preferred statins, the lower cost statins, for example.

  Q44  Dr Taylor: I always remember when that indicator came out about generic statins, we looked at the constituencies of three of the Health Ministers at the time when there were about 300 PCTs, and three of the Health Ministers at the time were in the 290-303 sort of group.

  Professor Crump: Yes.

  Q45  Dr Taylor: Is there any place for MPs, when they discover that their particular trust is doing badly on one of these indicators, jumping up and down?

  Professor Crump: Firstly, they are publicly available on a quarterly basis, so there is certainly no reason why they would not be available for that purpose. Secondly, they are indicators and it is important to think about circumstances where your particular population, or your particular setting, or indeed one of your particular institutions might have such a different case mix or such a different set of circumstances that they should not be used crudely. For example, we have removed from one of the indicators the hospitals that are the specialist cancer hospitals because they were appearing to be poor performers, but their specific case mix determined that actually, for example, their new to follow-up ratio in outpatients was bound to be different, but I would encourage them to be used, yes.

  Q46  Dr Taylor: Three of the original ones were reducing staff turnover, reducing sickness absence and reducing agency costs. Have you made any progress on those?

  Professor Crump: Those indicators are now not part of the dataset because the availability of reliable data was a real challenge for us in relation to those indicators. We are doing additional work with the Department and with its workforce directorate and we have not lost interest in those really important topics, but the availability of the data on a quarterly basis was not sufficiently strong for us to use them in the indicator package.

  Q47  Dr Taylor: So what should we be recommending?

  Professor Crump: I think these indicators are most helpful if there are not enormous numbers of them, if they do really provide a focus. I think the existing dataset is probably quite a reasonable dataset to use. Secondly, I think they should be taken seriously. I am perfectly comfortable about organisations that, having looked at their position on the indicator, reach a conclusion that they are satisfied with their particular position because they can explain why it is aberrant, but I would be very disappointed if organisations are not using them—chairs, boards, as well as the chief executives—and I think SHAs should be making sure, in their performance management of organisations, that they are taking these into account.

  Q48  Dr Taylor: So we could remind SHAs of their duties in that respect?

  Professor Crump: I think that would be helpful. Also commissioners, PCTs, should be looking at the indicator set (and they can do this) for the organisations that they commission from.

  Q49  Sandra Gidley: Can I butt in a minute? You seem to be producing a vast amount of data. You cannot enforce it. You do not seem to have any idea who might or might not be using it. What is the point?

  Professor Crump: The point is that prior to us making this data available in this way it was actually paradoxically harder than it was a decade before for an organisation to know where it stood compared to other organisations.

  Q50  Sandra Gidley: But we have just learnt that some of them have no incentive to improve. Have you done any work to show who is using your data, if anybody?

  Professor Crump: We have worked to show what happens to individual organisations through the data, and we know through our contacts with SHAs that some of them make them part of their performance management system, but, again, these indicators were the first attempt to try and help to give to managers some tools that got them to shine a light at some of the clinical processes in their areas.

  Q51  Sandra Gidley: So would you say that the NHS Institution for Innovation and Improvement offers value for money?

  Professor Crump: I would. This is one minor part of many things that we do that I would be very happy to talk to you about.

  Q52  Dr Taylor: Moving on from Better Care, Better Value indicators, the Productive Ward initiative is one of yours, is it not?

  Professor Crump: It is, yes.

  Q53  Dr Taylor: We have seen it working in at least a couple of places. How widespread is this and is it really effective?

  Professor Crump: There is independent work as well as our own work on this. Our estimate at the moment is that 30% of wards are using the Productive Ward in the NHS.

  Q54  Dr Taylor: 30% of wards across the whole NHS?

  Professor Crump: Yes.

  Q55  Dr Taylor: In all specialities?

  Professor Crump: Yes. There is still substantial potential for more wards to use it. Most organisations have at least one productive pilot ward. The university hospitals in Nottingham and in Manchester are doing whole-hospital implementations and are on a path to be able, for all of their 90 or 100 wards, to have used it over a two and a half year period.

  Q56  Dr Taylor: Is it sufficiently popular so that, if one ward does it, it spreads to others in the hospital?

  Professor Crump: That is the ideal, and it is what is happening in most places, but it needs leadership and it needs a purposeful process to ensure that it is used. It was designed 18 months ago, before the productivity focus was so great, specifically on releasing time for direct clinical care to improve quality and safety.

  Q57  Dr Taylor: Can you give us one or two specific examples of what it has produced and how it has helped?

  Professor Crump: Yes. Organisations, for example, in Sheffield, which have increased the proportion of the nurses' time during a shift that they spend in direct patient care from 25-28% at the baseline to 45-50% when they have implemented the changes.

  Q58  Dr Taylor: What sort of changes have led to that increase?

  Professor Crump: They focus typically on the common aspects of life on a ward that you will be very familiar with: handovers, ward rounds, drug rounds, meal times—these common processes. The nurses themselves use a series of tools but they themselves re-design the care in a way that suits their particular setting and their particular organisation but with the measurement of how that affects the time that they have for direct patient care.

  Q59  Dr Taylor: Is there an emphasis on communication between nurses and doctors, for example?

  Professor Crump: There is. There is particularly an emphasis on reducing the time spent but improving the quality and effectiveness of handover between shifts. There is an emphasis on, for example, reducing interruptions through much better visual information about every patient on the ward to avoid the need for people being interrupted when they are doing something really important, like the drug round. The really important thing then is that the time that is released is spent on direct patient care and it is spent on the right clinical interventions. What we can now see, and we are collecting data on, is the extent to which that has led to improvements in observations, detection of deteriorating patients, reductions in healthcare-associated infections, improved patient experience and patient satisfaction—all of those things.

  Q60  Dr Taylor: Are you disappointed it has only spread to 30% of wards so far, or is that as fast as you would expect? Can you expect it to go right across the NHS?

  Professor Crump: We do expect it to go right across the NHS, and I think things like the new national workstream that is being developed will give great stimulus to that, but we deliberately focused on disseminating this intervention through professional channels rather than through the managerial line. We worked a lot with nurses from wards in its development. It has two names, this piece of work. It is known as the Productive Ward, Releasing Time to Care. The nursing profession told us that they find that their members find the word "productivity" has negative connotations, that a focus on releasing time to care created far greater ambition to be involved, and so almost all of the dissemination happened nurse-to-nurse through professional channels and actually its reach across the service was faster than anything else that we have ever introduced. So I do think that there is merit in that kind of more professional dissemination rather than solely relying on the diktat from the Department of Health.

  Q61  Dr Taylor: We should abolish the Productive Ward title and call it Releasing Time to Care?

  Professor Crump: We use both titles. It is doubly named partly because the managerial community have come to know it as the Productive Ward, and it is one of a whole series. We have similar approaches now for community nursing, for operating theatres, for maternity wards, for mental health wards.

  Q62  Dr Taylor: It really needs emphasising tremendously, because (and I am sure I am not alone) the complaints I get are about nurses not having time to care.

  Professor Crump: Exactly.

  Dr Taylor: Thank you.

  Q63  Stephen Hesford: Patient safety. John and Bernard, has having better patient safety produced savings and efficiency and will it produce better savings?

  Professor Appleby: To be perfectly honest, I do not know. The NHS has for many years put emphasis on patient safety. If you cannot keep patients safe at a minimum, then what on earth are you doing as a health system? Clearly that is an issue. We have recently had yet another inquiry in Mid Staffordshire. Clearly patient safety was completely compromised there, and that is an aspect of quality which is an aspect of productivity and so on, and so dealing with these things has to be a top priority. Patients have to be safe, at a minimum, when they are being cared for, but hospitals and healthcare do dangerous things to people and use dangerous chemicals and there are risks. I do not think the link between patient safety and productivity has been made that strongly in the system. Patient safety is for patients' safety's sake, so the issue is whether the NHS is getting better at that. I am not aware of all the evidence around that. We know there are huge numbers of medical errors, we know there are problems, and we have examples like Mid-Staffordshire and other hospitals, and they will occur in the future, I am sure. It is more a case of doing the right thing for people and keeping them safe as a matter of course, I would have thought.

  Q64  Stephen Hesford: Are we going to get any better at it though?

  Professor Crump: I think there is some potential to contribute to the productivity challenge through the avoidance of some of the most egregious and difficult aspects of patient safety. For example, we have made a lot of progress on a range of healthcare-associated infections and some of them, like acquiring pneumonia when you are on a ventilator on ITU, are not just tragedies for the family and the person concerned, which result in very much worse outcomes, indeed often mortality, they also lead to far longer lengths of stay and therefore that ITU bed cannot be used for other patients. I think this might be the point to make the point that, in the end, where we have to release cash for other things, some of these improvements will only release the resource if we can capitalise on the improvements in utilisation of facilities and remove some of the facilities.

  Q65  Stephen Hesford: We heard in our Patient Safety Inquiry that there is a kind of consumer resistance to this in the system, which from what John was saying is almost self-evidently daft. How can we break down that consumer resistance?

  Professor Crump: I am sorry, which consumers?

  Q66  Stephen Hesford: The people who are running the Health Service. They are not responding to this agenda, the new technologies. Bar coding of blood bags, for example, so you do not get the wrong blood. These things are just not being done.

  Professor Crump: I would say there are two different things there. Are there managers in the Health Service, and indeed clinicians, who are resistant to the idea of trying to improve patient safety? I think it is true that many more of them are aware now than they were even five years ago of the significance of patient safety and the number of errors through the work of the Chief Medical Officer and others. However, are there systems to make sure that even apparently cost effective uses of, for example, new technology get introduced quickly? No, there are not, and there are three or four reasons for that in my view. We are not great at leading innovation. We do not choose our leaders and help them know how to lead for innovation. They tend to lead for compliance, for delivery of things they have been asked to do. Secondly, often, and the example you quote is a good example, there is a misalignment between the way the business processes of the way the NHS work with an objective like investing in a new technology to improve patient safety. It is very difficult to get all of the necessary people together to agree on, for example, a capital investment or which particular model to use even where it looks as though the investment will be very cost effective. We have been very slow at overcoming some of those misalignments of business objectives.

  Q67  Stephen Hesford: That is the description. What is the answer?

  Professor Crump: The answer is that we have to identify how we introduce new innovative businesses processes. For example, how we can work with the suppliers to agree a process of perhaps a tapered tariff for a new system so that as the benefits arise to the NHS of the use of this new technology, those benefits are shared between the company that sold us the system and the NHS in a structured way, a bit like has been the case for some of the new drugs that are made available within the service. It is very hard to invest across some of our organisational boundaries at the moment and we have to break some of that down.

  Q68  Mr Bone: In 1997 Tony Blair got it absolutely right when he said our Health Service was not good enough and we were falling way behind Europe. He also recognised that we were not spending much money on the Health Service in comparison to Europe and he thought the solution was to put lots of money into our Health Service and at least bring it up to the European average. My greatest criticism of this Government would be that they put the money in but they did not get anything in return for it, and I think if Tony Blair were here now he would at least go some of the way to saying that. Lord Warner, the former Health Minister, recently accused the NHS management of "monumental incompetence", "too much money given too quickly". Do you think that is right, Professor Appleby?

  Professor Appleby: No, I do not think it is wholly right. I think when the decision was taken to put more money into the Health Service, as you said, compared with other European countries we were spending far less than our national wealth would suggest we could be doing, far less than I think the public wanted. There were lots of concerns about the NHS, particularly in terms of waiting times and so on. A decision was taken to put more money in. Sir Derek Wanless produced his seminal report on how much should be spent on the Health Service, and I think it was probably at the limits of what the NHS could sensibly absorb, but it is not true to say that the money went in and nothing happened; an awful lot happened. The issue we are facing at the moment is that the inputs went up and the outputs went up, but the outputs did not go up as fast as the inputs; that is one of the issues about productivity. Waiting times are now at a historic low. They are simply not an issue for members of the public by and large.

  Q69  Mr Bone: In your own document, Our Future Health Secured, Sir Derek Wanless said that of the additional £43 billion spent on the NHS since 2002 44%, £18.9 billion, went on paying higher wages and inflation. That contradicts slightly what you are saying.

  Professor Appleby: No, that was not too far out historically with where the money goes when you look at what is spent on the Health Service. It is, as Andrew was saying, a labour-intensive industry; it always will be. The NHS spends 60% of its funds on people. There are clearly issues about retaining staff and paying the wages that are needed to do that. In the period we looked at with Sir Derek Wanless for that review which you quoted that happened to be the figure, but that is not out of line with the previous decade and the decade before that, so, yes, the money does go on paying people more and on paying higher prices.

  Q70  Mr Bone: Turning to Mr Haldenby, of the £50 billion or so extra each year that we are now getting in our NHS, Professor Appleby says not much of that has been wasted. Do you think any of that has been wasted and, if so, what proportion?

  Mr Haldenby: I do not think it is possible to put a number on it at a national level for all the reasons that we have said, but I just repeat that the professional judgment of the people we speak to in the NHS, and it is similar in other public services, is that individual organisations can expect to save 20% without too much trouble.

  Q71  Mr Bone: That is very good because I have also spoken to senior people managing the NHS who say, "You are going to cut 20%", referring to my government if it comes into power, "and we can handle that", so there is a sort of figure, a suggestion, that 20% has been wasted.

  Mr Haldenby: It is just something that has been repeated to me independently by several people.

  Q72  Mr Bone: Professor Crump, when those sorts of things are talked about in the future, that we are going to make these cuts, is not what the NHS is going to do is produce a series of completely unacceptable cuts, they are going to slash and burn rather than tackle the root problem? Is that not going to happen when whatever government is in power after the election?

  Professor Crump: I hope not and I would not want at all to encourage a slash and burn approach. We are encouraging the exact opposite, which is an approach that takes, as its starting point, an identification of those areas where we can improve quality and safety in a way that reduces resource by, for example, tackling variation, tackling waste, like the productive series, and also by identifying the avoidance of unnecessary activity because there is by common consent unnecessary activity. I would be interested to talk to the colleagues that Andrew has talked to about how they would see this 20% reduction playing out because that would be bound to reduce activity, it would be bound to have an impact on public perception about the quality of the service.

  Q73  Dr Stoate: As we have already heard, the Government has doubled the amount of money spent on the NHS. I suppose the simple question to Andrew is: is it possible to make these reasonable cuts without frightening the horses too much, or will it inevitably lead to public dissent?

  Mr Haldenby: Given that we have just had at least ten years, and perhaps even 60 years, of debate around the Health Service, which has been based on the idea that spending more is good for the Health Service, and again it was written in the Budget yesterday—I will not make a long quote—since 1997 NHS spending in England has more than doubled in real terms ... " (and various other public services as well), and that this "has enabled public services to deliver high quality and sustainable outcomes", that has been the tone of the debate around public spending on the Health Service. There has also been a focus that increasing inputs is a good thing in itself, and I quoted the hospital numbers also from the Budget. I think it would be difficult for any politician, unfortunately, to stand up and say that savings will have to be made. That is a problem for politicians rather than for policy people, but in terms of the political challenge of frightening the horses it is obviously a very great one. However, the more positive side is that there are people within the Health Service who are already doing it, from changing the way facilities are used to changing the way that staff are employed, so any government will be able to work with those people and there are changes that can be made to the structure of the service which will help.

  Q74  Dr Stoate: Recently there has been criticism about the A&E four-hour target and whether that has possibly been damaging patients in certain circumstances. Do you think that should be relaxed or should we be sticking to it?

  Mr Haldenby: I think we need to follow the clinical evidence on it. Inevitably, these black and white targets will not be appropriate for some patients, but that is just a statement of the obvious. I would have thought that something like the waiting time targets are different from some of the other public services. Clearly, all other things being equal, it is better to treat people quicker because they do not deteriorate. Compare that with something like schools education, the main productivity measure in schools education at the moment is class size. I think in many cases a good teacher teaching a class of 40 kids is better than a bad teacher teaching a class of 20 kids. This is a controversial thing to say but, to compare those two services, I would have thought that the waiting time targets are more sensible in their approach than the one on class size.

  Q75  Dr Stoate: You have just antagonised the entire teaching profession at a stroke! What about waiting times? Again, is it something the public would be prepared to accept, if waiting times were to creep up or do you think that is absolutely taboo?

  Mr Haldenby: I am not sure any of us are arguing that waiting times should go up. One of the things that has been argued is that there is a re-orientation of the service towards chronic disease so that that is much more heavily carried out in primary community care services. In our recent report on the hospital estate we discovered that the really heavy provision, the density of hospital beds, is in London, the North East and the North West, and Nick Bosanquet, one of the authors, was pointing out to me that each of those areas—London, Teesside and Manchester—have got incredibly high problems of chronic disease. It is in a way surprising that there would be lots of hospital beds in areas of lots of chronic disease, you would think that they would have much more primary community services. A service which organises demand better and is treating people more in primary community services is taking pressure off the hospital waiting lists.

  Professor Appleby: On waiting times, they are now very low indeed; the majority of patients get treated well within 18 weeks, by the way, and that is the maximum. Public surveys show that it is simply not an issue with most people any more. In a sense the NHS has done the work. It has got over that hump; it does not need to work even harder to reduce waiting times, so I think it is sort of there. One of the things I suggested in our written evidence to the Committee was that Wanless, for example, was recommending a maximum wait of two weeks from GP referral to a bed in hospital if you needed it. I suspect now that most people are generally content with that. I am not saying it is going to stay like that but at the moment it seems to be the case. Just on beds, the UK is not exactly over-endowed with beds, if you look at other OECD countries we are near the bottom of the league table for the numbers of beds per thousand of population. As a country the UK has also reduced its bed stock the fastest of any other OECD country. This issue about getting rid of beds and so on is a little bit moot. It needs to be examined a bit more.

  Q76  Stephen Hesford: Labour costs—pensions, wages—you mentioned, Andrew, 50%, it is more than that, of the total NHS bill. It is one of the things that you were asked about before, whether there were areas where you could save money.

  Mr Haldenby: Yes.

  Q77  Stephen Hesford: Has there been any work done on how much could be saved and what are the realistic ways of saving money in this area, labour costs and pension costs?

  Mr Haldenby: In terms of better use of people, and the Treasury highlighted it yesterday, there is a huge amount to be saved in sickness absence. The Treasury pledged yesterday £555 million to the service.

  Q78  Stephen Hesford: We will come to sickness absence. That is an area that I was not particularly focusing on. I was thinking more of pensions and pay. Have you done any work on that?

  Mr Haldenby: The question would be: have pay increases in the NHS been out of line with those in other public services? The last time I looked at the pay review bodies I think they found that for doctors—so there is evidence here—the increases had been much greater than in other public services and for nurses the increases had been in line with other public services, so there would be an opportunity to look at doctors' pay levels and perhaps bring those back. My personal contact with doctors would indicate that they do feel overpaid because they got too generous a deal in the last contracts. On pensions, as we know, the provision of final salary linked pensions in the public sector in general is now out of line with the rest of the economy and there is focus in all parties on how to move away from the final salary system in the public sector, and that would bring down costs.

  Q79  Stephen Hesford: When we report would you be urging on us to say something like there should be real effort to bear down on pension costs as a legitimate and doable way, instead of having some kind of massive row and getting nowhere?

  Mr Haldenby: It is clearly not accepted as a given that all public sector pensions are going to move into line with private sector pensions, and that is an argument that has to be had, but what has happened is that the private sector has discovered that it cannot afford pensions at that level, it has tried it and it has not worked, and now the public sector is going through that process and so is lagging behind.

  Q80  Stephen Hesford: John or Bernard, if we did freeze pay and we did look at pensions, how would that affect recruitment and retention and would it be adverse and would it be worth the candle if we got that wrong and we stopped getting doctors and nurses?

  Professor Appleby: I think the policy is a pay freeze in the NHS. GPs, as I understand it, have essentially had a pay freeze for two years now. In the Pre-Budget Report Alistair Darling essentially produced a 1% cash pay cap for the whole of the public sector and a pay freeze in cash terms for senior people within the NHS, including senior medics. Pay for doctors, and I should say nurses as well, is not unreasonable by international standards.

  Q81  Stephen Hesford: Is there any evidence that it affects recruitment and retention, the fact that we are going into this area?

  Professor Appleby: Recruitment and retention are good and have been for a number of years now and I think that is what the Pay Review Board reports show as well. A pay freeze—this is my opinion—I do not think it will have much impact on recruitment and retention.

  Q82  Stephen Hesford: Bernard, should the NHS introduce pay differentials, from your experience within the service, so within one area a nurse would get paid X, in another area Y, and I suppose different payments for different clinical specialties in different areas to encourage GPs and consultants into understaffed area? What can we do with that?

  Professor Crump: This is not an area we have looked into in any detail. Very briefly, I would say that historically whether the output of your medical school favours going into a primary care part of the NHS or into hospital practice has been affected by comparisons of pay between the two sectors. There is some sensitivity in those sorts of choices. We have had a long system of not paying differentially for different specialties. There is a great deal of benefit in that in my own personal view. I do think the use of tariff and what we pay an organisation for delivering different sorts of care is a potent way of changing practice which we have only just begun to use and there is lots of potential to use that to help with productivity in my view.

  Q83  Stephen Hesford: You would prefer the payment by results route rather than pay differentials?

  Professor Crump: Yes. Personally, I am not in favour of substantial amounts of pay for performance at the individual level. I do not think the international evidence is very strong on that. On tariff, if you are going to have payment by results at all then we should use it more intelligently than we have been using it in the past.

  Q84  Sandra Gidley: I am not quite sure who to aim this one at. Nursing is going to become a graduate profession. What is the implication of this for staffing costs?

  Professor Appleby: At a guess, an increase, I would have thought. It is tricky to speculate on this. One of the things you learn as an economist is that if you change something in the system something else will react against it, so if you try to predict the behaviour of the system, as it were, it may start to bear down on the total numbers of nurses employed, for example, if they are more costly per nurse. It may stimulate a harder look, going back to the skill mix issue, at what is the most appropriate training, let us say, for doing this particular set of activities and these sorts of things. It is hard to predict what the impact would be on the total costs.

  Q85  Sandra Gidley: Andrew was nodding as you said "an increase", but we had, Philip Nicholson in front of us; if not him it was some Department of Health bean counter, who said that there would be no extra cost.

  Mr Haldenby: Well, he would say that, would he not?

  Q86  Sandra Gidley: That was my view.

  Professor Appleby: I think he was coming at it from the total budget end as well, that the budget would simply stay the same anyway. I was trying to moderate my initial reaction to your question in the sense that I think it is quite hard to know what would happen given the reactions by managers and the hospital and so on to a potential change in cost for those nurses.

  Q87  Sandra Gidley: Would a fair summary be that if they are all graduate nurses that would mean higher pay but there may be an attempt to rebalance the work with the skill mix to keep the overall costs similar?

  Professor Appleby: Certainly a pressure for higher pay, whether that is met is another matter as well.

  Q88  Dr Naysmith: John, York University researchers claimed that management and admin costs amount to 25% of all NHS staff costs. Does that figure look about right to you?

  Professor Appleby: It sounds initially a bit high, but when you look at the staffing figures produced by the Department of Health they do various categories. They have one for senior managers and they have support to clinical staff and NHS infrastructure support. Those groups include admin people, secretaries, a whole range of different jobs, not just senior managers. When you multiply up the numbers by the average pay on that, I have got a figure which is over £11 billion.

  Q89  Dr Naysmith: It is not far out then?

  Professor Appleby: That is matching how much we spend on doctors in the NHS, but that is all managers, all admin, all secretarial support in the entire NHS.

  Q90  Dr Naysmith: So it is about a quarter of the money that is spent on pay?

  Professor Appleby: It is not far off that figure.

  Q91  Dr Naysmith: We have to make 30% reductions in managerial costs in primary care trusts and SHAs; the Department is requiring this amount. Which areas should we start focusing on to get this large sum down a bit?

  Professor Appleby: PCTs are going to be under pressure. I do not know whether you have visited a PCT and seen exactly how many people work in some of these organisations. It is not as many as you might think perhaps. At SHA level these are organisations which have transformed over decades and the numbers of people in these organisations are not that great. The bulk of the staffing is in hospitals. PCTs will be under pressure on this with their reduction in management costs and I think there is an argument to say that that is the wrong place to start cutting management costs. We are probably underskilled and there are simply not enough people with the right skills in PCTs to do the job that the system is asking of these organisations. I guess the focus perhaps should be more on secondary care.

  Q92  Dr Naysmith: It has been suggested that strategic health authorities lack a clearly defined role. Do you think that is true? If there were cuts on them would it make much difference?

  Professor Appleby: I think traditionally they have been the buffer organisation between the secretary of state and the rest of the system in part, have they not, so they do have a role to play. I think they are here to stay but I agree with you: I think they need more clarity, certainly in the public side and people outside the system, as to what role they do fulfil. As I understand it, they are working down the PCT commissioner route to manage that part of the organisation, but I think if you looked in detail at how SHAs carry out their work and their functions you would find they vary quite a bit from region to region.

  Q93  Dr Naysmith: If we are not going to have an influence on PCTs and strategic health authorities where will this 30% cut in managerial jobs come from?

  Professor Appleby: I think it is focused on PCTs and SHAs. That is the message from the Department. All I am saying is that I think there is a strong argument to say do not cut PCTs' management in terms of numbers. In fact, there is an argument for boosting numbers there.

  Q94  Dr Naysmith: If the Department goes ahead with these reductions and insists on them, what will be the effect on the NHS?

  Professor Appleby: I do not think it is going to have a positive effect on the ability of PCTs to do what is a very difficult job. They handle about 80% of the NHS budget, so £80 billion-plus. They are there to make decisions on our behalf, their residents' behalf, the population's behalf, about what care gets paid for and provided and so on. These are big and difficult functions that we ask these groups to carry out on our behalf with public money and I think bearing down on the management costs, yes, there may be some case for that in some areas, but a general blanket 30% target I personally think that is inappropriate.

  Q95  Dr Naysmith: I know this could be opening up a wide area and I do not want to do that at this stage in the morning, but most of this money is paying for maintaining the purchaser/provider split. We know that in Scotland and Wales they are in the process of getting rid of that. Is that where the management costs should really be?

  Professor Appleby: It is not going on maintaining or running this quasi-market system that we have. That is not where the money goes. Roughly these sorts of proportions of spend on admin, on managers and so on, that has been the case for decades in the NHS.

  Q96  Dr Naysmith: Has anybody got anything to add?

  Professor Crump: Two things briefly. Our experience of working with PCTs on areas like shifting care from secondary to primary care is that a crucial determinant of whether that is successful is their execution skills, their capacity, their capability to manage that process. The second thing to say is that it is quite likely there will be a pressure, I guess, for amalgamations with PCTs. In some areas there are rather small PCTs, rather large numbers of them, and I guess that pressure is going to continue. The third thing is this process we are all waiting to hear the results of, which is the decision about their provider functions. What we do know from our work is that there is very substantial potential for improving the effectiveness and the productivity of community-based services and they are somewhat under-managed in our experience, so the quality of the management effort brought to deploy those services really needs improving.

  Q97  Dr Stoate: That neatly brings me on to evidence because you have just mentioned the idea of shifting work from secondary to primary care back into the community and improving community services and so on, all of which is exactly the flavour of the month in terms of where we are going, but is there any hard evidence that that works in terms of saving money?

  Professor Crump: There is hard evidence that it works in terms of achieving the objective. As to whether that objective saves money, the evidence is less good.

  Q98  Dr Stoate: What objective?

  Professor Crump: For example, we worked with 15 projects that sought to care for patients in community settings or in their home where they had previously been admitted to hospital and we were able to support those organisations—this was independently reviewed by the Health Service management centre in Birmingham—and in all bar two of those instances they achieved the shift of care.

  Q99  Dr Stoate: I am not saying you cannot shift the care; what I am saying is, is there any evidence that doing so achieves anything apart from shifting care?

  Professor Crump: For that particular work at that particular time the financial objective was not the objective that we were looking for. There are pieces of work that suggest that caring for patients in community settings, who would otherwise be in hospital, on a day-by-day basis is about as costly in a community setting as it is in hospital but the length of time that you have to deliver that care is significantly shorter in community settings, so the spell, the episode of care, costs less in a community setting than in hospital. The watchword about early discharge from hospitals is that you should try and avoid people ever getting in in the first place if you can because once you are in hospital discharge is very difficult to achieve, so, yes, there is some evidence.

  Q100  Dr Stoate: Let me turn to Andrew. Let us assume that in the brave new world we are preventing people from going into hospital and we have therefore presumably saved that episode of cost. How quickly can we execute changes in configuration? I know your organisation Reform has done some work recently on this. Assuming, if Bernard's figures are right, that we do not need so many hospitals or beds, and that is what you have been saying with Reform, how quickly and relatively easily can you reduce capacity in the acute sector to make the savings needed?

  Mr Haldenby: I think it will vary but the major reductions in the hospital estate are clearly not going to happen in 12 months. It is going to be more like the life of a parliament and that is because of the necessary consultations that will need to be undertaken, and I think we are starting from a low base on this, so one would expect a major programme of changing the estate to take a number of years.

  Q101  Dr Stoate: Yes, but your organisation has just come out with some fairly hard-hitting figures that we have got something like 30% too many beds in the NHS. I have forgotten what the figures were, but it is all very well saying that; what are you going to do about it?

  Mr Haldenby: What we need to do is help the NHS focus much more aggressively on value for money. As I said earlier, good people are doing this in the NHS. We spoke to people in the Birmingham PCT who have been closing hospitals and opening new local facilities, and this process is going on around the country. The question is what pressure can we put upon managers in order to see—

  Q102  Dr Stoate: It is not so much pressure on managers; it is how you achieve your objectives. If your objective is that we need 30% fewer beds, for the sake of argument, unless you can come up with a way of achieving that it is rather pointless.

  Mr Haldenby: The beds figure that we put out was a comparison of bed density in the South Central SHA with the most heavily dense areas, so we are just pointing out that there is a regional difference in this country which would indicate that some areas could make progress. I think the real job is a structural one: how do you make chief executives of PCTs think that their job is to think in a whole new way free of historical constraint about the design of services in their areas? I come back to something like giving citizens a choice of PCT so that suddenly we increase the accountability of chief executives of PCTs.

  Q103  Dr Stoate: It all sounds a bit woolly. John, have you got any views on how we go about this? It is easy to say there are too many beds but no-one is suggesting what we should do about it.

  Professor Appleby: Part of the reason why we have variation in bed numbers, by the way, is that there is a variation in need for healthcare across the country. That accounts for some of the difference there. As I pointed out earlier, we are not exactly over-endowed with beds in the UK and never have been and yet we have reduced the numbers mainly in line with reductions in length of stay which are driven by medical changes, not so much by managers sitting round saying, "We don't need so many beds now" or, "We are under financial pressure". It is much more driven by changes in medical technology, techniques and so on, so people simply do not have to stay in hospital so long, you do not need so many beds, and that is what has really historically driven changes in beds. In terms of now, certainly as long as I have been working in the Health Service and outside it and as an economist, there has been a feeling that it is dominated by secondary care. You could do more in the community, you could do more in patients' homes and push everything down the line, as it were, but it has been very hard to achieve. The plan is now to do that. London, for example, is a good example and the way they are doing it is it is being driven by the strategic health authority. There were initial reports, as you know, by Lord Darzi about healthcare for London and what the broad look of the system could be. Those are now being worked up by individual PCTs along with trusts so there is quite a co-operative thing going on. In terms of the public, as they hear about these plans they are starting to get worried about this. In my local neck of the woods the local A&E department may be downgraded to a minor injuries unit but A&E re-provided in a bigger way, and hopefully a better way than another hospital. These things are going to come out into the public arena and there are going to be issues there about how they are dealt with, and, I have to say, particularly by local MPs as well. It is happening now. In terms of timescale, yes, it will be two, three, four, five years, depending on what the change is.

  Q104  Stephen Hesford: Care for the elderly and patients with chronic conditions—what are the issues about changing, saving money, better value for money, in those areas?

  Professor Crump: Lots of the approaches to improving the time that nurses have available for clinical care are focused on elderly patients. The vast majority of patients in hospital care are elderly. Improving the ways in which we give responsibility to nurses to use, for example, criteria-based discharge, is an important way of helping people get home quickly. A big focus, however, for me would be on trying to identify, condition by condition or presenting complaint by presenting complaint, those areas where we have historically admitted more people to hospital than is clinically necessary. Finding ways and incentivising people to deliver different appropriate care in community settings is really important. The decision in the last operating framework that if a hospital has emergency admissions above its 2008 level then in future, instead of getting a full tariff payment for those admissions, they will only get 30% of a tariff payment comes in next week. That decision has already had a big impact on getting hospitals much more actively involved in discussing with their local PCTs what alternatives there are for hospital admissions.

  Q105  Stephen Hesford: Did you want to come in on this, Andrew?

  Mr Haldenby: I found a quote in the BMJ this week from Professor Adam Timmis, Consultant Interventional Cardiologist at Barts, who said that cardiology patients tend to be elderly and for patients who were coping well at home before admission "every day spent in hospital is a disaster as patients lose their independence and are at risk of hospital acquired infections". He is saying there has to be strong self-management by patients and also strong community services to manage care and as far as possible keep cardiology patients out of hospital.

  Professor Appleby: There is an issue here around the role of health and social care in chronic conditions as well. I do not think it is simply a case of having to save money. It is a case of improving quality within the budget, and that will be an improvement in productivity. There are good examples in the NHS. Torbay Care Trust, for example, has been doing good stuff, because people's health needs are quite often health and social care-type needs and these things can be substitutes, they can be complementary, depending on what the issue is. There are examples within the NHS of providing better care within the budget and a better quality of care, so more productivity.

  Q106  Mr Scott: Private finance initiatives have left the NHS with very huge bills. Do you think firstly they should not be used in the future for improvements to the NHS estate?

  Professor Crump: I would not pretend to be an expert on PFI, but it is true that there is a legacy. This legacy is not very evenly distributed across the country. There are places where the historical legacy to use a certain amount of estate because of the nature of the private finance initiative is going to be a big problem to overcome. However, in places I have worked, I have seen hospitals that for decades have needed to have much needed improvements which had not happened under previous capital regimes but certainly the legacy of a 40-year commitment in some parts of the country to a very large annual spend will tend to mean that estate will be the estate that people will want to continue to use, and that is going to be quite a challenge, particularly because it is so unevenly distributed.

  Q107  Mr Scott: John, you referred to "in your neck of the woods". I am not quite sure where that is.

  Professor Appleby: North London.

  Q108  Mr Scott: In north-east London, my own constituency area, there were proposals put forward which fortunately the minister came and put a halt to yesterday; I cannot think why! Nonetheless, the cost of the PFI has obviously affected or could affect the services at other facilities in the area. If there was not a PFI what other suggestions would you have for funding it?

  Professor Appleby: PFI and nearly all capital spending has ground to a halt now in the NHS and I do not think we see much prospect of that over the next few years and across the public sector. In terms of the legacy, and as Bernard said it is very uneven, there are some hospitals with huge amounts of PFI and it is then a commitment from their revenue budget. They have to earn the money to pay that off over years. I have not done any detailed work on this but I do wonder whether there is potentially a case for the liabilities being bought out on PFI in certain cases, simply that it would make more economic sense—

  Q109  Mr Scott: —to get rid of it now?

  Professor Appleby: Yes, to pay off the debt now, for the State to do that. When you look at the sorts of commitments into the future, even allowing for inflation and so on, and that is in the future, I wonder whether there is a case in certain instances for just, "We will deal with that capital payment and we will pay it now".

  Q110  Sandra Gidley: Moving on to GPs, the PAGB have argued that we could save £2 billion a year if patients with minor ailments were educated not to "bother" their GPs. Would any of you agree or disagree with this?

  Professor Appleby: I always thought it was one of the main skills of a GP, something they learned for those patients in those areas to be able to usher them out of the door quite quickly; that is a key skill that GPs have to acquire quite quickly.

  Dr Stoate: I could not possibly comment!

  Q111  Sandra Gidley: It would be much more of a skill if they could stop them going there altogether if it was a trivial complaint.

  Professor Appleby: I suspect there is some saving that you could make here but I really do not think it is substantial. I do not know what Howard would say in his role as a GP but there will be patients who turn up and say they feel they have something wrong with them and it turns out it is nothing or it is very minor or it is self-limiting but they do not know that. I think the proportion of people deliberately bothering their GP is pretty small.

  Q112  Sandra Gidley: The IMS survey indicated that a fifth of GPs' workload was things like backache, coughs and colds, headaches, which you do not need to see a GP for.

  Professor Appleby: Yes, I could have bothered my GP with a cough and maybe I would not be coughing now during this session.

  Professor Crump: I would say three things. We are aware of innovations in many different ways in respect of trying to tackle this problem but it is not an easy problem to tackle. There are practices that have developed minor illness policies and booklets and education programmes and have worked with their population, particularly where they have a more stable population, with apparently positive effects, places that have introduced completely different approaches to making an appointment. We have promulgated a programme that was developed in Christchurch in Dorset where every call that comes in is taken directly by a doctor immediately and a very substantial proportion of those calls are handled without the patient coming to the surgery. There are lots of examples of nurses who are first responders to these kinds of complaints, which works particularly well in bigger practices which have the ability to sustain a regular, high quality, first nursing response service. Whether that number that they quoted, 54 million visits, is accurate and whether you could reduce the resources by the amount they say I would not know. I guess pharmacy is another important arena. There are lots of different places where there has been a much more active role played by pharmacy in the management of—

  Q113  Sandra Gidley: In Scotland they have a minor ailments scheme. Has your organisation done any work to compare whether that is more cost effective?

  Professor Crump: We have not looked at that scheme. I will find out about that.

  Q114  Dr Taylor: You have been fairly dismissive of self-care for minor ailments. Are you aware of the work of the National Endowment for Science, Technology and the Arts, NESTA, which predicts that self-care for long-term conditions could save even more, £6.9 billion? Is that fantasy?

  Professor Crump: I do not know about the financial value that they have come up with. I am sorry if I have come over as dismissive of the importance of patients in self-care. There is no doubt at all that the role of things like the Expert Patient programme, where it has been successful, peer/peer support from patients to other patients, has had a big impact on quality of life. I am seeing NESTA this afternoon so I will talk to them about that particular study because that seems like a very high financial value to be placed on that initiative.

  Q115  Dr Taylor: Moving on to user charges, particularly for GP services, is this something the Government should be promoting?

  Mr Haldenby: It seems to be thinking about it for the reason that we have heard, that other countries, France being an obvious example, do see a very small level of charge, usually then remitted afterwards, as a means of increasing responsibility amongst patients for GP visits.

  Professor Appleby: I think it is a blunt instrument for your objective. If the objective is to get rid of so-called frivolous visits to GPs, there are many other more cost effective ways of doing it which do not have the downside, that you may dissuade even a small number of people, which would not be acceptable, who should be going to their GP because there is something seriously wrong with them. In terms of raising money, we have a much more efficient system of doing that, that is called taxation. User charges, governments have thought about it and I think they have thought about it and then dismissed it.

  Q116  Dr Taylor: You are tackling the very people who cannot afford them in any case.

  Professor Crump: I agree more with John on this, though I would say that I have always thought that it would be incredibly positive if when patients have interacted with the NHS, they saw what it had cost for them to receive the treatment even if they had to make no direct contribution to it at all. I would have wanted on every prescription, when I pick up my prescription for my blood pressure, to see the real costs. There is an issue here that I know that occasionally I will be getting a medication that I will be paying more for from my pocket than would be the cost, and I appreciate that that has to be handled. When I am discharged from hospital I can see no objection to being able to make the patient aware of what has been the cost of the care they have received, not that they should pay it but I think it would be helpful to give them some sense, even if it is within a band, of what they have been the beneficiary of.

  Q117  Dr Taylor: Yes, I understand that. You are trying to make them realise what it costs but you are not actually putting a charge on them for it?

  Professor Crump: No. I do think we have had a culture which has meant that some people have regarded the Health Service as free and they would be very surprised, I think, in some cases, at the scale of the cost of the service they have received.

  Q118  Dr Naysmith: We have spent quite a lot of time talking about PCTs driving up productivity and moving care out of acute settings, but PCTs are price and quality takers rather than price and quality makers. Some people have said that the relationship between the commissioners and the providers is a bit unequal. How can the relationship be made more equal and what cost savings or productivity gains might this yield?

  Professor Appleby: You say they are price and quality takers, they are to an extent, quite a large extent, at the moment. There are certainly very strong indications that in the next few years the fixed price tariff set by the Department of Health could be relaxed so that you do not have a fixed price but you have some negotiation going on between commissioners.

  Q119  Dr Naysmith: Would it be a good thing if they could compete on price?

  Professor Appleby: Potentially, but what I am saying is that in terms of that taking of the price, there is going to be a certain amount of making of that or negotiation around that. In terms of the quality and to an extent the price that PCTs pay, there is a system called CQUIN—it completely escapes me as to what it stands for, but quality and innovation—which is a way of giving an added incentive on providers to provide a certain level of quality, and if they do not, they do not have so much money given to them; they do not get a proportion of the contract price. At the moment it is only standing at about 0.5% of the contract price. I do not quite understand why it is not 100%, to be honest, or a much bigger proportion of the contract. I think there is scope there for some of these levers, so the price lever to be changed, and also, frankly, for PCTs just to start using the powers they have had since 1991, when all this was introduced, to influence the quality of care that providers provide.

  Q120  Dr Naysmith: There is this feeling of inequality. You get a big teaching hospital, a university teaching hospital and, as you pointed out, a little PCT in a corner somewhere trying to negotiate. Do you think they have got the levers to do things now, to negotiate?

  Professor Appleby: In theory they have. I suspect, and it goes back partly to that question about cutting back on management costs for PCTs, I do not think they have had a whole range of things, the skills, in a sense almost the political clout with a small "p" with where the action is in the Health Service, which is operating on people, it is providing care, it is prescribing, it is all that stuff. There is probably an argument for having fewer and bigger PCTs. There may be an argument, for example, for exploiting what the NHS has developed through things like cancer networks. There may be an option simply to give the cancer budget to cancer networks and for them to focus solely on commissioning cancer services, so they specialise in certain areas. That may be a way forward as well, so that we have a mixture if you want to retain a split between groups who have the money and no services and organisations which have services but no money and we want some transaction to go on. I think there is a variety of options ahead that could be looked at.

  Professor Crump: I guess we should also mention practice-based commissioning and the role of GPs as commissioners, which I do not think has fulfilled its potential, and we can talk about why that might be but I know that there are plans for it to improve. I think that particularly the involvement on both sides of the discussion of the clinical teams as well as the finance teams is an essential part of the process which has not always been given enough prominence. The best practice tariff which is being introduced, but only for a small number of conditions, is something we have been advocating for a very long time. We looked at common things that are done in hospital. We found high performers and poor performers and we have been able to codify that into a way that would allow the tariff to be based on how high performers work and that should produce substantial reductions in tariff, and it certainly gives an incentive for organisations to look hard at exactly how they are delivering certain types of care. We have evidence that where they do that you can produce very substantial changes in clinical care over short periods of time, nine months or so for dramatic improvements in caesarean section rates, for example, in hospitals.

  Q121  Dr Naysmith: Have you anything to add, Andrew?

  Mr Haldenby: We have spoken to PCT chief executives who feel the system militates against them exercising their powers, particularly on the financial side, if they achieve a surplus. There have been examples where that surplus is then, they feel, taken from them and used to "bail out" another organisation which made a deficit. In the current operating framework I think there is a commitment to allow PCTs to keep some of the savings they are making, at least in the current financial year, but clearly if there is uncertainty about that, and if PCTs are able to keep their surpluses and reinvest them themselves that gives them a strong incentive to do it.

  Q122  Dr Stoate: Just to boast a bit about the tariff, John, what we want to know is whether the tariff can be used as a lever to control demand rather than simply price.

  Professor Appleby: I think Bernard gave an example of that. It is the action on the supply side but by implication potentially on demand as well, so hospitals admitting more than, I think, 2008 levels of emergency admissions will not get paid the full tariff; they will get 30%. I have a suspicion that even at that price it may be worth doing for many hospitals, to be honest. Maybe the price should be set at zero if you want to really have an impact, so I wonder how much you have to waggle that price lever to get an effect.

  Q123  Dr Stoate: That is what I am really coming to, that things like payment by results and a tariff obviously have severely skewed the way hospitals operate. Do you think there is any scope there for saving money?

  Professor Appleby: I am not sure it has necessarily skewed the way they operate. There is a growing focus on those elements of a hospital's activity which are paid for via the fixed price tariff.

  Q124  Dr Stoate: In terms of payment by results, for example, the more they do they more they get paid for regardless of any other consideration, so the incentive is to do as much as you possibly can.

  Professor Appleby: Not necessarily. If I were a trust and my costs were higher than the tariff then I am not sure I would want to do more and more and make bigger and bigger losses, so I think there is an issue about the cost relative to tariff. You are right though: it was implemented largely to try and stimulate activity to deal with waiting times issues.

  Q125  Dr Stoate: That is what I am saying. Is now the time to revisit that?

  Professor Appleby: I think hospitals now are more canny about their production costs. They are into things called service line reporting and lower levels of budgets within hospitals. They are much more aware now of what it is they want to do. Most hospitals in a sense cross-subsidise from one specialty to another, so they may have high cost relative to tariff, low cost relative to tariff, making a surplus, but in the end it is the bottom line that really counts. I think there is much more focus now within trusts on which lines, as it were, are making money and what do we want to do about those areas where our costs are higher than the tariff, especially as the tariff has now been frozen in cash terms, let alone in real terms, over the next few years. At the margins hospitals are going to have to same tricky decisions: "Do we carry on supplying ophthalmology", or whatever it may be, "or do we really try and reduce our costs here?", and so on. It has taken time for it to have an impact and it is because without the in-depth knowledge of the business, as it were, the production costs and how things fit together, it is an incentive which is not pushing against anything. People see it as an incentive in theory, but in reality, unless you have some knowledge about then how to play the game correctly to react to the incentive, it does not have any effect. I think that is changing.

  Q126  Stephen Hesford: My question is a massive area, it is the drugs bill. We could have a whole session on that and given time constraints we cannot. Basically what can we do to drive down the drugs bill? A supplementary is the power relationship between the NHS and drugs companies in terms of purchasing, so what are the issues around that?

  Mr Haldenby: We have not done a huge amount of work on productivity within the drugs budget, but I think I would say that this question is usually framed, just as you ended there, about the power relationship between the Department and the companies and this idea that somehow the Department has to screw a better national deal out of the companies, and there has been year by year a renegotiation of the PPRS to that effect. My submission is that it needs to be more of a local decision, so it is about individual NHS organisations commissioning drugs on behalf of their patients and I suspect it does then bring you back into this wider discussion.

  Q127  Stephen Hesford: You mean they are not using enough generic drugs or something like that?

  Mr Haldenby: Yes, and also there is lots of evidence that when drugs are prescribed they are not very well used. People do not stay with their programmes of treatment and so on, so there is an enormous amount of waste. Those would all be things where better services at the local level could make better use of the bill.

  Q128  Stephen Hesford: And that is a PCT management issue?

  Mr Haldenby: GPs as well.

  Professor Appleby: On the generic issue, the NHS has done pretty well over the last couple of decades. I cannot remember the figures exactly but we must be approaching three-quarters generic.

  Q129  Dr Stoate: It is between 70% and 75%.

  Professor Crump: Certainly in dispensing areas.

  Professor Appleby: That is a tremendous rise. It could go further, what, another 10%?

  Q130  Dr Stoate: Probably.

  Professor Appleby: Probably, so it could go further on that. Clearly, the NHS is almost a single buyer, a monopsonist of a lot of pharmaceutical products, and for it not to use the power that that gives it over price would be silly, it seems to me. Clearly, there have been problems with competing objectives at a broader government level so the NHS would like to use its power to extract the cheapest price for the drugs it prescribes and gives. On the other hand the pharmaceutical industry is quite a big industry and a big earner for the country nationally, so there has been a competing theme between health and wealth, if you like, and that has been tricky to square within the Department and the PPRS and so on, but certainly I think there is scope for looking at more innovative ways of paying for drugs but also negotiating prices as well, and, of course, through NICE. What is the point of the NHS prescribing drugs of very little value, so do not waste the drugs bill on things which are not clinically effective and do not do patients good. That is NICE's role.

  Q131  Stephen Hesford: So, in a sentence, on that particular aspect, NICE is a force for good?

  Professor Appleby: Completely, yes.

  Professor Crump: I would agree with all of that. I would just reiterate the point that Andrew made. People not using the drugs that they have been prescribed is one of the greatest wastes of all and very common. The numbers are staggering in terms of the potential for being able to address that either by not making the prescription or by helping people to get the value out of the drugs that have been prescribed.

  Q132  Dr Taylor: We gather that PCTs are now going to be able to withhold payment for Never Events. Is that going to save much money?

  Professor Crump: I do not think it will save an enormous amount of money. I think it is quite important symbolically. What has happened in the US has been that the debate has moved on so that hospitals now say, "Not only will we expect that you will not pay the bill; we will not bill for a Never Event. We will recognise that it is not appropriate if we have led to harm". Never Events for people who are not aware are rare but I am talking about things like leaving in a swab, operating on the wrong kidney. There is a change. In the US the list of Never Events has grown towards areas where there is a risk that, as they become more common or potentially more common (since in the end the clinicians and the hospital who cared for the patient have to `fess up by admitting that they have had such an event because only they are in a position to do that), people may become less open and honest and fully code their episodes if they become such a huge financial incentive.

  Q133  Dr Taylor: Should we be pushing for an extension of the list because the list is very short?

  Professor Crump: It is short. I would say it is more symbolically important to give people a focus on safety than it will be a major contributor to the £15 billion to £20 billion.

  Q134  Dr Taylor: What sorts of things should we be putting on the list? Errors in prescribing?

  Professor Crump: The difficulties are those which are definitely attributable to the organisation concerned. For example, one of the biggest areas would be patients who fall in hospital and have a prolonged stay as a consequence of having had a fall when they are in the care of the hospital. They are very common. It would be very difficult to attribute that to, for example, deficient care. Another big area is the care of patients who have pressure-related ulcers which develop when they are in hospital but, as you will be aware, clinically there is often a debate as to whether that process had begun before the patient was admitted. If you stick to "Don't operate on the wrong side", "Don't leave inside instruments or swabs", the most egregious events, the numbers are, thankfully, fairly small.

  Q135  Dr Taylor: Is there any compulsion on hospitals to have policies to avoid falls? We visited some where they do have initiatives on this.

  Professor Crump: We are a co-sponsor of the National Patient Safety Campaign, Safety First, and that has been a very major part of that campaign. That campaign has not run on the basis of compulsion. We have tried to make it compelling rather than compulsory, but those policies have been so successful and the dramatic reduction in the number of falls in hospitals in places that really take those policies seriously is very impressive that you could make the case for regulators introducing a requirement that that is an expectation, for example. That may well make sense.

  Q136  Dr Taylor: You would be a bit careful about increasing the list of Never Events?

  Professor Crump: I would be anxious that it did not then spawn an industry of how one checked. I think there is a case for considering whether there might be a way of patients, who should know and many often will know whether they or their family member have been the subject of a Never Event, being part of the process of policing it, but I am worried if we get a very long list.

  Q137  Dr Taylor: So we come on to the complaints process, really?

  Professor Crump: Yes.

  Professor Appleby: Just on that, I think these Never Events, not paying for something that should never happen, is down at the extreme end in the CQUINs; that is what it is about. Can I just again emphasise that the extent to which not paying for a Never Event contributes to the £15 billion to £20 billion is not about saving money; it is about preventing a Never Event, an incentive. The value of that in itself contributes to the £15 billion to £20 billion.

  Q138  Dr Naysmith: You will all be glad to hear we have reached the last question of this session. The National Audit Office have highlighted in reports on subjects such as autism and dementia, and we have touched on it in a number of areas already this morning, that the interface between health and social care is too often a problem and a barrier. Why can we not seem to do anything about that? Perhaps, Professor Crump, you can begin and tell us what, if anything, your organisation is doing about it.

  Professor Crump: We are supporting a group of PCTs who are working with their local authority partners on a range of different interface issues, including interface with social care but also interface around health inequalities. I think there is progress that can be made but within the limits of systems which have different accountabilities and often different priorities. I do not think the Berlin Wall, as it used to be described, is evident in the places that we are working with but there is a substantial challenge to being able to get really effective partnership working. The key to it in the work we have done so far is in the buy-in from both chairs and boards and their local council partners, often in the context of this series of pilots that have been called Total Place where in many places the Health Service is playing a pretty active role. I am quite optimistic that these arrangements will become more successful and more of a focus over the next year or two. I think we know how to do it but it is certainly not happening everywhere yet.

  Q139  Dr Naysmith: Could there be a case for spending more on social care in order to save money in the Health Service?

  Professor Crump: Yes, and I believe there are examples of that. Indeed, less commonly, there are some examples where people have also spent Health Service money on housing provision, for example, targeted around specific housing requirements of people which affect their health.

  Mr Haldenby: There is different policy and particularly funding frameworks in health and social care, one is not means-tested and one is, one is funded by national taxation and one is funded by both national and partly local taxation. It would seem to me if it is accepted that there can be greater flexibility about the NHS budget that, for example, in some cases there could be some means-testing or variation in funding, that would make it easier to combine services.

  Q140  Dr Naysmith: John, you get the last word. There must be a number of studies in the King's Fund that have looked at the interface between social care and health care.

  Professor Appleby: As Bernard said, there are examples where much closer working, not complete and total integration, between health services and social care services produces good things for people. The NHS has a history of trying to do that through, for example, setting up budgets which are shared between services. Some work I did some time ago in Northern Ireland where they have, at least formally, an integrated health and social care system showed that the social care people were not that keen on it, in part because they felt that when push came to shove with budgets it was the health care side of things which took the money and the social care was seen as a bit of a poor relation. One of the points they made was simply to put these services together, put them in the same building, give them the same budget, give them a joint manager, whatever you do to bring them together, was not enough and the good work happened at a professional level between people who worked in social care and individuals who worked in the NHS. That does not necessarily imply that you have to put the two systems together to get those things.

  Q141  Dr Naysmith: What happened to joint commissioning? There used to be a big thing about that.

  Professor Appleby: There still is, and maybe it should be bigger. The point I would make is there is an integration at a professional level and that is where you may get much more the benefits which are better quality and maybe some cost savings, but if you get better quality that is good enough.

  Chair: Could I thank all three of you very much indeed for coming along and helping us with today's evidence session. We will not be putting any commentary alongside this evidence session because of the imminence of a General Election, but it will be on our website in a few days anyway. Thank you very much indeed.

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Prepared 21 July 2010