Health and Social Care Bill

Memorandum submitted by Professor Roderick Martin (HS 119)

The Future Organisation of the NHS

1. The Health and Social Welfare Bill’s proposals for the future organisation of the NHS are characteristic of ‘permanently failing organisations’ (to use the US sociologists Meyer and Zucker’s term): incompatible objectives; lack of clarity on roles and responsibilities; organisational complexity; and multiple, overlapping responsibilities.

2. Incompatible objectives

Conflict between quality and competition. Responsibility for quality is rests with the Care Quality Commission, responsibility for stimulating competition rests with the Monitor. The Bill simply provides that the two should cooperate with each other: no mechanism is suggested for resolving the inevitable conflict.

Conflict between competition and continuity of service. The Bill proposes measures to facilitate supplier entry and exit. How can exit be eased without disrupting continuity of service? Health care continuity is more difficult to ensure than car company after sales service.

3. Lack of clarity

Two areas are uncertain: the relationship between the Department of Health and the independent NHS Board; and the precise role of the Secretary of State. It is difficult to see how the Department can transfer such a large element of its responsibilities to an independent body. Secondly, the Secretary of State will be accountable for the service, but not responsible for its day-to-day management; instead, the Secretary of State will present a mandate for the NHS for the forthcoming year, with authority to revise the mandate only in ‘exceptional circumstances’. Ministers have not been very good at adhering to self-denying ordinances, especially when possible justifications for intervention are provided by ‘accountability’, exceptional circumstances and budgetary responsibilities.

4 Organisational complexity

GP practices will be tied to the decisions of the group commissioning consortiums, and which will be monitored by Healthwatch Committees, for quality, and the Monitor, for value for money and competition. The organisational chart published in the Commons Research summary of the Bill indicates the complex ‘dotted line’ relationships in the new structure; such dotted lines are easier to draw than to operate.

5 Overlapping responsibilities

Responsibility for assessment of quality will rest with the Secretary of State, the independent Commissioning Board, Healthwatch England, regional bodies, and local representative bodies including local government representatives- not to mention the GP and the actual patient. The possibility for consensus is small.

6 The stated overriding purpose of the reform is to align clinical and financial responsibility, to create incentives to ensure commissioning decisions provide value for money and improved quality of care through efficient prescribing and referral patterns (Impact Assessment Para A4). The relation between patient quality of care, much less patient preference, and efficient prescribing and referral patterns is not clear. Given the overall financial context, and the role of Monitor, the incentive for GPS to prioritise value for money will be difficult to resist.

7 The Monitor institutionalises the government’s commitment to competition as the driver for improving quality, mainly through innovation, and reducing costs. The Impact Assessment ‘Provision-provider liberalisation, economic regulation, and joint licensing’ states: ‘There is very clear evidence from across services and countries that competition produces superior outcomes to centralised management and monopoly provision. Competition is more effective where markets are highly contestable and contestability requires that organisations are able to expand/enter the market and contract/exit particular markets in response to consumer preferences’ (Para B10). The Assessment recognises that market failures exist – due to externalities, natural monopolies, and imperfect information and uncertainty - but does not discuss their significance for competition in health care provision. It is regarded as axiomatic that competition is superior to regulation – ‘competition where appropriate, regulation where necessary’: no mention at all of professionalism, skills, or judgement. The assessment argues that competition leads to innovation, which leads to quality improvement. However, innovation depends upon collaboration as well as competition, and high levels of inter-organisational trust, especially where outputs are difficult to define and evaluate.

8. The impact assessments focus wholly on limited economic issues, with no consideration of organisational consequences. Even in economic terms, there is no consideration of Liebenstein’s ‘x- efficiency’. The costs of organisational upheaval are treated as transitional costs, although evidence from research on private sector mergers and acquisitions shows that such costs, for example regarding the integration of information systems, are long term.

9. The Bill reduces the basic structure of the NHS to a system of market relations, in which patient care is bought by GP practices via commissioning consortia, and sold, by licensed willing suppliers, within a competitive market. Policy is designed to create a level playing field, with no role for cross subsidisation, and management discipline provided by competition and, ultimately, by the fear of insolvency. Surprisingly for a market analysis, there is no mention of profit.

10. Major private sector manufacturing organisations, especially in Europe, have rejected the extreme forms of competitive market thinking enshrined in the Bill, as leading to short-termism, instability, inadequate learning, and lack of incentive for innovation. It is tragic that such a discarded model should form the basis for transforming the NHS. The organisational arrangements in the Bill are a rehash of a market model popular in business schools in the 1990s, applied in a wholly inappropriate context.

March 2011