Memorandum by Professor Nick Bosanquet
(PEX 03)
1. The questions set by the Select Committee
seem to reflect a top down macro view of how to promote better
value. The future of the NHS does not depend on whether NHS funding
increases a little slower or a little faster than the GDP deflator—somewhere
in the range 1.5-3% a year in cash terms. An increase even at
the top of the range means that the cash amounts to local commissioners
will show little increase as it is essential to keep a central
reserve for contingencies. At the local level there will be unavoidable
increases in costs from PFI schemes and the training of medical
graduates.
The alternative perspective stresses that without
micro changes to secure better quality and value there will be
little progress towards the goal of improved services for patients.
The Select Committee should declare that the long era in which
the total level of spending has been the key variable is over.
The priority for the next five years should be that of monitoring
the vital changes needed to get more value out of the vast sum
now being spent on the NHS.
2. The increase in health expenditure over
the last decade has tripled NHS funding from £35-£110
million. This has been very poor value for money. Better use of
incentives would have led to better results for £20 billion
less. Increasing spending without more information on quality
and outcomes has had results—predicted at the start—of
raising cost and expenditure rather than quality. The NHS has
started some new services and reduced initial waiting times but
much of the extra funding has simply raised costs of treating
the same patients as before. Where data do exist there is little
correlation in the NHS between the amounts being spent and results.
A recent review of one year survival rates for colo-rectal cancer
showed that the best results in the UK were being achieved at
a relatively small unit (Telford and Wrekin) which had low levels
of funding and staffing.[1]
Some of the poorest results were being achieved in the London
area which has a wealth of specialized consultants.
3. The NHS is now on a labour standard.
It cannot increase the amount of experienced staff time, which
will be further reduced by a high level of retirement among nursing
staff over the next 10 years. Much trained professional time is
wasted through lack of support and adequate IT. Much time is wasted
in producing obsolete services such as outpatient letters when
simple email communication could be delivered with savings on
the £2.5 billion currently spent on producing these letters.
The key issue is how to empower staff to deliver better services
for patients.
4. There are opportunities to invest in
new kinds of closer-to-patient services. The NHS under central
planners has suffered from the Tirpitz syndrome—producing
the wrong navy for the wrong war.
The required £15-£20 billion worth
of productivity savings (in real terms) should be seen as an urgent
investment programme in better services over the next five years.
The services could include:
(a) Better communication with patients. The NHS
is currently the wrong side of the digital divide.
(b) Care pathways for long term medical conditions.
A recent study of Medicare in the US has shown that these patients
now account for most of the growth in spending and the NHS faces
the same pressures.[2]
(c) Increasing primary care capability through
increased access to diagnostics particularly with the rise of
medium ticket technology.[3]
(d) Intensive local rehabilitation and home health
care. The NHS has failed to develop home health care, an omission
which has shifted much responsibility to the social care services
(which have also felt a resource squeeze).
(e) Stronger support for carers. At present the
health of the carer often breaks first.
(f) Specialist units with a pathfinder mission
for better outcomes such as the new Cancer Centre now being developed
at UCLH Foundation Trust.
5. Foundation Trusts have begun to develop
service line accounting, but this has not gone far enough. The
quality of financial information available at the business unit
level is woefully inadequate. Like any company or third sector
organization the NHS needs simple balance sheets setting out revenue
and expenditure. This would allow much more use of marginal cost
decision-making. It would also mean shifting decision-making to
a more local level where £1 million is a lot of money and
away from Whitehall, where there has been a sad loss of any sense
of value of money in the billions passing though in the past decade.
This change is particularly urgent given the severe financial
problems facing many Trusts as the New Operating Framework leads
to reduced Trust income. The effect of the new Framework is to
shift potential deficits from PCTs (or their successors) to Trusts.
6. The key issues for the Committee are
the micro ones of giving local clinicians and managers the tools
to get better value. It is only with these tools that the NHS
will be able to provide increased service for the limited increases
in funding which are likely over the next five years. The government's
plans for more local initiative for commissioners and providers
are highly positive but they need to be supported by a very definite
and forceful action plan to raise local capability for financial
management.
In summary there is no one right level of increase.
If the NHS restores local initiative the current funding will
be adequate: if it does not do this then any amount of extra funding
will not add much value, a conclusion supported by the recent
OECD Report which stressed that efficiency gains were a much more
important way of improving health outcomes than raising total
spending.[4]
September 2010
1 DoH. Cancer Reform Strategy Achieving Local Implementation-Second
Annual Report. 2009. Back
2
K Thorpe et al, Chronic Conditions Account for Rise
in Medicare Spending from 1987-2006. Health Affairs 29 No
2 2010 718-724. Back
3
N Bosanquet. Technology: scientific force or power force?
In J Costa-Font Ed The Economics of new health technologies.
OUP 2009. Back
4
I Journard et al Health Care Systems. Efficiency and
Institutions. 2010. "The... results (of statistical
analysis) are remarkably consistent in suggesting the population
health status could be improved significantly, while keeping inputs
constant, in most OECD countries. Potential efficiency gains in
the health sector might be large enough to raise life expectancy
at birth by more than two years on average across the OECD (holding
all inputs constant) while a 10% increase in health spending per
capita would increase, life expectancy by only three to four months."
p 18. Back
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