Commissioning - Health Committee Contents


Examination of Witnesses (Questions 330-393)

John Seddon, Kingsley Manning, Alan Downey

30 November 2010

Q330 Chair: Thank you for joining us. I think all three of you heard the previous evidence session. Perhaps I can ask you to briefly introduce yourselves to the Committee before we start?

John Seddon: I am an occupational psychologist. I run a consulting firm called Vanguard. Vanguard's purpose is to help organisations change from a conventional command and patrol design into a systems design. I was asked to come here on the basis that I have been working in health but I haven't in the sense that I haven't helped any health organisation to redesign itself. We have inasmuch as this work starts by studying your organisation as a system and some of that work has gone on but, in all cases, it leads people who work in the NHS to a position of conflict with the Department of Health. But I am grateful to be invited and I would like to explain, if I have the opportunity today, how it is that commissioning is driving costs up.

Chair: Thank you. We shall look forward to coming to that.

Kingsley Manning: I am executive chairman of Tribal, a health business. Tribal is a leading supplier of support and advisory services to the healthcare system.

Alan Downey: I am a partner with KPMG, the accountancy and advisory firm. I am responsible for our public sector practice within KPMG and, like Tribal, we are a provider of professional services to the NHS and to other public sector bodies. A particular focus of much of our advice is on financial management, good financial control and introducing commercial discipline.

Q331 Chair: Can I begin by focusing the minds of all three of you gentlemen on the twin nature of the change management challenge faced by the health service at this moment, that is to say, first, that it has to deliver a 4% efficiency gain compound over four years and, secondly, that it has to engage in a process of institutional change which is described in summary in the White Paper? The Committee would be interested to know, first, whether any of your organisations were consulted by the Government as part of the preparation for these processes and, secondly, what your observations would be about the way in which the process is unfolding. Who would like to go first?

John Seddon: The answer to the first question, for me, is no. My general view is that, like a lot of change in the public sector, this administration believes in industrialisation and scale. I think that is a mistake.

Q332 Chair: Would you like to enlarge on that?

John Seddon: Yes. Most of the Ministers concerned with the public sector believe in bigger is better, that we should, for example, share services, share front offices and back offices and these kinds of things which have IT-led change. The greatest example of this failure at the moment is HMRC. I think the numbers are that something like 1.7 million people have paid too much, more than 4 million people have paid too little and 17 million people they are not sure about, which must be most of the people on PAYE.

Chair: I am pleased to say HMRC falls outside our sphere of responsibility.

John Seddon: Yes, but we're doing it in health.

Q333 Chair: The Secretary of State, I guess, if he were here, would say he is precisely seeking to aim away from that mistake by encouraging responsibility closer to the patient in the form of GP consortia. Do you think that is right?

John Seddon: I think it is vital that we have clinical decision making in the health service. We have made a great mistake with too much managerialism, I am sure of that. I listened to the conversation earlier about patients and choice. What I have found in every other public service I have been involved in is that people don't want choice, they just want a service that works and when they haven't got a service that works they will spend a lot of time going out on a cold Tuesday in November or whatever.

Q334 Chair: Shall we go along the witnesses first? Mr Manning, I saw you nodding both ways in the course of the comments of Mr Seddon.

Kingsley Manning: Certainly we haven't been paid for advice by the Government since 5 May. In fact, we have been asked to reduce our prices significantly along with other tier 2 suppliers, so much of the advice we have been giving has been for free.

  The important point to remember in terms of regaining the efficiency gain that David Nicholson spoke about is that some 70% of that will be achieved by tariff reform, in other words, to provide a reform. Most PCTs, most service health authorities, are quickly going to enforce price reductions on their suppliers. Therefore, it is not a question for PCTs so much except to the extent that PCTs and commissioning groups of other sorts, including GPs, get in the way, if you like, of the efficiency shifts that have to be achieved and productivity gains that have to be achieved on the supply side. So 70% of your 4% per annum, Chairman, is going to be achieved essentially through a forced price reduction on suppliers. The balance, certainly, has to be delivered through commissioning and that, essentially, assumes doing less or ensuring that what you do is done with cheaper suppliers or controlling referral processes.

  There is a conflict between having significant change and the reform of PCTs at a time when you are attempting to manage that process. But the fundamental direction of aligning decision-making, clinical decision-making and individual patient decision-making, at the front end of the system seems to me to be exactly the right diagnosis. The whole process of transition management may not be the one we would have potentially designed if we had been asked but it is the one that has been chosen and I think that, as Nigel Edwards has put it, the arguments for going slower and faster are about equal and, having announced the change, there is a sense of inevitability and momentum which now needs to be carried through.

Alan Downey: We were not consulted prior to publication of the White Paper. As far as the challenge that the Government has set for itself and for the NHS, it is a very big challenge because it is trying to do two very important things in parallel, a major change of policy, the shift from PCT-led commissioning to GP-led commissioning, and, at the same time, addressing a pretty substantial financial challenge under the QIPP banner.

  I don't agree with John that the policies which are now being proposed are all about industrialising processes. I think in many ways this is a much more devolved process than the one which was followed under world class commissioning, the PCT-led initiative of the last Government, and my hope would be that we will see a variety of different approaches being adopted by different GP consortia and that that will not only be accommodated but will be welcomed by the Government. So they are making efforts to stand back a little, to push accountability down and to allow clinicians to do what everyone who has spoken so far, I think, has agreed with, which is to align clinical judgment with financial accountability. I think that is absolutely the right way forward.

  There is going to be turbulence in the system over the next couple of years, not least because there is this rather unusual position of saying to the PCTs, "We want to abolish you but not yet." I'm not sure, for example, that many private sector organisations would have approached the task in quite the same way but we haven't seen a great exodus from PCTs. They do seem to have held up reasonably well. The clustering of PCTs will help to reduce the turbulence. The QIPP agenda, after all, has been running for the last 18 months so we would expect some fairly well advanced plans to be in place already. It is not a new challenge for the NHS. But, given that the decision has been taken to give responsibility to GPs for driving change in the system, there is every reason to believe that with the right support they can rise to that challenge. They are the best placed people in the system to remove some of the unnecessary variations in referral practices, in prescribing practices and also better placed than I think PCTs were to make that vital joining up between primary care and secondary care which has been a real problem for the NHS for such a long time.

Q335 Grahame Morris: I have got a number of questions but I wonder if I might just clarify in my own mind that you three gentlemen are all representatives of private sector organisations that would presumably profit from the changes that are being implemented in the health service? That isn't necessarily the case.

John Seddon: Yes and no.

Q336 Grahame Morris: That's a good answer. Could you elaborate on your opening comments where you suggested that commissioning, either in its present form or as envisaged, would drive up costs in the health service?

John Seddon: I would be happy to. We first saw this phenomenon in housing repairs and, to a systems thinker, it is identical to commissioning in the health service. In housing repairs people use a schedule of rates. It is everything that could go wrong with a house and in it is a specification for what you should do, with standard times and materials. It was mandated as best practice by the centre and the ethos in it is that we need to manage costs.

  Actually, when you employ the schedule of rates in housing repairs you have a whole series of problems and they are all created by the inability of this design, in particular the schedule of rates, to absorb variety. Not all tap repairs are the same. And we have made this mistake in health. Because having a schedule of rates stops you absorbing variety you get both under and over provision. With under-provision "You get what we do", not what you want. I disagree with Alan. We've industrialised a lot of voluntary sector services that are bought on a contract against a specification. We've done the same with things like health and equality as part of health agenda and so on. And scale contracts as well in adult social care—a big mistake. With over-provision you are, effectively, incentivising any provider to do more work, and that happens.

  On top of this, of course, we have a whole administration for coding, re-coding, doing lots of re-work because we get it wrong at the start and so on. This creates a lot of repeat demands into services. I call these demands failure demand which I define as caused by a failure to do something to turn it round for the customer. We know nobody has studied failure demand in health but we have studied it extensively in adult social care. It typically runs at about 80% of the total demand under the system.

  When you couple these ideas up with standard times and standard costs you effectively discourage innovation and you discourage any reduction in costs and when you add to that standard tariffs it encourages cherry-picking, so "We'll do the things that advantage our position." What we know in housing, and to a systems thinker it is very like health, is that in housing when you dispense with the schedule of rates and design the service against demand you halve your costs at the same time as improving your service. I think that kind of opportunity is available in health but you would have to completely re-think the philosophy of commissioning.

Q337 Grahame Morris: With what alternative?

John Seddon: We made this mistake years ago in the private sector and private sector companies got out of these mistakes. If we think that we should organise work on the basis of standard times, that is a big mistake because there is variety in work. So we have to get off the idea of the times that things should take and the things that should be done, which is all included in the specifications, and start understanding and measuring what things do take and what needs to be done. When you make that simple shift you are starting to work with measures that help you understand and improve the performance of the system which you do not get when you use standard times, which are a feature of industrialisation.

Chair: Grahame, do you want to follow that up?

Q338 Grahame Morris: I do, but it is more related to some of the earlier comments or responses in relation to how critical it is that GPs are involved in the commissioning cycle. In an area like mine, in Easington, in County Durham, a population of about 100,000 where we have about 50 GPs, in order to properly participate and make it a success what proportion of those 50 GPs would you think should be actively involved in the commissioning process?

Kingsley Manning: First, can I come back to your first question, which is to say, yes, we are a public company. We are quoted on the Stock Exchange. We are owned almost entirely by our staff and pensioners. Therefore I have a fiduciary duty to deliver a profit to my shareholders who depend upon it for their pensions and a return on their savings. In doing so, we wish to operate at the high standards we have done for over a decade. I have been working in the health service for 30 years and I believe that we have delivered value for money and enormous benefits to our clients over that time period, which is not incompatible with us being an ethical commercial company.

  Do we stand to make profits out of the reforms? Possibly. We won't make any profits out of commissioning as Mr Lansley is quite clear that nobody will be allowed to make profits out of commissioning, indeed which I think we would agree with. That would be the ability to take a profit related to an inflation-based risk and I think that would be inappropriate.

Q339 Chair: You could, presumably, give profitable advice about how commissioning could be structured?

Kingsley Manning: We already provide advice to about 12 or 15 PCTs as it stands on commissioning with a significant return on investment in those cases and an improved outcome for patients and improved cost-effectiveness for the NHS.

  I believe that the changes in the White Paper, which have to be taken as a whole, including the AWP process as well, but particularly around commissioning, do allow the possibility of having a significant engine for change being driven not just by GPs but, as importantly, by patients and citizens. I think it is terribly important—there was a lot of discussion in the prior session about the role of clinician here—that the clinician is not the centre of this system, or at least it shouldn't be. It should be the citizen, not even a patient, because we should be dealing with people who are well, not just ill. The problem about being a patient is that one immediately becomes a supplicant of this system and one of the really interesting backbones of the White Paper is the information revolution that will go along with this, such that we will have patients informed in a much more powerful way. Citizens will be able to see the performance of hospitals, individual GPs and individual surgeons and be able to judge the outcomes of individual providers. It is therefore giving, for the first time, the ability potentially to be partners in the management of their own healthcare for both wellness and illness. It seems to me that is a terribly important part of it.

  That, coupled with the ability to have a choice of providers, which I think is the second very important part of this, has to be seen as being the other side of the commissioning process. This is not simply about setting a clinician up as the centre of the system, but the citizen and the patient. What that requires is, I am afraid, John, industrial level risk-taking, industrial level infomatics and industrial level support to enable those patients to take choice.

  The evidence in mid-Staffs, the evidence of the extent of choice network, is that if patients are given information and if the choice is important, they will take it. If you have a child and your daughter or your son has cancer, you want a choice of the best cancer provider available to you. Citizens are much more sophisticated about this, and therefore choice does matter. Increasingly we should trust patients much more and trust citizens much more to become much more powerful in the management of their own healthcare.

Alan Downey: I think there was a question about the number of GPs who should be involved in commissioning and I think the simple answer is all of them because every clinical decision that is taken by a GP, indeed every clinical decision that is taken anywhere in the NHS is in effect a commissioning decision. There are financial and other consequences that flow from it.

  I don't think it is necessary or desirable for the Department of Health to be prescriptive to the GP consortia about how they should organise themselves, about their governance structures and about how they should decide on decisions that need to be taken other than those which are taken at the individual GP level. So if one consortium decides that it wants to devolve a lot of responsibility to all GPs and another decides that it wants to raise some of that decision-making up so that it can be taken by one or two individuals on behalf of the whole consortium, that is a decision for each individual consortium to make. And it is a feature of the system that the Government is trying to introduce now that it is about trying to empower these GP consortia to set things up in a way that they think will work best in the interests of their patients rather than prescribing a particular approach which was more a feature of the system that we had before the election.

Q340 Grahame Morris: So are you targeting areas that are currently under-doctored where you have a smaller proportion of GPs per head in selling your services or offering them in the terms that Mr Manning described earlier?

Alan Downey: We are not targeting areas in that sense because it is not our role to provide medical services. What we have been doing is holding discussions with a number of consortia that have started to perform to try and provide them with assistance to enable them to think through the roles that they have taken on.

  I don't want to dwell on this point about profit because Kingsley has addressed it already, but in the current climate where the Government as a whole and the NHS in particular is under huge financial pressure, there is very little money around to pay the bills of the likes of KPMG and Tribal and so on. We are not actually earning any money at all. We are not making profit at all from the work that we are doing at present. It is no problem to us because, if you take a firm like KPMG, approaching 90% of our business is with the private sector. We only provide to our public sector clients the services that we also provide to our private sector clients and if they decide that they no longer wish to buy those services and the Government decides that they no longer represent value for money, it is not actually a huge problem to us.

Q341 Grahame Morris: I can't let you off the hook. Is that a kind of long game, a kind of what we would describe in layman's terms as a loss leader in anticipation of a wholesale privatisation that private sector companies would be involved in and that you would subsequently profit from?

Alan Downey: That would certainly be my hope, that by staying in the game at the moment we will be able to continue to provide services to the NHS in the long term. But that is by no means guaranteed. We are not making a calculating business decision based on an accurate assessment of risk. We are simply staying in the game at the moment because we think it is the right thing to do. It is perfectly plausible to believe that, in due course, there will be far, far less work for firms like ours not only in the NHS but in the whole of the public sector.

Q342 Valerie Vaz: I am sorry, the right thing to do for whom?

Alan Downey: For the public sector clients that we have relationships with.

Q343 Valerie Vaz: Right. Not for the patient necessarily but for your clients?

Alan Downey: We are not engaged by patients so we don't have a direct relationship with patients.

Q344 Valerie Vaz: They're the ones that are paying their tax to get a service.

Alan Downey: Of course they are, but you have to deal with the people who are in a position to seek your advice, enter into contractual arrangements and so on. Ultimately, the whole point is to try and produce a health service which delivers a higher quality service and which delivers value for money for the taxpayer. That's why we do what we do. We need to be able to make an acceptable level of profit in providing our services because we are a commercial organisation and if the time comes when we are not able to make an acceptable level of profit in the longer term, then we will revert to providing services to our private sector clients which, as I say, is approaching 90% of our business.

Chair: I suggest we move on from that subject.

Q345 Chris Skidmore: I am keen to draw out the experiences of your organisations in either observing or enacting change, both in terms of clinician-led commissioning and also in terms of the transformation processes involved. First, Mr Downey, I'm very interested in what your colleague Mark Britnell had to say at the NHS Alliance Conference on 19 November. I don't know if you are aware but he said that KPMG did some work in a big northern city with an access population of 1 million and that, through introducing clinically based decision making, that was able to deliver over £200 million worth of efficiency savings, roughly about 20%. So you are meeting the Nicholson challenge over and above through clinician-led commissioning. Would you be able to elaborate on that and give a bit more detail about what that programme was?

Alan Downey: Yes. I think it would be accurate to say that we identified savings to the tune of £200 million rather than that we delivered that amount because delivery, in most cases, depends on the organisations in the NHS acting on our recommendations. But one of the issues and one of the challenges which the NHS faces is that care tends to break down when patients cross the boundaries between different organisations and they move from primary care to community services, to secondary care and so on. The particular project that Mark was referring to was one where we were able to work in a single project with all of the health service providers in a particular locality, with the primary care trust, with the mental health provider, with the community health services provider, with three acute trusts and so on. By bringing all of those organisations together, it was possible to identify some very substantial savings that could not be achieved within the organisational boundaries of one of those players. It was necessary for there to be co-operation across the boundaries.

Q346 Chris Skidmore: So that's including social care as well?

Alan Downey: This was primarily focused on services delivered by the NHS but the local authority was also involved in the programme and so there were some savings there as well. That is the kind of role that an organisation like ours or, indeed, other organisations that we frequently compete with can play, which is to help facilitate decision-taking across boundaries which are genuinely quite difficult within the NHS as it is currently structured.

Q347 Chris Skidmore: Do you want to say something, Mr Seddon?

John Seddon: I haven't earned any money from this, given the responses earlier, but I think it is as well for the Committee to know that in Plymouth there is a consultant neurologist who has followed my principles. I teach managers not to manage cost because it drives your costs up but manage value instead. He has transformed their stroke care. This is a delivered saving, not a maybe saving. Originally the cost of stroke care in Plymouth was £6,000 a patient. It is currently running at £3,000 a patient. Interestingly the tariff is 4, which is a problem I referred to earlier about arbitrary measures and tariffs, and he did it all on his own, without any help from me or anyone. He did it all by reading my work and working it out.

  In adult social care, most interestingly, there have been major savings and this has occurred in Wales. It is indicative that it occurs in Wales because Wales doesn't have the same kind of regulatory control that we have in England. But there are significant savings in administration, very large savings in use of materials and the provision of materials but the largest savings come from solving people's problems in their community, not driving them into care homes. That is all evidenced and is reported by the Welsh Audit Office in a report earlier this year which you can access. I think it is really important to say that these designs have been achieved by ignoring the strictures from the centre.

Q348 Chris Skidmore: That is surely what the White Paper is partly trying to achieve, devolving power. It is plastered across it.

John Seddon: I think the White Paper lacks coherence and good operational clarity. As I said earlier, I think it is very important the clinician should be involved in decision making but I would go further. I would say in order to design a better health service you really need to understand demand. If we can understand demand we can design a better health service. The clinician that has used my idea, Stephen Allder, in Plymouth—I think you should invite him here, by the way—has studied demand in his trust for all major conditions, the first person to do this, to my knowledge, and the interesting thing is that all conditions are stable in demand terms. To a systems thinker that is Christmas because it means we can start designing a service that works because we know these things are going to occur. Most of the people in that system wouldn't believe that demand is stable. They think it is going to be random. They think it is rising because we are getting older. Actually, the data shows that demand is stable by major conditions.

Q349 Chair: Do our other witnesses agree with the proposition that demand is stable because it is certainly not evidence that has been presented to us hitherto?

Kingsley Manning: Fundamentally. First of all, you can't treat demand in healthcare in any way like a homogeneous section. It is not. It varies enormously. But demand for most services is incredibly predictable. We can be pretty certain how many people are going to have heart attacks in Barnet in three years' time. Predictive analysis is an incredibly powerful tool. We are doing it for 15 or 16 PCTs already. You can predict the people that are likely to have falls and those that are likely to suffer from cancers in a very, very effective fashion. Demand for most of these conditions is both predictable and stable.

The shifts in demand that have occurred are usually system-generated and are very much in unplanned care—emergency admissions—and are very often to do not so much with clinical conditions but with social circumstances, the failure of social care provision, under-provision, and the failure of having alternatives to, for example, hospital admission for complex elderly care services. So you cannot treat these things as separate but we have known for a long time how to measure demand for healthcare in great, great detail and to be able to predict it increasingly with substantial accuracy.

Q350 Chair: But it is also true, is it not, that demand, as experienced by the healthcare system in terms of attendances, in terms of treatment episodes and in terms of alternative treatments available, has been on a rising trend?

Kingsley Manning: But fairly modest. You have already heard today that in places like Cumbria and others it hasn't been rising. We have had a year on year pretty standard rise in any attendances in unplanned care, about 3% across the country. But it does vary. There is not an infinite demand for people to have heart surgery. There is not an infinite demand for people to have cataracts. There is only a finite number of cases of this. There is a pretty much infinite demand, as I keep telling my family, for loving care and attention but that is different. That is a different element of care. So you have to be very clear about what you mean by rises in demand. You have to segment it.

Q351 Chris Skidmore: What about Wanless and the rise of the demographic trend for older people for the next four years of their care?

Kingsley Manning: Yes, in some respects. But, first of all, at the moment it is actually within a lull. There is rising expectation of some elements of care but we are still uncertain yet how that demography will play out in terms of the elder population. Actually, it is the new generation, as I am approaching being one of those people. I am going to be much fitter, much more able and much more demanding as a patient and my demand will be very different.

Q352 Chris Skidmore: This one is longer because the whole model of the efficiency gains are modelled on the NHS standing still by having these £15 billion to £20 billion savings delivered to be reinvested.

Kingsley Manning: But I come back to my original point which is that David Nicholson's current plan is that most of that demand will come out of technical efficiency gains within provider hospitals. He is essentially saying, "I'm going to force you to employ less people, use less concrete and use less drugs to deliver more care" to the providers. He is only, at this stage, assuming some 30% of gain will come from stemming demand or finding alternative patterns of demand. Ultimately we are going to have to do a lot more to be able to live within the cash envelope and that will require us to think very radically about alternative supply mechanisms or different patterns of care. But part of this demand is complex and it is changing and a lot of it is to do with not just demography but also our assumption about what care we deserve, what care we have as a right and what care we require. That is a very much more complex issue than a single epidemiology of the incidence of cancers.

Q353 Chair: Would Mr Downey like to contribute to this discussion on demand?

Alan Downey: I'm not sure that I would because I am not an expert.

Chair: Don't feel you have to.

Alan Downey: I'm not an expert in forecasting in these matters and I think it is probably best if I leave it at what Kingsley has said.

Q354 Chris Skidmore: I had an additional question, Mr Manning. Obviously your organisation has major experience in enacting transformational programmes across the country. The NHS is now facing its biggest transformational organisation in 60 years with the abolition of PCTs, SHAs and the shift of clinician powers toward GPs. That is obviously going to cost an enormous amount in redundancy packages. One estimate from the Department of £1.7 billion was already, apparently, put aside by the previous Government. Other witnesses and evidence have said it is nearer £3 billion. I just wondered from your own experience of redundancy packages if there is some modelling or some way you might be able to explain to us how realistic the £1.7 billion sounds, whether it should be higher than that?

Kingsley Manning: PCT management tend to have been members of the NHS for quite a long time and they are reasonably well paid. A rough rule of thumb is somewhere between £50,000 and £100,000 per person made redundant. It is as simple as that. You can work it out yourself from the numbers. We have discussed with the Department ways in which some of that can be mitigated, through, potentially, the transfer of staff to other providers of support services. The TUPE staff will go into various areas. We are already doing it, and we have made that clear to the Department, that if we can help in mitigating that redundancy and securing continuing employment for people through joint ventures and the creation of mutual and social enterprises with ourselves as partners then we are prepared to do that.

Q355 Chris Skidmore: In terms of the figures, how many PCT commissioners may end up being made redundant? Would you be able to give a rough figure, maybe, from your own experiences of what has happened in other circumstances Tribal has been involved with?

Kingsley Manning: We have undertaken an analysis. There are about 37,000 people currently employed by PCTs. That's a misleading number because a significant number of those people are engaged in doing elements like public health, like public engagement and a whole host of other things. Somebody said earlier it is all the things that PCTs get on and worry about. The actual number employed currently in commissioning is quite small, relatively speaking. We think that with GP consortia the total number of people employed between GP consortia and the National Commissioning Board is probably between 10,000 and 15,000.

Q356 Chris Skidmore: That is 10,000 to 15,000 currently employed?

Kingsley Manning: No, you would need to employ with GP consortia and the National Commissioning Board.

Q357 Chris Skidmore: So there's a possibility that 10,000 to 15,000 from the 37,000 currently within PCTs could find alternative roles within the new structure?

Kingsley Manning: I would hope so. The sensible thing is for the Department to find ways in which those staff can be transferred to consortia or to support service organisations to avoid the necessity of going through an unnecessarily expensive redundancy route.

Q358 Andrew George: Representing the sector that you do, where do you think, having looked at the White Paper, you can be both most helpful in delivering the objects of the White Paper and what aspects do you think would be most profitable for the private sector to engage?

Alan Downey: Speaking on behalf of my own organisation, I said at the beginning that the focus of the advice and support we provide is in the financial commercial field. Where we think we can be most helpful to GP consortia and indeed to other parts of the NHS is in helping them to implement good financial management regimes within their organisations, to get a good grip on their finances, helping them to reduce costs without compromising quality, helping them to improve efficiency and, if we are looking at the larger organisations within the NHS, helping them to effect transactions which will help them to deliver their strategic objectives. For example, there are a number of acute trusts which are in the process of taking over the community services organisation so they need to conduct their due diligence on the organisation to make sure that they are integrating them in an effective and cost-effective way. That is where we play as an organisation.

  Our strong preference is to provide skills and expertise which are not available within the NHS and which will never be available within the NHS and which the NHS will buy on a time limited basis. We will provide that expertise and then we will depart. We are not in the business of trying to take over the jobs of people within the NHS. We are not in the business of what we call manpower substitution. We think it is important that within any organisation, and particularly within any public sector organisation, there should be strong, competent, self-confident business people who can run those organisations who will turn externally for advice only when they really need it. That is the kind of advice that we provide to our private sector clients and it is the kind of advice that we like to provide and want to provide to our public sector clients as well.

Q359 Andrew George: Could you do that on the basis that the NHS remains in the present structure to the same extent or do you think you could do more in terms of offering that service under the proposals of the White Paper?

Alan Downey: As with the provider of any service, there is a question of supply and demand. At the moment demand for our services is high but willingness to pay is low, which is an interesting situation to be in. We could certainly do more. It is our view that financial and commercial skills are not as strong within the NHS as they ought to be and that they could be improved. We would certainly be keen to do more and, what is more, we would be willing and keen to do more on a basis where we put our fees at risk where we were only paid if we deliver a successful outcome. If it was, for example, a project where the focus was on reducing costs we would only be paid a small proportion of the costs that we helped to reduce when the saving was actually delivered. That's the nature of our business.

Kingsley Manning: I would just say we operate already in a number of our projects on both a performance basis and on a risk of return basis so we often inventively invest in projects or services and only get paid proportional to the success of those. I think, generally, by the way, that the most attractive opportunities for new suppliers into the NHS are to do with service provision.

Q360 Andrew George: I am sorry, to do with?

Kingsley Manning: To do with service provision, new models of care. You have heard today about people with new models of diabetes care, chemotherapy at home services and the rest of it. That is the most likely area for private sector development and independent sector development--more broadly, the third sector. We are not in provision. We will not enter into the market for direct provision of clinical services. We provide a range of technical and professional services, both advisory and in commissioning of services to the NHS. We have invested very substantially in the delivery of very high quality, very, very innovative infomatic services which we do on behalf of about a dozen PCTs where we are bringing international level skills and innovation in the use of a series of very potent products and tools for analysis and support in decision making. We also see opportunities for helping GP consortia to undertake commissioning decision making which we are doing with a number of PCTs at the moment and also in the delivery of what we would call care navigation services where we engage in directly supporting the patient with the GP in managing their own care pathways and their own wellness of health over a period of time.

Q361 Valerie Vaz: Is Mercury Health that part of your company?

Kingsley Manning: We sold Mercury Health six years ago now.

Q362 Valerie Vaz: But you were providing this service as well, were you?

Kingsley Manning: But that was, I am afraid, well before I became a partner in Tribal.

Q363 Valerie Vaz: I am trying to see what the future is like.

Kingsley Manning: No, we won't. In common with most other suppliers of ISTC services, it was a great way of destroying shareholder value.

Q364 Valerie Vaz: So you just see yourself as supporting commissioning as opposed to actually providing the service as well. Is that right?

Kingsley Manning: Yes, and this is something we touched on before. We think that there is a potential conflict of interest between people supporting commissioning services and providing services themselves. That seems to me to be fairly obvious.

Q365 Valerie Vaz: But you do see there is a conflict of interest, do you?

Kingsley Manning: If we were to provide clinical services, care services and commissioned them at the same time, yes, there is a clear conflict of interest. We wouldn't do that.

Q366 Valerie Vaz: But you see other people doing that?

Kingsley Manning: I think that there are people who think that it would be very nice to get a very large commissioning budget and then potentially develop businesses which they might then potentially commission to deliver services. I think there is a real problem about that.

Q367 Chair: Do you want to contribute on this, Mr Seddon?

John Seddon: Very briefly, yes. I doubt that I will get the opportunity but if I was asked I would very much like to help the Minister and his civil servants in the Department of Health understand that managing costs drives your costs up, that the last thing we need is industrialisation and that we need to move from arbitrary measures to real measures that tell us about the achievement of purpose. I think the purpose of the health service ought to be for every demand to have fast and accurate diagnosis and then for each condition to be treated on time as necessary. If we built measures around that we would be half-way to improving the system. Then I would very much like to help clinicians understand how to manage value rather than costs which would drive costs out of the system. But I doubt that I'll be asked.

Q368 Rosie Cooper: Mr Manning, there are two questions I would like to ask but the first is you have suggested that patients should be allowed to form their own commissioning group in the same way as parents can run schools.

Kingsley Manning: You have been reading my paper.

Rosie Cooper: What do you think the advantage is of such user-led consortia, what are the potential pitfalls and, as I have been trying to push the Secretary of State for a number of weeks, do you think we could have the best of all worlds by having patients actually involved and on the boards of consortia?

Kingsley Manning: I would never, clearly, in my job ever disagree with the Secretary of State, whoever it was, over the last 30 years.

Chair: I don't remember that.

Kingsley Manning: I was simply wondering aloud why these things were called GP commissioning consortia because there are nurse-led general practices. Why shouldn't we have clinician-led or medicine-led consortia? In those circumstances, why wasn't I being allowed to set up commissioning consortia for the benefit of middle-aged men who are usually very under-represented at these things?

  There is a really interesting opportunity around consortia that will lead to specialisation and segmentation where, potentially, people will be able to make choices. There was a very interesting question earlier about geography, for example. I think people will begin to make choices on outcomes based upon the performance of consortia and if you have a particular condition or are in a particular locality you may well choose to register with a GP, and therefore with a consortium, that much more reflects your needs and requirements. If you are HIV-positive and you live somewhere where the incidence of HIV-positive patients is very low indeed, wouldn't you do better to register with a consortium in Fulham, or wherever, that has real expertise and knowledge about that?

  The logical continuation of that is that we will have a system which may reflect communities, as they are increasingly becoming, that are less to do with place than with self-definition, to do with a virtual environment, to do with condition, stage of life, choice or preference. These communities are not necessarily related to place, certainly not in urban environments and the consortia should reflect that degree of specialisation. The notion of having consortia that are driven by condition or particular interest—mental health, a long-term condition, dementia or diabetes, for example—is potentially a very exciting possibility and I can't see why it should not be possible within the plans to at least enable that to happen. I think it will happen inevitably, by the way.

Q369 Rosie Cooper: What do you think the pitfalls of that would be?

Kingsley Manning: The pitfalls for anything which is driven by individual interest are narrowness and vested interest but that is already the case. Vested interests drive the NHS as it is today. They drive a false distribution of resources and they drive false priorities, both because there are vested interest suppliers and vested interest in particular patient groups. This way, at least, it becomes transparent.

Q370 Rosie Cooper: So there will be a great benefit to consortia, however described, if they had coalitions and patients, the two sets of people for whom this has got to work, at the core.

Kingsley Manning: I think that in extremis, and your Chairman has spoken about the possibilities of writing out vouchers and so forth, you end up getting people making real choices between commissioners and the commissions become the servant of the members. These things should become membership associations. They should become members of the consortia and members should be in a situation where they begin to direct what its priorities should be.

Q371 Rosie Cooper: Okay. We will obviously investigate a little further. Under the new commissioning system, where do you think the greatest areas of potential growth for your business will lie?

Kingsley Manning: A great deal has been written and spoken about support services to consortia, much of it misguided. The total value of those services, at about £5 or £6 a head, will be £250 million or £300 million. It will be extremely difficult for any commercial organisation to deliver support services to GP consortia. It will require very substantial scale and investment. We may well consider doing that, but I don't think that we see it as being an overly profitable or extensively interesting opportunity. The most interesting opportunity for us is providing technical support services to the management of lots of conditions and the use of patient management systems coupled with care navigation based on very effective infomatics where the opportunity to deliver vastly improved outcomes for patients combined with substantially reduced costs means that there is the opportunity of driving both scale and the potential for margin and taking risks, by the way. That is where you take risk.

Q372 Rosie Cooper: In your evidence earlier today you were very clear about conflict of interest between the commissioning and provider role. In the past, Tribal, for example, has been involved in commissioning and in providing via Mercury, one of your subsidiaries—

Kingsley Manning: I want to make this absolutely clear. We sold Mercury, as I said before.

Rosie Cooper: Yes, absolutely.

Kingsley Manning: And we were not involved doing any commissioning work at that point.

Q373 Rosie Cooper: No. Forgive me, I am not suggesting you are now but there is an example, a prime example, of where commissioning and providing in a system existed together. There may be other subsidiary companies and organisations where this could in fact be a creep and a big danger. Do you see that?

Kingsley Manning: I think it is a problem for the whole system and one of the issues that GPs are struggling with is, do they want to be providers or commissioners and where did the line divide? The commercial imperative is very often to become providers whilst remaining part of being commissioning consortia.

Q374 Rosie Cooper: Commissioning you can't make a profit, providing you can?

Kingsley Manning: There's hugely more money to be made for GPs and everybody else in the provision.

Q375 Rosie Cooper: So we'll not have very many commissioners and lots of providers?

Kingsley Manning: The scale of the market opportunity for the independent sector is vastly more on the provision side than it is on commissioning. To reiterate, just do the mathematics. The management costs per head that the Government Department is talking about is going to be £5 or £6 or £7, something of that ilk. Fifty times that is about £300 million. The commercial sector and others are being asked to provide support to GP consortia for that amount of money which was previously done by PCTs spending nearly £1.7 billion. It is not a big market. It is not a very big market. We are very interested in doing it. We think it is a really interesting process. We think it is really exciting stuff. But we are not and nobody else is going to get very rich on this.

Q376 Rosie Cooper: I was wondering whether I could have one sentence, a dangerous sentence perhaps. The medical community is a reasonably small community. It's a big community but in an area everybody knows everybody and they will know the providers. What is the danger of those relationships being too close in a conflict sense?

Kingsley Manning: I think there's an extraordinary danger but that is already the case. This is a highly stable and self-satisfying system which basically reflects the vested interests of the parties participating at a local level. It is highly collusive. It delivers very, very well in a satisfying way to suit the services. But the reason why you go to mid-Staffs, the reason why you go to Medway, the reason why you go to Sheffield and the reason why you go to Bristol is because these systems are not self-reflecting or critical, they are highly collusive.

Q377 Rosie Cooper: Can you see anything in the White Paper that will deal with that?

Kingsley Manning: Yes, I do. I think that the publication, which is the Secretary of State's intention, of virtually everything that can be published on outcome data and on performance data will lead to a level of transparency that will enable there to be an enormous light shone on the process. It will simply not be possible for a GP consortium to enter into a collusive relationship with a particular chosen preferred provider. It will be obvious in the data. It will be obvious to patients and it will be obvious to their competitors.

Rosie Cooper: I do hope you are right.

Alan Downey: If I could just support that, if we've got strong GP commissioning consortia, if we have a reasonable level of competition for the provision of services and if we have a high level of transparency and data published for the benefit of patients, those three things between them should ensure that we have a health system that delivers high quality care and good value for money. I don't think, in principle, that it is at all complicated. Clearly getting there is a real challenge and that is what the NHS needs to manage over the next few years.

Q378 Yvonne Fovargue: You mentioned the third sector. It has always been an aspiration to get the third sector more involved in this and it hasn't worked particularly well so far.

Kingsley Manning: It is very patchy. The most successful commercially aggressive organisation in healthcare that I have seen is Turning Point, whose innovation, combined with their commercial nous, is second to none. I hold them up as a beacon of how things can be done successfully.

Q379 Yvonne Fovargue: How do you feel the White Paper would expand that across the country, because it is very patchy at the moment?

Kingsley Manning: It will be very difficult. The problem with healthcare is that it requires very substantial investment, the regulatory barriers are high and most independent typical capital organisations find that very difficult. But there are glowing examples: the hospice movement, St Christopher's in south London and a range of others. The market opening will clearly not be there but there will be specific efforts under AWP to be open to the voluntary sector, the third sector and the independent sector. That will be an enormous opportunity for them and an opportunity to deliver very interesting new models of partnership with the more normal commercial structures.

Q380 Dr Wollaston: Based on your company's experience of providing management support to the NHS, what do you feel is the appropriate level for the management allowance?

Kingsley Manning: Much more than they are going to set it at.

Q381 Dr Wollaston: We've not had any clarity, really, about them. There have been murmurings but what would you, in an ideal world, think it should be?

Kingsley Manning: It is very true, and Peter Weaving—I don't know if he is still here—made this point several times about how his experience is such, about the importance of good support and management services. There is a danger that we potentially cut it at a level which means that we are down to absolute basics. That will then mean, and Peter has talked about this before, that you are then going to make choices about: Do you spend some of your commissioning budget on management and support rather than just your management budget? If it is too low there will be benefits in doing that. Our view is that potentially nearer to £10 than £5 it becomes effective.

Alan Downey: There are also risks associated with setting the management allowance too high, strange though that might sound, because one of the advantages of the GP commissioning approach as compared with the former PCT approach is that it is part of the Government's aim that these consortia should be entrepreneurial, innovative and find new commercial ways of doing this job successfully. Anybody who has worked closely with PCTs would probably say that although a great deal of good work was done, a huge amount of money was also wasted. You can pump too much money into the system and almost drive poor value for money as a result of doing that. If the GP consortia can be resourced to an adequate but not generous level, the Government will probably have struck the balance about right.

Q382 Dr Wollaston: So, £10. Any advance on £10?

Alan Downey: It would be purely speculative to name a figure.

Q383 Dr Wollaston: So you can't name a figure. You think it should not be set and just see where it arrives at?

Kingsley Manning: No. It has to be set. I agree with Alan that if you over-fund it, you will effectively encourage a dysfunctional market and waste. It needs to be set at a level that reflects the underlying scale economics of providing these services and that is certainly probably sub-ten pounds.

Q384 Dr Wollaston: You think around £10?

Kingsley Manning: This is highly speculative because, frankly, the data doesn't exist. The analyses have not been done. The NHS has set out to cut its costs by this wonderful figure of 46%, which is wonderfully, spuriously accurate. Essentially, it is going to be dramatically reduced and then it is up to us and other potential suppliers to see whether or not we can deliver an effective system within that envelope. That's the challenge.

Q385 Dr Wollaston: So there is no evidence base on which to base this?

Kingsley Manning: There are probably tons and tons of analyses and spreadsheets but, at the end of the day—

Q386 Chris Skidmore: But if you deliver at £5 and it is set at £10, the consortia take the £5 in their pockets? You were talking about £5 to £6 as possibly something that you could deliver yourself.

Kingsley Manning: I am talking about the total costs of delivering the service. I am very happy to share with the Committee our analysis of the underlying economics of these things, but there are core costs here. You have to set up infomatics, data centres, transaction services, 24 by 7 staff. There are core services you need and then there is volume and that is why it is going to be very important for any supplier to achieve realistic volumes to be able to support this. I thought that the question around who pockets the difference was going to be in the Bill. I repeat Mr Lansley is not terribly keen on people making profits out of this.

Q387 Chris Skidmore: I didn't mean profit, I mean in terms of the consortia itself managing its budgets, its possible deficits and taking over PCTs. If the allowance is set at £10 and then, suddenly, an organisation comes along and says, "We can deliver that for a management allowance of £5—

Kingsley Manning: Bear it in mind that at a population of 200,000 the average consortia would have about £400 million of commission budget and an average of less than £2 million for the management budget. The management budget is tiny by comparison with the commission budget.

Q388 Chair: Would Mr Seddon like to contribute to this debate from, as it were, outside the mainstream?

John Seddon: I have learnt, in my life, that the most important thing to do is to redesign operations before you discuss what levels of management you want. I think the evidence is there that if we redesign health operations, we could save a fortune at the same time as improving the service and then you address the question of what you want the management to do. I know that is rather odd but it works that way round in the private sector.

Chair: I think that came dangerously close to a mainstream view.

Q389 Valerie Vaz: A question for you, Mr Manning, in your description of this virtual patient. Where do you see this accountability of public money? Do you see it as an issue?

Kingsley Manning: It is a tremendous issue. The issue of the Government's accountability through the GP consortia--the question was asked as to the accountable officer--my understanding is that it would be the chairman but they will also need to appoint a finance director.

Q390 Valerie Vaz: They're not elected, are they?

Kingsley Manning: There is a real question about that. There are boundaries here between the elected process, which ends up with one sense of representation, and the participation as a member which ends up with a different process of accountability. I would like to see the empowerment of the citizen as a member of these organisations, and particularly in relationship to their own experience of them and having the right to leave or to move away from them. I am concerned, and we will have to see how the relationship with the local authorities work and the rest of it. There are models where the foundation trusts have gone for membership models and governance and there have been temptations to have elected members. Indeed, some original thinking about consortia was from those members. But that results in a certain type of representation which tends to be incredibly institutionalised and, again, to reflect vested interests rather than the common interest of the average citizen.

Q391 Valerie Vaz: You have concerns about this under the White Paper?

Kingsley Manning: I think everybody has concerns about the distribution of £80 billion to a large number of organisations. I know Mr Lansley does because the accounting and audit issues of that are going to be very substantial indeed. The level is NHS fraud is already significant. We will need to be very careful that that level does not rise further through a reduction in the control mechanism.

Q392 Valerie Vaz: You described the White Paper as denationalisation?

Kingsley Manning: I got told off for that.

Q393 Valerie Vaz: Do you see it moving to a privatisation policy?

Kingsley Manning: No. I tried to explain to Mr Lansley that when I said this, I wasn't talking about privatisation at all. What he is very interested in doing, and again I understand this is helpful, is the development of a social enterprise model, a mutual model, which is moving people out of state management into self-management organisations—effectively, a denationalisation process. You can either believe that or not as being a good thing. It seems to me a very exciting prospect that you effectively say to provider organisations within the NHS, "If you wish to take control and manage this organisation for yourself, you will have a right to do so, a right to provide. In so doing, you will move outside the conventional historic state and become something much more like a university structure." It is a bold step and it would change the nature of the service dramatically but it would create a very, very large, effectively not-for-profit, independent sector, a voluntary sector, through the denationalisation of currently state-managed assets.

Chair: We have covered a lot of ground. Thank you very much for your contribution this morning. We will reflect on it in the context of our report.


 
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