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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