2 Current weaknesses in NHS commissioning
Commissioning arrangements since
2002
10. Since 2002 the statutory bodies responsible for
commissioning in the NHS have been Primary Care Trusts (PCTs).
There are now 152 of these, each of which is responsible for ensuring
that all the healthcare needs of their respective (geographically
defined) "responsible populations" are met, within the
available budget.
11. PCTs are run by appointed (executive and non-executive)
members of Boards, which are ultimately accountable to the Secretary
of State for Health. The line of accountability runs through the
10 Strategic Health Authorities (SHAs), which function as regional
outposts of the Department of Health (DH), performance managing
PCTs and acting as a conduit for their funding.
12. PCTs are responsible for spending around 80%
of the NHS annual budget, which stands in 2010-11 at £104
billion. PCT funding is mostly accounted for by the "unified
allocations" (non-ringfenced revenue sums) which they are
given to pay for Hospital and Community Health Services, General
Practitioner (GP) services and the drugs prescribed by GPs. Each
PCT has a target unified allocation, determined using the "weighted
capitation" formula. This seeks to allocate funding so as
to achieve "equal access to healthcare for people at equal
need", as well as "to contribute to the reduction in
avoidable health inequalities".[6]
13. PCTs must choose how to deploy the resources
available to them to meet their local populations' health needs.
They must do so within certain constraints. They are required
to fund interventions that have been endorsed by the National
Institute for Health and Clinical Excellence (NICE) on grounds
of clinical and cost effectiveness. Generally, PCTs must seek
to achieve value for money, as well as meeting policy goals such
as reducing health inequalities.
14. The previous government's programme of "system
reform" meant that commissioning had in recent years operated
in the context of an emerging NHS "market". Under "Free
Choice", patients were given the right to choose their provider
for elective secondary care, with "the money following the
patient" under Payment by Results (PbR). Under "Any
Willing Provider", independent sector providers were given
the right to provide elective secondary care for any NHS patient
who chose them (provided they met NHS quality standards and the
work was done at the fixed NHS "tariff" price). Accordingly,
the role of PCTs included managing, and fostering the development
of, the "market" in the NHS. However, in practice the
exercise of choice and the involvement of the independent sector
remained limited and Government policy on "contestability"
was tempered by the presumption that the NHS would be the "preferred
provider", where it was already providing satisfactory services.
15. The previous government sought to improve the
quality of commissioning by PCTs through several initiatives:
- Practice-Based Commissioning
(PBC) allowed GP practices (singly or in consortia) to
volunteer to control indicative budgets for commissioning some
kinds of care for their patients.
- The Framework for Procuring External Support
for Commissioners (FESC) facilitated the buying in of private
sector commissioning support.
- Various new commissioning levers, based
on the idea of "pay for performance" (P4P), were introduced
to give commissioners more influence over providers:
- Commissioning
for Quality and Innovation
allowed commissioners greater influence over the safety and quality
of services purchased from providers by making payment partly
conditional on achieving stipulated quality standards.
- PCTs
were enabled to withhold payment from providers where "Never
Events" (serious and preventable harm to patients) occurred.
- Some
"best practice" tariffs were introduced, so that the
national prices paid by commissioners to providers for certain
procedures were based on the costs of the best performing providers,
rather than the national average cost.
- The World Class Commissioning
(WCC) initiative sought to make NHS commissioning more professional
and effective by reviewing and rating PCTs' commissioning performance
against a set of indicators.
The previous Health Committee's
report
16. Our predecessor Committee conducted an inquiry
into NHS commissioning, publishing its report in March 2010. It
noted that, while commissioning is "a key function of the
NHS", and PCTs spend the majority of its budget, "the
great majority of English people do not know what commissioning
is or what a Primary Care Trust (PCT) is."[7]
17. The Committee found that while there were examples
of good practice being undertaken by PCTs, commissioners were
too "passive", failing to "insist on quality and
challenge the inefficiencies of providers". These weaknesses
were "due in large part to PCTs' lack of skills, notably
poor analysis of data, lack of clinical knowledge and the poor
quality of much PCT management". The situation had been exacerbated
by "the constant re-organisations and high turnover of staff".[8]
18. In addition, commissioners still lacked "adequate
levers to enable them to motivate providers of hospital and other
services".[9] PbR
gave providers a perverse incentive to generate more activity
(regardless of what was optimal in terms of clinical or cost effectiveness)
to increase their income. The Committee noted the possible benefits
of FESC, P4P and WCC, but was still sceptical about them. In respect
of P4P, it called for careful piloting and evaluation.
19. It was noted that the then government had announced
it would cut by a third management costs in PCTs and SHAs. The
Committee commented that "At a time when we are expecting
so much of PCTs, it seems risky to be cutting their management
costs by 30% when they need better skills and more talent".[10]
20. The Committee regretted the inability of the
Government to give accurate figures on the transaction costs involved
in the purchaser / provider split, while noting unpublished research
(commissioned by the DH) which pointed to total NHS management
and administration costs of 14%.
21. The report noted that witnesses had referred
to having the "disadvantages of an adversarial system without
as yet seeing many benefits from the purchaser / provider split".
It concluded that if "reliable figures for the costs of commissioning
prove that it is uneconomic and if it does not begin to improve
soon, after 20 years of costly failure, the purchaser / provider
split may need to be abolished".[11]
22. The starting point of our inquiry has been
our predecessors' findings on the significant shortcomings of
the current arrangements for commissioning in the NHS. Like the
previous Committee, we are motivated by the desire to deliver
high quality care to patients and good value to the taxpayer;
and we see the need for an effective instrument to drive innovation
and quality if these objectives are to be met. It is from this
perspective that we have sought to ask "How do we make commissioning
effective?" and reached our conclusions about the Government's
proposals.
23. In the next two chapters we consider the development
of the Coalition's proposals on NHS commissioning.
6 Department of Health, Resource Allocation: Weighted
Capitation Formula (sixth edition), December 2008, p 39 Back
7
HC (2009-10) 268, para 1 Back
8
Ibid., p 3 Back
9
Loc. cit. Back
10
Ibid., p 5 Back
11
Ibid., p 6 Back
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