Public Expenditure - Health Committee Contents

2  Meeting the Challenge: the need for service redesign and integration

5.  As the Committee pointed out in its Report of December 2010, the NHS needs to deliver efficiency gains of 4% per annum over four consecutive years if it is to continue to provide a good quality, comprehensive service and meet the increases in demand coming from demographic and other pressures. It is an immensely difficult task which requires those responsible to rethink fundamentally the way that services are provided.

6.  David Nicholson, NHS Chief Executive, said that the Department recognises what is being asked of the service:

Please do not think we underestimate the scale of challenge that people have here. This is a very, very different way of working, particularly for the acute sector. [...] We are going to have to focus much more on outcomes and integrated care. If an acute hospital thinks they can carry on as they are and, in a sense, salami-slice their service through efficiencies, it will not work for them. They will have more and more difficulty. They increasingly need to look at how they integrate with health and social care and to think about what sort of organisation they are going to be. They also need to look at the disposition of their services: can every DGH [District General Hospital] do everything? All those things are what people need to do. A substantial proportion of them are getting into that, but it is tough, absolutely.[6]

7.  When the Committee asked if the Nicholson Challenge was deliverable, Mike Farrar, Chief Executive of the NHS Confederation, said

[...] yes, it is deliverable but only if significant improvements are made in terms of the way we are going about it at the moment The "if" bit relates to, first, the scale of the challenge and, secondly, the fact that in order to deliver this there needs to be action at a number of levels, which all have to come off [...] Individual organisations need to be as efficient as they possibly can and deliver savings within their boundaries. The care pathways need to be redesigned and commissioners and providers need to work together to get the most effective use of resource. There needs to be more intelligent configuration of services between acute services in order to take out capacity, which we probably cannot afford to keep if we are going to release that to deal with the extra demand. Finally, the NHS overall needs to use its ability to orchestrate at scale those areas like management of supply chain and things like that in order to deliver benefits. To make all that happen is a Herculean task.[7]

8.  The Secretary of State told us:

The National Audit Office [...] said to your Committee [...] that most strategic health authorities told them that the model the Department had put in place to support the development of QIPP[8] plans and integrated plans had been very helpful and effective, that they considered it had brought a necessary discipline to the process and that they received an appropriate level of follow-up, feedback and challenge. It is a measured process. It is absolutely not as has happened in the past. You will remember when the NHS fell into a loss of financial control in 2005-06. One of the things David and his colleagues did was to restore financial control after that period. At that time there were short­term expedients, salami slicing and budgets being cut without regard to the impact on quality. We are not contemplating any of that. We are working across the Service to our utmost to ensure that we deliver against these financial and other efficiency challenges while continuing to improve the quality of the service provided to patients".[9]

9.  The evidence submitted to the Committee is therefore unambiguous. The Nicholson Challenge can only be achieved by making fundamental changes to the way care is delivered. It is neither possible nor desirable to achieve the required levels of efficiency gain through existing structures and any attempt to do so would result in a combination of inefficiency and poor quality which would (rightly) undermine public confidence in the system and represent an indefensible use of taxpayers' funds.

10.  We are concerned, however, that evidence does not suggest that the magnitude of this challenge has been fully grasped. Although it is relatively early days, and there are certainly localised examples of welcome innovation, there is also disturbing evidence that the measures currently being used to try to control the financial situation could fairly be described as "short­term expedients" or "salami slicing". We are not persuaded that the actions currently being planned will allow the situation to be sustainable over the four years of the Spending Review.

11.  The first year of this process ought to see the changes being made that will facilitate future redesign and yield further savings as the programme progresses—instead, as we discuss in the remainder of this report, we have the impression that NHS organisations are making do and squeezing savings from existing services simply to get through the first year of the programme. We heard little to persuade us that this overriding need to do things differently is being planned for in future years and we are convinced that the required level of efficiency gain will not be achieved without significant change in the care model.

12.  The Committee believes that the distinction between healthcare and social care, which has its roots in institutional decisions made in the 1940s, is now a major cause of inefficiency and service breakdown. The persistent failure of successive governments to address the requirement for more integrated, patient focussed care is creating powerful perverse incentives in the care system which are driving up costs at the same time as undermining the ability of the system to meet the needs of its patients. It is also increasingly apparent that the contribution that social housing could make to a proper integrated service is also impeded by institutional structures.

13.  While the separate governance and funding systems make full-scale integration a challenging prospect, health and social care must be seen as two aspects of the same service and planned together in every area for there to be any chance of a high quality and efficient service being provided which meets the needs of the local population within the funding available. We would like to see best practice in this rolled out across the Health Service and underperforming commissioners held to account for failure to engage in this necessary process of change.

6   Q 121 Back

7   Q 41 Back

8   See paragraph 15 for a definition of the QIPP programme. Back

9   Q 140 Back

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Prepared 24 January 2012