The NHS in England is rarely out of the headlines and three big issues seem to dominate the coverage: safety, reform and efficiency. We’ll probably visit the first two in later posts, but for now we’re going to concentrate on the last issue – the question of health system efficiency.
In 2009, the management consulting firm McKinsey produced a report for the Department of Health which modelled future funding and expenditure over a five year period in England. They estimated that, due to fiscal tightening of public finances coupled with ever-increasing demand for healthcare, the NHS in England could be facing a recurring funding gap of £10-15bn a year by 2014. In the same report, McKinsey estimated that £13-20bn of productivity savings could be realised in the same period through provider productivity improvements (around half of the savings) combined with a mix of rationing (withdrawing funding for ‘low value’ clinical treatments) and reorganisation (shifting care from hospital settings to community). One year later and the NHS Chief Executive, Sir David Nicholson exhorted all NHS organisations to strive to achieve these efficiency improvements in what has now become colloquially known as the £20bn ‘Nicholson challenge’.
To put that in context, you could easily run more than 100 district general hospitals for £20bn a year
It’s worth noting that, technically at least, this does not represent £20bn of ‘cuts’. The NHS escaped the last government spending review with no real term reduction in funds (ie after allowing for normal price inflation). So it may be more meaningful to say that the NHS will need to ‘absorb’ an additional £15-20bn of clinical work within its existing budget. However, there’s no escaping the fact that this is a huge, huge challenge and many are claiming that it is simply undeliverable.
Let’s assume for argument’s sake that the NHS in England costs around £100bn a year to run, so we’re talking about a 20% productivity gain over five years. To put that in context, you could easily run more than 100 district general hospitals for £20bn a year.
So this is big. And unprecedented. The NHS has never faced such a massive efficiency challenge in its history, so if it stands any chance of success, what needs to happen? Well, we don’t know the answer (!) but what follows is a kind of ‘thought experiment’ which will hopefully expose some of the issues and provoke further debate.
The McKinsey solution is a possible starting point, but is unlikely to yield the answer in the long run. Providers of healthcare are already struggling to balance their books and many organisations are caught up in a vicious circle of increasing deficits, so layering another excessive efficiency demand upon them will almost certainly destabilise the sector for many years to come. Quality is also likely to deteriorate if tariff rates for hospital activity are reduced too far, and institutional gaming of the system will arise to make up the lost income in other ways – as it always does. The rationing and prioritisation agenda is patchy and marginal, subject to appeal and often heavily scrutinised by the public and media, so that is unlikely to produce the goods either. And the evidence for efficiency gain arising from community reprovision is conspicuous by its absence.
So what is to be done? Here are a few ideas from us, none of which we should say has been researched or evidenced. They are just ideas – your starter for ten. This is just a thought experiment after all.
First, we need to recognise that, in order to absorb another £20bn of clinical work within the NHS, the balance between clinical and non-clinical resources will need to change. The service will need more doctors, nurses, other healthcare professionals, clinical space, equipment and consumables. Within a static budget, that means that all other non-clinical activities (finance, administration, support services, etc) must consume a significantly lower proportion of the total spend than currently is the case. This will need to be a shift in order of magnitude of £billions not £millions to be significant. Of course, achieving that shift – whilst maintaining or improving the quality of management support to the frontline – is the tricky bit. But it must be acknowledged.
Second, there is an increasingly strong case to abandon the purchaser-provider split. Whilst the system introduced in the 1990s has had some benefits (around quality, access and efficiency), its adversarial nature now just seems to be getting in the way. Integration and collaboration are fundamental to redesigning a more efficient health service and it may be worth re-visiting the pre-1990 planning model where each geographic area (district health authorities back in the day) worked within a fixed budget and deployed this in the most effective way between primary, secondary and other providers. If this were clinician led, with a ‘good enough’ planning support team, then whole departments and organisations would no longer be required to run the system, slashing transactional costs at a stroke. There would be a downside of greater performance and governance risks perhaps, but we’ll need more imaginative ways of addressing those which don’t involve multiple bureaucratic layers.
Third, and following from the first two points, let’s abolish Payment by Results. It consumes a huge amount of resource to operate, is frequently circumvented and undermined through closed-room deals, and still only covers no more than 50% of NHS spending, leaving the other 50% subject to fierce price competition. Like the purchaser-provider split, it has had some utility in the last decade with incentivising waiting list reductions in a time of unprecedented financial growth, but now it just incentivises activity in all the wrong places.
It must cost many hundreds of £millions if not £billions to operate this transactional contracting environment and if we’re serious about re-profiling resources to the front-line, then surely the time has come to ask whether we still need it. We can continue to use the contracting and tariff data (whilst it exists) for benchmarking and analysis, but let’s use the data intelligently rather than assuming all providers should cost the same, as they clearly do not.
A fourth suggestion is to standardise everything. The NHS is a patchwork quilt of nationally defined contracts, standards and directives interwoven with locally negotiated exceptions, business rules, pathways, and variation. If we assume that (a) we have to run the NHS with much less bureaucracy and (b) with maximum equity, then we cannot afford to have every organisation, network and health economy designing its own procedures, protocols, pathways and priorities. Just do it once centrally, but do it well. This means employment terms, clinical standards, treatment priorities, supply chain partners, back office systems, organisational policies, everything. Involve the experts, the public and others, but mandate it for the whole NHS.
We’re sure everyone who works in the NHS can think of at least one process which they know adds little or no value to the patient experience.
Our fifth suggestion is that every organisation, board, department, team and service be subjected to a rigorous economic evaluation designed to identify low value processes. We’re sure everyone who works in the NHS can think of at least one process which they know adds little or no value to the patient experience. Let’s agree a kind of evaluation checklist scoresheet and apply it to everything that’s done. Things at the top are essential for patient safety, outcomes, quality and efficiency, whilst those near the bottom much less so. Stop doing everything below a cut-off point, which will be determined by affordability and legal compliance.
Sixth, in parallel with all this, the NHS needs to get serious about maximising employee productivity. Not just piling more of the same work onto already over-stretched staff, but supporting the workforce to work much more productively. Almost certainly, this needs investment for a quantum leap in training, coaching and managing all the human resources of the NHS in new and innovative ways. Again, we’d challenge you to find anyone in the NHS who did not have views on how this can be achieved. It could involve small changes such as shadowing peers to acquire better skills. Or medium-level changes like breaking down institutional barriers in the way staff work across organisations. And there would be a case for large-scale interventions such as the creation of a whole new type of trained healthcare worker that doesn’t yet exist.
Finally (for now at least), our seventh suggestion to consider is that the NHS really needs to work across the whole of government and civic society to raise the profile of preventive work. To date, most demand management efforts have focused on the immediate demand expressed by patients who are already unwell (triage, referral management, diversion schemes, and so on). Again, these are often costly initiatives with only a marginal impact which move the ‘problem’ somewhere else. A renewed focus is therefore needed upstream on the direct prevention of ill health (through screening, health MOTs, health promotion, social marketing, etc) and indirect prevention (health impact assessments for government policy, social inclusion, living wage, industrial incentives and penalties to encourage healthier lifestyles). Such activities can often smack of ‘the nanny state’, but given the scale of the challenge, can the NHS seriously not afford to look again at the opportunities they could yield?
OK, so those are our seven suggestions to get you started. We’re sure there are many other ideas of equal or better merit out there. And we don’t pretend that any or all of our suggestions are even achievable. For one thing, the NHS is a political entity and political interest may militate against some of our suggestions. And we may be wide of the mark with the evidence in some places. But, that’s OK, because this is after all just a thought experiment.
So, what does everyone else think?