Economics Healthcare Politics

NHS Reform – for Worse or for Better?

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Published on Left Foot Forward on October 5th

Under the coalition’s planned NHS reforms GPs could find themselves with a serious headache. Patients armed with detailed outcome data and on-line hospital reviews may enter a GP’s surgery demanding referral to a named specialist at a hospital in another part of the country. The patient-choice imperative will make this a difficult request for that doctor to resist, but the financial and commissioning responsibilities handed over by the reforms may give him or her a worrying conflict of priorities.

A traditional role of the GP in the NHS was as a ‘gatekeeper’, who filtered out those of his or her patients most likely to benefit from specialist care, and referred them according to knowledge of the local hospitals and consultants. In this way, costs were kept down, capacity constraints observed and quality was managed through professional reputation. Now that paternalism is a dirty word, self-diagnosis takes a few mouse clicks and professionals are no longer trusted by default, this is no longer acceptable.

Under the proposed new system GPs, as well as being care providers in their own right, will form consortia to take on a role closely analogous to that of health insurers in countries such as Germany and Holland where healthcare is funded through more or less universal cover. These insurers become responsible for funding care for all applicants at a premium determined by their income. The basic level of cover is determined by law, and high income, low risk individuals subsidise the low income and high risk through state-mandated financial transfers between insurers. In effect, the new commissioning role for GPs differs only in that their consortia will have no option to feed rising costs back into higher future premiums, as has happened in Germany and Holland.

GPs will have the responsibility for contracting with every provider of healthcare to their patients within a fixed budget. Resisting any attempts by financially-focussed providers to cut their own costs by reducing quality, or to boost revenue by performing unnecessary procedures, will require water-tight contracts and close monitoring by GP-commissioners. The costs of this, when choice drives the use of multiple providers, may lead to serious pressures on clinical freedom and the financial viability of the GP-consortia.

In part, the coalition’s proposals are a continuation of an unsteady trend toward an NHS that, while remaining free at the point of care and funded through general taxation, increasingly involves market-type mechanisms. But the step-change envisaged here will allow NHS care providers to act in most respects as if they were in the private sector, as well as exposing these providers to the risk that they may be replaced by actual private sector providers.

The coalition believe that the NHS is not performing as it could or should, for which there is some justification from international performance and satisfaction surveys. Their claim is that this stems from a lack of accountability to patients along with excessive bureaucracy and a top-down control that blunts incentives to quality and innovation. But it could be argued that any relative failure of the NHS compared to comparable healthcare systems might be accounted for by an overall level of funding that is still generally 10-15% lower than other European countries and by the repeated structural upheavals of the last 25 years. There is certainly no justification for believing that market-style structures are necessary for better outcomes and satisfaction with care. Among the best performers on both counts are the almost wholly publicly funded and run Scandinavian systems. One of the worst performing healthcare systems in the developed world, and by far the most expensive, is the largely privately funded and privately provided US system.

The serious care and management failures uncovered last year at the Mid-Staffordshire Foundation Trust were not caused by a lack of financial motivation but by poor planning, absent communication and a culture of oppression. This demonstrates the importance of co-operation, communication and trust in healthcare. According to Professor Regina Herzlinger of Harvard Business School, the US record on innovation is actually quite poor, and more market-oriented care often appears to be a barrier to it, rather than an encouragement. But if incentive does have a role, it may be better to provide this in more flexible and targeted ways that go with the collaborative nature of healthcare and the high intrinsic motivation of healthcare workers. Perhaps NHS providers could operate as John Lewis style partnerships, sharing bonuses for meeting specific yearly targets for cost-cutting or quality? A bonus fund, to be similarly shared, could be set up for successful innovations in care. Other creative solutions that go with the grain of healthcare provision rather than against it are possible.

If decentralisation is important, this doesn’t necessarily require GP-commissioners or providers to be independent of direct public control. Sweden, Denmark and Finland, all high performers on healthcare outcomes, satisfaction ratings and overall costs, have healthcare systems primarily local authority led and funded. So not only is there locally responsive control of healthcare but also locally transparent costs, which the NHS’s funding from general taxation lacks. The results suggest this is the best of all worlds, and the shift to such a system would be hugely less risky and less costly than the coalition’s plans.

This article is based on a more lengthy analysis with appropriate references which you can read here.

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