A glimpse of a demand-side revolution

Richard Lewis

The NHS reform agenda has been dominated by efforts to strengthen the role of health care providers since the Labour government came to power in 1997. Foundation trusts and the purchase of extra capacity from the independent sector have hogged the headlines and occupied ministers' minds above all else. Now, the focus is switching to commissioning, with the possibility of real change, argues Dr Richard Lewis, Acting Director, Health Policy.

Publication:  Insight
Reference:  The King's Fund bi-monthly update, August 2006

Recent guidance from the Department of Health has placed the commissioning function centre stage (Health reform in England: update and commissioning framework). The guidance articulates in detail how commissioning might be undertaken and sets out a number of important new flexibilities that will strengthen the role of commissioners.

Given these moves, it might be tempting to see commissioning as a completely new activity that is set to transform the NHS as we know it. The reality, of course, is rather different. Commissioning has been around for more than 15 years, having been introduced in 1990 as part of the first attempts to create market-style incentives in the NHS.

Despite its longevity, commissioning is widely recognised as being the dog that has not barked. Far from challenging health care providers, commissioners (with some honourable exceptions) have generally failed to exert much influence at all over the actions of hospitals.

One result of this is a wide variation in health service provision across the country that is hard to explain with reference to differences in local needs. The King's Fund briefing Local variations in NHS spending priorities reveals stark variations in spending, with primary care trusts (PCTs) allocating vastly different levels of resource to the three clinical priorities of cancer, mental health and coronary heart disease.

So why have the purchasers of health care not managed to use their financial leverage over providers, or indeed bring more coherence to their own allocation of resources?

There are a number of reasons that might explain this: the techniques of commissioning have remained undeveloped; there has been little incentive for general practitioners to join in the commissioning process; and there has been a lack of political will to back controversial decisions that commissioners might seek to make. So should the Commissioning Framework give us optimism that these obstacles to effective commissioning will be resolved? The answer is a qualified yes.

The framework describes a number of techniques – already in use in some parts of the NHS but in their infancy – that will help PCTs predict and manage demand more effectively. Such an intellectual and financial investment in building the skills of commissioners and providing them with effective tools is long overdue. The new freedoms for PCTs to encourage new providers into the marketplace, through income guarantees and additional payments, are also important. Commissioners will, in future, need to be far more dynamic, able to proactively shape and create the sort of supplier market that they and their patients want, rather than simply passively accept what is offered.

More attention has been given to the nature of contracting and the relationships between commissioner and provider in an environment where patient choice increasingly holds sway. This illustrates the uneasy balance between markets and planning that lies at the heart of the NHS reforms. Patients must be free to choose, but PCTs and providers must also try to plan activity in advance and stick to planned levels as far as possible. Providers face incentives to withdraw from markets for some care (for example, where these are not profitable), but PCTs may be given powers to match those of Monitor to insist that those services are maintained in the public interest. A clearer vision for how this market system will be regulated is needed urgently.

Much of the commissioning agenda, in particular the ability to control demand and stick to budget, relies crucially on the success of practice-based commissioning. Achieving engagement among GPs remains a crucial challenge. Evidence from the earlier GP fundholding scheme in the 1990s suggests that practice-level commissioning can be effective. But the current environment, with many PCTs facing financial deficits and with the Quality and Outcome Framework competing for GPs' attention, is not particularly conducive to achieving universal coverage of practice-based commissioning by the end of this year. New incentive schemes announced in the framework will help, but will they be enough?

There must also be doubts about whether there is the political will to cope with the perhaps uncomfortable outcomes of commissioning (and of patient choice). Historically, politicians of all hues have found it difficult to countenance the loss of cherished hospitals and this has stood in the way of commissioners achieving change. The current government is talking defiantly about the need for radical change and they will need to stand by this rhetoric if commissioners are to have the confidence that tough decisions will be backed.

The Commissioning Framework is an important step on the path to creating a better balance between the powers of commissioners and providers. But there should be no doubt that strengthening the 'demand side' could create great instability within the NHS: there is little point in it unless it does. This underlines a central question of the latest attempts to reform the NHS: when ministers say that patients must have the power to revolutionise the NHS, do they really mean it? The next year should give us some important clues as to the answer.