Sending shockwaves through the NHS?

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Taken at face value, Simon Stevens’ recent remarks to the Public Accounts Committee should be sending shockwaves through the NHS. Six to ten sustainability and transformation plan (STP) areas, to be announced in the forthcoming Forward View delivery plan, are set to become ‘accountable care organisations or systems, which will for the first time since 1990 effectively end the purchaser–provider split, bringing about integrated funding and delivery for a given geographical population’. 

It would be hard to overstate the magnitude of such a shift in policy, if that is what we are witnessing. Since the early 1990s, governments have pinned their hopes on purchaser–provider separation as the basis for health care improvement. Simon Stevens’ comments reflect, in large part, a growing perception that the costs of the purchaser–provider split outweigh the benefits of the market it was supposed to create. Transaction costs are high. Meanwhile, the market has delivered, at best, only modest efficiencies. Demographic and epidemiological changes are driving integration, which makes arm’s-length contracting even harder. 

NHS England is not, at this stage, proposing to abolish commissioners or bring commissioners and providers within a single organisation. However, it is contemplating blurring the boundaries between commissioning and provision in two ways. Under one option – an accountable care system – commissioners and providers could agree to work as a system with collective management of a budget. Under another – an accountable care organisation – commissioners might transfer a budget to a lead provider or group, with providers taking on many activities currently delivered by commissioners. Both borrow from the ‘virtual’ and ‘integrated’ models being developed for primary and acute care systems.

These proposals need to be seen alongside other changes in commissioning and service provision. Clinical commissioning groups (CCGs) are coming together through partnerships or mergers. Hospitals are establishing groups or networks. Primary care, community services and hospitals are creating new partnerships. 

These changes have important implications for how commissioners and providers should work together. First, they will not be able to work flexibly in an effective partnership if they rely on transactional relationships and the details of contracts – consider Toyota’s agreements with its suppliers, which simply commit to joint working to resolve difficulties. Second, the role that competition and financial incentives might play in these systems is unclear. What is the point in one member of an alliance devising complex schemes to motivate performance in another, only to bail it out after they are applied?

If these models are the future, commissioners are likely to become planners and funders, responsible for allocating resources to these systems and holding them to account for delivering improvements. Rather than top-down performance management, competition and regulation, our research on ‘reform from within’ points to the role that devolution, system leadership, quality improvement, transparency and benchmarking could play in making these systems work.

The NHS will clearly face challenges in implementing these changes. The governing bodies of CCGs and foundation trusts must agree to mergers or to work in close alliances. NHS Partners Network has warned of the need to respect procurement rules; Virgin Care’s recent legal challenge (launched after it lost a bid for a children’s community services contract) may signal an independent sector fight back.

A bigger question still is what will fill the gap in health policy? If there is a fundamental re-design of the relationship between commissioners and providers under way – and we at the Fund support the testing of alternative approaches – many other pillars of health policy come into question: procurement, choice, Payment by Results, foundation trust autonomy. If not through markets, how will government avoid a return to the state Alain Enthoven described when advocating the purchaser–provider split in the 1980s: monopolistic systems, more geared to satisfying the interests of managers and institutions than the communities they serve?  

At this stage, it is difficult to gauge the full ramifications of the change. New policy is emerging incrementally rather than through White Papers and legislation. While an evolutionary approach is welcome, at some point thought will need to be given to a policy and legislative framework that is unravelling before our eyes. For example, how will government hold these new systems to account while giving them autonomy to drive improvement? How should it modify a regulatory system built on the purchaser–provider split and focused on individual organisations? Where does this leave patient choice? The debate on these issues should surely now begin in earnest.


Tony Ranzetta

Comment date
02 September 2017
Chris/Ben excellent report but 2 comments
why go all the way to NZ when Scotland is into itss 17th year of iintroducing this model ith bette health outcomes and better health improvement than NZ?
then where are the other 2 divides that need to be adddresssed, dealt head on in Scotland in the 2000 Easter coup but not mentioned. If we want to elimiiate the beedd blocking that remains the ajor inefffiiency cbipplinng our hosptals then
1. why do we continue to leave a privately funded nursing cre aand privat sector elective aare model in play cf Scotland where sorting both was part of a genuine total heealth system model add
2. community care has disintegrated in large parts of England so where are th models off intrgrstd care? NZ is far from best, whereas France, Switzerland, Japan, Italy all offer better integrated models.
3. Has there been any attempt to simulate the benefits challenges and risks because I have done so and each time we leave a ky component of total healthcare out of the equation we introduce delay with complications of care as well as lost capacity arising plus we introduce conflicts of priorities and additional transaction costs


Birchwood PPG
Comment date
18 April 2017
Is it not time for the policy wonks and sus GCSE Sociology wallahs and profit sharks spivs and shyster to stop 'experimenting' with the NHS ?[that includes you ]

Simon Bolton

Regional Organiser,
Comment date
28 March 2017
A good article covering what has been clear for some time that the purchaser /provider split to encourage privatisation of the NHS has failed and after 26 year of governments trying the policy needs to be laid to rest. The policy came out of the Thatcher Governments obsession with private sector good public sector bad despite all the evidence to the contrary.

You only have to look at the US to see what happens when the private sector is left to provide healthcare with costs per capita of double the UK and for a worse service.

The worrying thing is that the politicians can't or won't just get rid of the market even though it isn't working but will saddle the NHS with the continuing waste of resources just to appease the private sector.


Edge health
Comment date
27 March 2017
Well written article Ben. There were many good reasons for the split that seem to be forgotten all too casually. My fear is another (necessary??) restructure that changes the system, but has little impact where intended.

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