Reforming the NHS in England

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Some time around 2000 it became evident that the service the NHS provided would not be 'transformed' to the extent that the government desired. The model was wrong. In England an impressive clutch of reforms were being implemented, partly set out in the NHS Plan: better regulation; more training, development, and staff; more 'change management', for example through collaborative programmes; more easily accessible guidance on best practice; better information and information technology; and pay modernisation. These would all help, but they would not be enough. Central directives, coupled with strong arm performance management, were highly effective but could be realistically applied only in a limited number of areas, and perverse outcomes were a high risk.

In short, it was recognised that the NHS could not be effectively run from the centre. And local NHS organisations did not have enough incentives to perform well. Why did it take a national target, with stiff sanctions on managers, for waiting times in elective care to be reduced so much? And why were staff too often providing excellent clinical care face to face but a lousy overall service?

The usual response to these questions is that the NHS has been chronically under-funded. Partly because of such responses, unprecedented increases in funding flowed into the NHS in England from 2001.

With investment came the need to reform. This reform focused on introducing market style incentives to prompt improvement. The resulting policies included measures to stimulate competition between providers: extending choice of hospital for patients; introducing a new system of paying providers (payment by results); encouraging new non-NHS providers to compete for NHS funded patients; allowing NHS trusts greater freedoms through foundation status; and strengthening commissioning of care.

Although it is still the early stages, the immediate direction of travel seems clear: withdraw from state ownership and from directing providers from the centre and instead allow competition, regulation, and commissioning to improve performance. This is a radical project, but will it work?

By the 2005 general election many distinct improvements but no overall transformation had been seen. Paradoxically, the number of NHS organisations facing financial deficits had increased, partly because of greater transparency in reporting of annual accounts, cost pressures arising mainly from pay modernisation, and the more exacting requirements of payment by results. On top of the more challenging financial environment are distracting mergers of strategic health authorities and of primary care trusts and a major roll out of practice based commissioning. Now, with few of the major reforms actually implemented, time is running out. What will happen then, if reform has not delivered enough to justify the investment?

Three main issues are pressing before that potential crunch point. Firstly, NHS organisations must implement the reforms already designed and manage the risks carefully. The supply of private providers must continue to grow. The reforms that may generate huge benefits for patients but that may also destabilise providers unnecessarily – such as payment by results, greater choice for patients at the point of referral, and the procurement of care from non-NHS providers – need to be managed. Inadequate or rushed implementation would stall much-needed reform; but so too would excessive caution.

Secondly, the current reforms, taken together, are unstable, and key elements need to be added. Most importantly, the financial incentives in the NHS in England encourage providers to admit more patients, which commissioners are too weak to counter appropriately. The incentives have been designed to reduce waiting lists, not reduce avoidable hospitalisation, which arguably is just as big a problem and more expensive. This is a glaring lack. Also, the more challenging financial environment is likely to spark horizontal mergers between hospitals and vertical mergers with commu nity or primary care services. If competition is to work, and alternative suppliers encouraged, then design of effective economic regulation – currently largely absent – is urgently needed.

Thirdly, politics. While things go steady in the NHS, Labour backbench MPs will give the government the benefit of the doubt on reform. But with a slim majority in parliament the first signs of trouble may prompt a reversion to type: a predilection for command and control. A return to the past, or botched reform, would surely usher in support for more radical and less acceptable solutions. Backbenchers should keep their nerve; but in turn the government needs to provide more evidence that reform on this scale can be managed effectively. They should both remember what unites them: a well functioning NHS that remains free at point of delivery.

Published in BMJ 2005; 331: 852