My mission statement

The times we are working in now need a great deal of accelerated change and there must be no negotiating that down. So my mission statement for this part of my consultancy career is to be clear that there needs to be and will be a lot of change from the work that I do with individuals and organisations and if organisations don’t want that, then it is probably best to go somewhere else.

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Dealing with failure is vital for the NHS to succeed.

Filed Under (Competition, Health Policy, Reform of the NHS) by Paul on 18-07-2011

Last week saw the latest episode in one of the longest running policy development sagas within NHS reform – the failure to create a failure regime for NHS hospitals.

This is a policy that has been much announced since the NHS plan in 2000. However little has been delivered in the 11 years since then. Three separate Governments have failed to create a failure regime. Each of them has recognised how important it would be to have one, yet each of them, as they come close to publishing one, has backed away.

Last Tuesday’s Financial Times had a familiar headline, “Regime for failing hospitals attacked”. The story reported on leaked DH documents that were commenting on the Government post-pause position on failure and how the failure to create a proper failure regime was going to cost a lot of money. The Civil Service estimate was that the failure to develop a real failure regime and which therefore keeps failed hospitals units and services open when these services can never be economically viable will cost about £500 million annually.

Readers of this blog will know that my own estimate of the cost of the Government’s inefficient hospital fund is nearer £3 billion cumulatively by the end of this Parliament. (And as I have commented this will need a direct subsidy from the Treasury as it will exceed the NHS budget. This could amount to about 50% of the money the Chancellor hopes to have available for tax cuts before the next election)

So the price of failing to have a failure regime that works within the NHS is very expensive.

Why does this matter so much to policy reformers? Why do we badly need a way of quickly dealing with failure?

In every industry and service there has to be a way of closing down less efficient and less productive parts. In the private sector there is a suddenness and ruthlessness in the way in which markets make this happen. If you fail to compete well against other organisations, if you fail to keep up with new ways of working, you will find those that do gain more business – and those that don’t lose. We have all seen how quickly this can happen when a shop or a brand that once looked very solid suddenly folds under a welter of debt.

Why this concentration on failure? Because it is the way in which industries and services move forward – not just as individual organisations but as a whole service. The best get better and/or more efficient and the less good, or the less efficient, fail and leave the industry. So failure and closure allow the whole industry to improve and move forward.

It also means that there is a mechanism for limiting the amount of variation that exists within a service. If those that deliver bad service close, the variation between very good and bad doesn’t grow – since the bad are no longer part of the service.

We all know that there is very considerable variation in the performance of organisations within the NHS, variation in both primary and secondary care provision. One of the exciting things about medicine is that what counts as a good service moves forward all the time – so there is an inbuilt dynamism in the relationship between science and health care outcomes. The best know that they have to keep scanning the horizon every day – or fall behind. Because someone else will.

So we know that there is a lot of variation in outcomes between different NHS organisations and more and more information about those variations is now available. That means that more and more people are choosing to go to the better organisations and those that are worse are losing business. Of course they can and should improve.

The whole improvement movement is based upon the capacity of organisations that are not very good buckling down and changing the way in which they work. So bad institutions don’t have to fail. They can get better.

But some organisations, for a variety of reasons, just can’t improve, and fail. If there is no way of dealing with this, they stop providing services and leave the service or the industry.

By definition when they leave the service the average outcome for the whole service improves. Let’s consider how this might apply to the NHS. If you have 200 hospitals with a set of outcomes for, for example, a heart operation ranging from a 1% failure rate in the best to a 5% in the worst then if the worst five organisations stop carrying out the operation, the overall outputs of the service improve because those operations that would have been done by the worst organisations are now done by a better hospital.

So if you want improvement in outcomes, efficiency, safety, then you need a way of quickly and efficiently closing those parts of the service that are working at worse than the current average.

This is why not having a failure regime limits the extent to which the NHS can improve, and gravely limits the capacity of the NHS to improve efficiency.

No failure regime. No success in meeting the Nicholson challenge. An issue I will return to later in the week.

In a different area of public policy – the first school was labelled as failing in 1996. This was a big shock at the time, but since then education policy has become used to recognising that some organisations will fail. They start by falling behind as others improve faster. Some that fall behind go through dramatic improvement and simply get back on the improvement track. Others cannot escape the spiral of decline.

The public education system now recognises that systemic improvement requires a recognition of failure and a set of methods for dealing with it.

Every month that the NHS does not have a failure regime, it limits its capacity to improve the health care it delivers to the public.


3 Responses to “Dealing with failure is vital for the NHS to succeed.”

  1. Paul,we do have a failure regime it is called the National Performance Management Framework,which covers performing,under performing,and Performance under review of NHS Trusts.The issue is how does the DOH manage the Performance under review status?It is not lack of a system that is the problem it is leadership of it.

  2. Well said Paul, agree on all counts.


  3. Paul
    An interesting post as always. The stark reality is that the additional £3bn you refer to will be required over and above the total NHS budget and will result in a ‘cost pressure’ for the NHS and indeed the Treasury. It is at this point that the public and other departments may realise that the inefficiency needs to be addressed in a different manner. I also wonder how many referrals to the CCP there will be as this may be construed as anti-competitive…

    Best wishes,

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