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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How cost-saving strategies could cancel each other out.

Filed Under (Expenditure, Primary Care Trusts, Reform of the NHS) by Paul on 02-12-2009

As I have said on this blog on many occasions, the reforms in the NHS are still incomplete. This means that the old culture that has run through the NHS, like names through a stick of rock, still has an enormous impact on how people make things happen. 

Given the reforms are so incomplete it is hardly surprising that, in facing the coming drop in the growth of public spending on the NHS, there are two distinct ways in which the NHS is going to try and work through it.

First it will try and do this through a ”top down” approach with which most NHS leadership feels safest.

Second it will try to achieve this by using the reform levers that the NHS has developed over the last few years.

The fact that, taken as a whole, the NHS will try to do both of these things is not in itself a criticism. In the next few years the NHS will be facing a pretty significant challenge, and when you are facing an important challenge to the future of your institution it’s important to use everything at your disposal to meet it.

So in the next few weeks I will write about the ways in which these two very different approaches will be used to try to improve productivity.

But today I want to highlight the possibility that these two methods could, overall, be used to cancel each other out. This sort of thing happens if both ’sides’ of the reform try and undermine each other. If the conservative and reforming sides of the NHS – in a sort of gentleman’s agreement – allow each other to pull their own lever, then we might get something which just stands still. It’s possible that the levers will cancel each other out. .

Here is one possible example which I expect we will see happening.

On one hand the old style NHS has always been anxious about the way in which, in the reformed NHS, acute hospitals have to gain work and get paid a price per piece of work that they do.

For these people over the last few years there has been a consistent anxiety about the way in which a hospital has to work hard to gain extra finance by increasing the amount of work it does. They see a hospital having to earn money as a sort of instability. It’s hard for an institution not to KNOW, what they are going to earn. Wasn’t it better in the old days for hospitals to be given a block grant from the health authority and say “this is what you are getting now get on with the work”? At least they knew where they stood.

And given some commissioners are not very good at what they do there is always the other danger that PCTs will run out of money because they are paying out more for acute care than they can afford. So the trouble with this kind of market management is that it’s just a matter of luck if BOTH providers and commissioners end up solvent at the end of the year.

For the anti-reformers, given that they see the tariff as increasing instability, and given we are facing this financial crisis, wouldn’t it be better if we could simply parcel the money out at the beginning of the year and say get on with that. This would give us much more control.

To make this work SHAs will be asking that certain health economies are exempt from the tariff in 2010/11 and will ask to be allowed to simply distribute the money as they used to by telling the PCT what it has to do. (Of course when they did this before, the part of the system that went out of control was the waiting time for patients. If the acute provider gets paid the same amount of money if it carries out 1000 hip replacements as it does if it does 1500 hip replacements, how many do you think it is going to do?)

So in the conservative corner there are those who will be trying to allow whole health economies to opt out of the tariff.

In the reforming corner there will be those that see one of the simplest ways in which productivity can be improved is by reducing the tariff, since the tariff is the price that the acute provider gets paid for carrying out a procedure. If you reduce the price then the provider has to try and carry out the procedure for less money – thereby forcing them to improve productivity.

It is almost certain the tariff will be deflated in this way as a method of improving productivity.

However if one part of the leadership of the NHS is reducing the tariff as a method of improving productivity and another is encouraging health economies to opt out of the tariff – they will cancel each other out.

Surely this couldn’t happen? In the next few weeks we will see.

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