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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It’s the incentives wot done it……

Filed Under (Incentives, Reform of the NHS, Resources) by Paul on 21-01-2010

A moment’s indulgence for the blog writer from the blog reader.

Wednesday’s publication of the Nuffield report on the four different home countries NHS reform policies left me shouting at the Today programme with much glee. (And that is not a reaction that ‘Today’ often draws out of me.) Not only had they published a research report that went beyond the orthodox finding of on the one hand and the other, but Jennifer Dixon as CEO of the Nuffield was on the radio defending the findings.

To be able to clearly say that hospitals in the English NHS were more productive in 2006 than those in Wales, Scotland and Northern Ireland was to say that one reform programme had worked more effectively in creating Value for Money than the others.

I remember in 2003/4 the Scottish and Welsh governments each saying that they felt it would be wrong to develop a purchaser/provider split in their countries. I remember that they said that such a notion of buying and selling health care did not fit in with their culture. They wanted to stick with a single organisation and felt they could, simply by putting in more money and a good chain of performance management, get the NHS to work better.

At the time I remember being very grateful that the UK Government had developed proper devolution in Wales, Scotland and Northern Ireland with clear local accountability. It was a difficult enough period for reformers at that time when we were in the middle of creating a pricing mechanism, patient choice and autonomous Foundation trusts, without taking on a series of different national cultures that seemed to find incentives wrong.

But I was left with a clear memory of how the English reform programme was different from the other home countries. We were trying to break up a very large single organisation with a range of internal incentives to encourage people to work differently. They were placing their money (more of it per head than we had) on keeping the organisation of the NHS whole. 

It was the incentives that were different in England.

This, and time, has helped me understand and distil all the different aspects of reform into the essence of a different approach to how you change organisational and individual behaviour.

So for example when, in 2002, we were working on the first pilots to develop patient choice (If you were waiting for a heart operation for 6 months you were given the choice to go somewhere else that could see you more quickly than your original hospital) we recognised that whilst it was important for the patient to be able to chose somewhere to have their operation more quickly, on its own this did not reform the system. So we suggested that those hospitals who ’lost’ a patient because the patient was made to wait longer than 6 months would not get paid for that patient.

At the time many people were horrified. Why were we punishing a hospital for not being able to do the work quickly enough? And why were we rewarding a hospital for being able to work more quickly. We were told that surely such a set of interventions had no place in health care.

The argument against our reform was that some provider should get paid for not doing the work and it would surely be insulting to suggest that the incentive of payment would have any impact on health care behaviour.

At the time I found it odd that the majority opinion in the NHS was that organisations would not respond to such an incentive. That it was in some way “grubby”.

One of the reasons I found this odd was that we were spending a lot of our time negotiating with doctors, nurses and other staff about their pay. It seemed to me at the time that payment for going to work was quite rightly one of the most understandable incentives for staff to turn up and work hard. I had no trouble seeing this as an incentive that works.

However if you were to suggest that the same incentive would impact on an organisation – that it would do more work if it got paid for the work that it actually did and not just received a block grant for any amount of work, that was in some way wrong.

So we constructed first patient choice and then the fact that money would follow the patient and those hospitals would get paid for the work they did.

This is the core of the incentive structure that has developed reform.

Interestingly these are the very incentives that David Nicholson saw as “ideological” and not part of the NHS as I posted earlier this week:

In December David Nicholson Chief Exec of the NHS gave an interesting interview in the Financial Times in which he said

“One of the mistakes that the ideologues around reform make is that they think that all you have to do is put the right incentives and penalties into the system and the service will respond”

Of course it’s important to get the incentives right; of course it’s important to understand what will change the specific behaviour of the people and organisations that you want to change. But generally in the world we live in paying organisations for the work they do, rather than paying them irrespective of the work they do, works quite well.

Now I know that everything is relative and that it would be completely wrong to characterise any or each of these national NHSs as ’efficient’, but it’s a little step forward. The coming financial pressure means that all of them need to do much much better in improving efficiency and productivity.

But at least we now have a clue about how to achieve that. And that is to find the incentives that get organisations to do what you want them to do, and use those incentives.

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