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Editorial Tuesday 18 November 2014: Filling the gulf between The Reid Code and the Five-Year Forward View

Denial is much more than a river running through Cairo. It's an understandable, if unhelpful, response to a fairly grim reality, such as the NHS's is currently.

A very smart friend recently observed that just now, the NHS is working to two planning strategies.

The first can be described as The Reid Code, after refreshingly abrasive Blairite Dr John Reid, who took over from Alan 'Opportunity Knocks' Milburn as health secretary in 2003.

Dr Reid got the NHS out of stalemete with the BMA contract negotiators and through the 2005 general election by the expedient method of getting the system to spend A Lot Of Money.

This led to a £1.2 billion overspend, causing the 2006 financial retrenchment which made toast of Sir Nigel Crisp and ushered in the era of Comrade Sir David Nicholson.

The Reid Code is simple: when facing a general election, find increasing squirts of extra (if not new) funding to get you out of political jail. To invert the slogan from the board game Monopoly, 'Collect £200. Pass 'go'.

That gets us to 8 May 2015. Maybe. If Treasury keep playing ball.

Then we have NHS England's Five-Year Forward View (which HPI reviewed here). The View gives us a 'wouldn't it be nice?' vision of what a successfully-reformed NHS would look like on 8 May 2020.

Health policy as Belgian government 2010-11
HPI readers are notoriously intelligent (as well as damned attractive), and will have spotted that there is a five-year gap between the Reid Code and the FYFV.

The absence of a strategy is one thing (Belgium survived quite successfully without a government for the best part of two years), were it not for the fact that the NHS is running out of money at scale and pace.

Blowing up the money
The money is blowing up, as the new NAO report describes: "the financial position of the NHS has worsened since 2012-13, with growing financial stress in NHS trusts and foundation trusts ... these trends are not sustainable. At the end of June 2014, NHS trusts were forecasting a net deficit for the current financial year of £404 million and foundation trusts a net deficit of £108 million. This compares with initial plans of a net deficit of £425 million for NHS trusts and £20 million for foundation trusts".

(And we need to remember that this is a deliberate political choice. The 'TINA' concept - that 'there is no alternative' to austerity - is eye-wateringly, hog-whimperingly, jaw-droppingly stupid when the real-terms yield on Treasury gilts is negative. Which the Bank of England's own data demonstrates that it is. As HPI has previously pointed out, TINA has a much more open-minded sister, TIA: There Is Always An Alternative. When Adair Turner is suggesting that we should start printing money to raise rates, we are deep into the realm of unconventional monetary policy.)

So far, so obvious. The advent of this NHS financial crisis has been charted by just about everyone from the Kings Fund, whose director of policy Richard Murray describes financial problems as "endemic", to the Nuffield Trust to the Health Foundation to the Foundation Trust Network to the NHS Confederation to the Healthcare Financial Managers' Association.

Yet no mainstream political party is discussing tax rises to fund the impending NHS deficit.

It's quite curious, given that a recent YouGov poll for The Times suggested that the sample of the public polled understand the need for income tax to rise to fund the NHS: "more than half of those surveyed ... said they believed the health service would still need more money spent on it if it cut out waste and made savings".

Where we put deficits
Let's remember why we've swapped the end of the purchaser-provider see-saw on which we now put NHS deficits. Back in those dear, dead days beyond recall when the NHS was getting 6% real-terms year-on-year cash growth, deficits were naturally put on the commissioner side.

This wasn't only because commissioners were ineffective, although most were. It was because we wanted more elective activity to cut waiting lists, and incentivised it crudely with the tariff, spiced up with the 'hurry-up' reality or threat of an independent sector treatment centre.

And it was because we knew that a bigger jug of extra money would come along next financial year to refill the overspent commissioner.

Today, we are desperate to try to reduce demand for hospital care. The Lansley reforms' 30% marginal tariff for A&E attendance over the 2008-9 level has been a magnificent success. Oh hang on, no it hasn't.

As well as that, we saw the foundation trust sector do what it was asked and incentivised to do and amass surpluses - although that is now being unwound to cross-subsidise tariff cuts and centrally-mandated increases in staffing in response to the Francis and Keogh reviews.

Indeed, the only reason the NHS achieved net financial balance in the 2013-14 financial year was by NHS England's local area teams forcing commissioners to accept lower-than-agreed payments.

PFI is also having its say in provider-side distress: Peterborough and Stamford is a glaring example, but there are so many.

Where there's a trust in the dung, there's a bung
So how is the system functioning at all?

In financial reality, it isn't.

Where there's a trust in the dung, there's a bung, as recent analysis by HSJ's Crispin Dowler revealed.

Foundation trusts are in principle not supposed to receive financial support from the DH, although this was breached years ago to stop Heatherwood and Wexham sacking  all their staff.

Revisiting The Bungs Formula and The Fuck-Up Fund
Longstanding readers of Heath Policy Insight may, once they've found a comfortable seat, like to cast their minds back to our analysis of The Bungs Formula and The Fuck-Up Fund

They fixed the problems of troubled providers nicely, didn't they?

Nor do we have problems with growing delayed transfers of care ... oh.

The financial cavalry - half a league onward?
Quietly, NHS managers throughout the provider system have been doing something heroic in the face of the rising demand and deflating tariff. They have looked at their available options which are a) blow up the money and b) blow up the quality, and softly said to themselves: "I'm going to get hung either way here. So I'll be hung for the money, rather than the quality".

We under-rate quiet subversion in this splashily emotive era: we really do. There may not be much public gratitude for this, but there were other, worse options available and NHS managers chose not to take them. So thank you.

The current talk is of the Chancellor's Autumn Statement on 3 December announcing an NHS Transformation Fund, of the kind advocated by just about every body who's tracked the NHS's slow-motion financial car crash. Nigel Edwards' piece on how such a fund could operate is well worth reading.

Many call it a done deal (if not 'the worst-kept secret in Whitehall'), but the figures I've heard discussed, ranging from £1.5 billion to £3 billion, are far too small.

Others are more sceptical, pointing to the strain of thinking in the Treasury which suggests that the NHS is over-funded by about 25%. (No, me neither.)

The NHS needs to transform how it delivers care: the Five-Year Forward View is right on that. There is a lot to transform. £2-3 billion is the kind of sum that buys off an immediate financial crisis next calendar year. It is nowhere near the 'big bazooka' that we are going to need.

All power delights; absolute power is absolutely delightful
So we are in trouble, and heading towards more trouble. This is where Who's In Charge Syndrome gets its moment in the sun.

Right. Who's in charge?

"Me!" chorused the massed voices of David Cameron, Jeremy Hunt, HM Treasury, the Department of Health, NHS England, Monitor, NICE, the Trust Development Authority, the CQC and the Competition and Markets Authority.

Well, I'm reassured. If we set aside the politicians from that list, what is everyone actually doing? We will find out where the Treasury sit on the Cowper Spectrum Of The Useful To The Ornamental in the Autumn Statement. The DH revise the Mandate, panic and make the odd phone call.

NHS England is doing its best to be consistently sensible and non-prescriptive in a system that is culturally used to being told what to do. Stockholm Syndrome is one of the very real cultural problems for an NHS system that needs a chief anthropologist far more than it needs any chief inspector. I may possibly have mentioned this before.

Monitor are caught in a trap. On the one hand, they - with NICE - are setting the tariff and efficiency requirements (whose good news should grace the scene before the end of this week). The tariff is one of the things that is driving providers into deficit.

On the other hand, Monitor are economically regulating trusts in deficit due in part to the tariff, forcing them into special measures and management consultancy whose costs worsen a financial problem. When that doesn't work, Monitor has a threadbare box of old-school system management tools, such as firing the chief executive, chair and board: tools that didn't even work in the old, more hierarchical, less complex and richer system. Their effect now?

The TDA is keeping properly remedial old-school system management alive, to absolutely no apparent positive effect.

As Monitor are trying to prevent another Mid-Staffs being authorised, so are the CQC trying to ensure that the gross quality failures there would be noticed. It's a good aspiration. The main risk for the CQC is that, as with OFSTED in education, adding bureaucratic regulation into a highly-pressured system grappling with demand outstripping resource is likely to tip providers into tick-box, checklist compliance mode, rather than driving them to fix the systematic issues which prevent them from delivering a high-quality service.

A focus on delivering a high-quality service has the by-product of making national service quality standards (oh all right, targets) achievable. We seem at times to believe that hitting the targets will fix the service.

And we'll know what the CMA once they've developed a bit more case law, further enriching lawyers.

Neither bad nor relevant
Let's be clear: the problem is not that these are bad people. The problem is that many of the things that Monitor was created and is tasked to do - driving efficiency through the tariff; promoting competition in the meaningless drag of preventing anti-competitive behaviour - are nice intellectual games for health economists and policy wonks to debate in abstract terms of how you might design a properly-funded system.

They are irrelevant to our current main problem, which is that we do not haver a properly-funded system, nor the means to fund changing what we have to something more efficient and effective.

"Ever tried, ever failed. No matter. Try again. Fail again. Fail better." ('Worstward Ho' by Samuel Beckett)
Our system of dealing with failure has failed. Are we proud of the results of Mid-Staffs and South London? The Mid-Staffs trust special administration cost around  £300 million, South London's nearer half a billion pounds. Every penny of it not spent on delivering healthcare. Lawyers and management consultants may be quietly content.

Perhaps this is weapons-grade irony; certainly it is a reductio ad absurdum.

Alright, smartarse, what would you do?
Good question, that.

The NHS needs quite a bit more money. Did I mention that already? There are two categories of need: revenue and transformation fund. Far better brains than mine could work on the revenue need for ages and still get it wrong.

But the Transformation Fund needs to be big. And for every £8 it spends on reforming the current provision system, it should spend £2 on evidence-based methods of changing the lifestyle determinants of ill-health. That may help us kick the demand can a bit further down the road.

Structures don't change things; people do
The limitations of fee-for-service funding have become apparent. A payment per procedure tariff works well in certain areas where you want to increase throughput. It seems broadly okay for elective care.

The desire to expend and deepen the granularity of the tariff into covering long-term conditions and mental health feels as if it might be more ideological than pragmatic. It may be worth trying, but with a candid eye on the opportunity costs of doing something so complex.

It seems sensible to default away from discussing structures. Yet we have constructed our current system on models of providers and commissioners as silos. To transform how we deliver care, we have got to stop thinking at micro-organisational level and get to macro-level of health and care economies.

This requires a new kind of leader: one who understands how to make a network effective and inclusive, yet who has the authority and clout to get rid of bad apples even if they are big beasts. (There were some virtues to big beasts, but the key problem is that nothing grows in their shade.)

Because I am defaulting away from changing structures, the new system leaders will need to be (or hire) great diplomats and communicators and managers of stakeholders. They will need to help people to see beyond their silo, and persuade them to take a fair share of the inevitable pain that will accompany the change from a transactional quasi-market to a health system/network.

There will be a lot of trade-offs to negotiate.

There may not be that many leaders of that kind currently in the system. Why would there be? We have neither recruited nor trained for those qualities.

So I would find those we do have. I would ask them to agree a geographical footprint or network of influence. I would ask them to meet monthly to share learning and challenges. And I would publish a report of every meeting.