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Editor's blog 10 June 2009: financial futures for the NHS

Regular readers will know that we have been banging on about the impending financial problems for the NHS pretty much since this site launched, a year ago. It appears that this is a common theme for Day One of the NHS Confederation conference in Liverpool, which train strike permitting, I will be attending.

Before launching into that, I will just point you to a new feature - written by the late  Professor Bob Sang. As I've mentioned elsewhere, Bob was a good friend as well as a good colleague. The article considers the vogue for quality in the light of management science and co-production.

The sky is falling, henny-penny
Perhaps the only way to get people's attention in a recession-hit nation, with debates over whether swine flu is yet a pandemic,  is to accentuate the negative.

The NHS Confederation's Dealing With The Downturn asks if the recession is  "the greatest ever leadership challenge for the NHS". Its key points note that "History tells us that letting waiting lists grow, diluting quality and structural change should be avoided" and that "The NHS will not survive the impending spending squeeze unchanged".

The document observes that cost pressures will affect both commissioners (the impact of Healthcare Resource Group (HRG) 4 and changes to the NICE appraisal process for end-of-life medicines appear inflationary; ditto impact of flu in autumn-winter 2009/10) and providers (efficiency assumption of 3.5 per cent for 2010/11; operating framework suggests a tariff uplift of no more than 1.2 per cent; the Clinical Negligence Scheme for Trusts (CNST) likely to keep outpacing inflation significantly; further devaluation of sterling could raise import costs). NI contributionsl also rise 0.5% in 2010-11.

The figures are stark: "With little or no cash increase, from 2011/12 the NHS will need to plan for real terms funding to fall by 2.5–3% per annum. This is equivalent to a cut of between £8–10 billion over the next CSR and up to £15 billion over five years."

The document also suggests four key principles to handle the downturn:
• The NHS underlying principle of social solidarity, in which the better off and well support those in need, should be followed. The NHS Constitution elaborates on this and promises a comprehensive health service largely free at the point of use. This is an important test for any proposals.
• Frontline services come first, but long-term improvement should not be sacrificed for short-term expediency. Sometimes investment in prevention, improvement, information and infrastructure now, may mean that frontline services can be even more productive and effective in the future.
• Where possible quality improvement through innovation and redesign should be the preferred route to improving efficiency. This requires rigorous use of evidence on effectiveness.
• The principles of co-production, subsidiarity, alignment, clinical ownership and leadership are sound. However, their application may need to change. In particular there are questions about whether some of the system reform policies are aligned with the needs of the changed world. A number of them are designed for a system with growing funding.

It also wryly lists 'bad ideas' and 'caution required' policy approaches from history. The report also notes that though commissioning is perceived with scepticism by some, few clearly better alternatives have been proposed.

Highly challenging
Most striking is the 'challenging options' section, which considers possible approaches and their fit with key NHS principles. It should be noted that the Confed are discussing these 'challenging options'; not recommending them.

User charges are considered, and wisely given a dead-bat approach. The job security, pay and pensions issues are also discussed, with the proviso that this would need to be handled nationally.

The most dramatic option, limiting the NHS basic package, is also pushed towards the long grass: "would require a very significant dialogue with the public and in some cases the
development of a new insurance market, and there is little evidence of any appetite for this. We believe it is difficult to embark on this before we have made a major effort to  demonstrate that all efficiency avenues have been exhausted."

Meanwhile, Tribal suggest that the five-year deficit could be as much as £20 billion in their paper.

However, they also suggest that these deficits are not inevitable. Matthew Swindells, Managing Director of Tribal in health, observes, “The economic downturn has to be the catalytic event for the NHS to improve its productivity – otherwise it is not going to survive in its current form.”

Productivity is their key to avoiding meltdown: a message Swindells emphasised in his interview with this site in February. Tribal believe that the ways to do this are "not new to the NHS – they are already known and are being implemented somewhere, either within the NHS or internationally".  

Swindells concurs with the NHS Confederation's caveats about across-the-board salami-slicing cuts: “the ‘simplistic’ cuts of previous difficult times will not be acceptable - in the new world of transparency, the impact on waiting lists and waiting times will be visible to the public. A loss of public confidence could bring the fundamental tenet of a comprehensive, tax funded system into question.”

Tribal's solution is commissioning (and their collaboration with Ashton, Leigh and Wigan PCT is discussed in a feature added here yesterday). They contend that "commissioners can save between 8% and 12% of their costs and improve the health and the health services of their community at the same time", by the following four strategies:
1. Transforming performance through the universal application of known techniques (such as managing demand; improving care at first contact; developing complex and continuing care; and health maintenance for the small number of patients who are intensive users of the service)
2. Challenging business models (moving from provider interests to favour patients and taxpayers)
3. Repositioning the consumer’s contract with the NHS (raising the level of self-care, reducing level of inappropriate service usage and gaining some acceptance of changing patterns of service).
4. Building capacity and capability for commissioners - skills, training and the right tools.

The answer is commissioning?
It is interesting to see commissioning coming into policy vogue again. It had an unduly bad press, thanks in part to the vogue for integrated care organisations and the Porter and Teissberg book.

The principles of greater alignment of resource use with local health needs, and more attention to outcomes and productivity that are intrinsic to commissioning, still seem intuitively correct. Commissioning has not been tearing up many tree-trunks to date. System reform strengthened providers first.

Eighteen months ago, you could have heard the quip, "if commissioning is the answer, what's the question?" Perhaps we've now found out - the question is 'how can the NHS avoid falling apart in a severe recession?'

Addendum: have a look at this excellent article by The Independent's excellent Hamish McRae.