Chris Ham on integrating to compete in the NHS

The Achilles heel of the government's NHS reforms could be.the inability of primary care trusts and GPs to negotiate on equal terms with powerful acute hospitals. Ministers have recognised this by reorganising trusts and offering financial incentives to GPs to play a bigger part in buying services from hospitals.

But there is little evidence that these policies are working. The harsh truth is that hospital managers and doctors are much stronger than their counterparts in primary care and no amount of policy guidance from the Department of Health will restore the balance. An urgent rethink of the direction of reform is needed.

Instead of separating the roles of buyers and sellers in the NHS, the government needs to encourage closer integration between hospitals and GPs. The benefits of integration include an incentive to keep patients healthy and to provide care in the right place at the right time.

These benefits are increasingly important in a world in which chronic diseases like diabetes and asthma represent the biggest demand on the NHS. When GPs and specialists work together to prevent and treat chronic diseases, the evidence suggests that the quality of care improves and scarce resources are used more efficiently.

The power of these arguments has been recognised in Scotland, where the NHS is organised through a number of integrated health boards. The same applies in New Zealand, which has turned its back on using markets to improve health system performance and has organised health services through district health boards.

Taking the reins

The biggest benefits are likely to result when GPs and specialists take responsibility for the use of budgets. This is because quality and efficiency in the NHS depend first and foremost on medical decisions, and these cannot easily be controlled by managers and politicians. If doctors have a strong enough incentive, then they will drive improvements in care.

In shifting the direction of reform, ministers should also rethink their policy on choice. Instead of giving patients more choice of hospitals, they should focus on offering a choice between integrated systems. Lack of choice is a weakness in the Scottish and New Zealand models, in which patients are served by health boards that are monopoly funders and providers of care in their area.

Patients' ability.to change systems would provide a strong stimulus to integrated systems to provide the highest quality of care within the budgets they receive. And in competing to attract patients, they would have to offer care that is accessible, responsive and in line with patients' demands.

Evidence from other countries has demonstrated the competitive advantage of integrated systems. In the US, for example, organisations such as.Kaiser Permanente and Group Health Co-operative outperform other forms of healthcare. They do so because they put doctors in the driving seat and lever the benefits of integration in competing with other providers.

Integrated healthcare systems recognise the difficulty of using a system of separate buyers and sellers to improve healthcare performance. The trick they have brought off is to align the interests of doctors with those of the organisation they work for. In so doing, they have minimised the need for contracts with other organisations, and channel their energies to deliver the best possible care to patients.

Getting started

How might integrated systems develop in the NHS? One way forward would be to allow.entrepreneurial GPs to forge.alliances with independent sector and NHS providers and to give.control of budgets to combined groups of GPs and specialists.

Another route would be through successful NHS hospitals integrating with primary care trusts and GP budget holders. In either case, integration might develop through local initiatives and then expand to other areas as these initiatives demonstrate their value.

Different forms of integration are likely to emerge. In rural communities, for example, it may make sense for communities to be served by a vertically integrated healthcare organisation that holds the budget and provides the full range of care. Elsewhere, vertically integrated organisations could compete with virtually integrated systems and more fluid care networks.

Under these arrangements, the allocation of public resources would follow patients' choices. This would require the dowries that patients bring to be adjusted for the risks they represent. Government would also need to regulate competition to ensure acceptance of patients and a common package of entitlements in different systems.

Ministers should encourage integrated systems to emerge organically from the current reforms rather than mandate them from Whitehall. The last thing the NHS needs at this stage in its painful evolution is another policy lurch that takes managers and doctors off in a different direction.

Competition should continue to be at the heart of the NHS reforms, but the locus of competition should be integrated systems and not isolated and uncoordinated health care providers.

Chris Ham is professor of health policy and management at the University of Birmingham and an adviser to the Nuffield Trust. He was the director of the strategy unit in the Department of Health between 2001 and 2004.