The government’s reform agenda for the NHS isn’t the beginning of the end of a primarily tax funded healthcare system. The reforms are probably the best way to preserve that for another generation or more. So, instead of focusing on the risks, let’s give more attention to the opportunities.

There are two big chances to be grasped.

First, the new system will offer a great opportunity to redesign services around the needs and preferences of patients, not providers.

GP commissioning consortia only have to look at other customer-facing industries to see what is possible.  Food retailers, for example, research extensively the needs and preferences of different categories of customer and then tell producers what products they need.

If the design of services for people with long-term conditions were to start with a large scale survey of the needs and preferences of patients with different conditions, the services would be very different from a situation in which the conversation had started with the hospital consultants, as is too often the case now.

The exciting thing is that GP commissioners now have the opportunity to build on their knowledge of the needs and preferences of patients, and the financial clout to get hospitals to deliver what patients need in the way that they want it delivered. Individual GPs can’t do this. Commissioning consortia can.

The second big opportunity is for the four national organisations – the National Commissioning Board, Care Quality Commission, Monitor and National Institute for Health and Clinical Excellence – and the Department of Health to work together to create the conditions for real innovation in health services. The drivers of service innovation will be competition and tariff, as well as commissioning based on patients’ preferences.

Monitor’s role in the fully-implemented system will be quite different from its current role, which was defined by Parliament primarily as stopping foundation trusts failing and preventing foundation trusts doing undesirable things.

In its new role Monitor can use its oversight of competition, its tariff-setting powers and the failure regime to help create the conditions for real innovation and service improvement.

Competition is about challenging established providers to do better, and about enabling new providers with new or better ideas to enter a market and offer their services to customers. It’s a powerful incentive to innovate.

However, there are services and geographical areas where competitive pressures may not arise for many years, if ever. Here the task is to use the levers at Monitor’s disposal to help drive down cost and drive up quality.

The tariff cannot continue to be a validation of existing cost structures. It needs to be developed to become a means of giving pricing signals to the market to stimulate change.

Instead of centrally-specified cost cutting programmes, the tariff should be used to give clear price signals about the optimal design of care pathways and the scale of resources that ought to be consumed by each component of a pathway, if they are operating efficiently.

Providers that cannot, or will not, deliver within the national tariff prices will find their costs exceeding their incomes. These providers should be allowed to fail. The failure and special administration regimes can be used to replace the board and the management with a more effective team, and to oversee the reshaping of the provider to something that meets the needs of the commissioners and is efficient enough to do so within the tariff prices.

The reforms will deliver sustained innovation and efficiency improvement only if there is close cooperation between the National Commissioning Board, CQC, NICE and Monitor – supporting and challenging commissioners, specifying quality, rooting out unacceptably poor performance, creating competitive pressures, sending clear price signals to providers and managing failure when it occurs. 

One test of success for the reforms might be the scale and pace of service innovation. If in five years less than, say, 5 per cent of services have been replaced by something better and more efficient, we might conclude that all the effort used to get the legislation enacted and implemented has largely been wasted.

But if the outcome is a substantial volume of new and better services, what an outcome that would be for patients.