Published: 03/10/2002 Volume II2, No.5825 Page 18

English strategic health authorities, like their counterparts elsewhere in the UK, have to produce capacity plans.Here I offer some key supply and demand issues for grading the performance of those involved in this difficult task.

Two key questions on the supply side are the levels and variation in activity and quality between trusts. If SHAs assume in their models that providers are all at maximum activity and prime minister Tony Blair's targets can only be met by additional capacity, they will have committed a major blunder.

Hospital episode statistics data shows declining activity among consultants. There is evidence of considerable variation in activity levels of individual practitioners.

NHS management has traditionally ignored these variations by not controlling those practising one or two standard deviations from the average.

Consequently, inefficiencies have been condoned and the production potential of the NHS has not been fully exploited.

The first test for SHAs is, will they too condone this or reform the performance of laggard providers?

The second test is whether they challenge the apparent reduction in consultant activity. If it is not a product of data inaccuracy, what is the explanation? The consultants' 'story' is that they are going slower to increase 'quality' following Bristol and other scandals.

Will SHAs challenge this argument by demanding data to demonstrate the consultants' story? If not, they cannot argue that they are being strategic and protecting the taxpayer.

Measurement of quality is not easy, but if the consultants say it is better they should be required to demonstrate it.Mortality data, infection rates and so on can be used to illuminate quality.What are trusts doing about measuring the functional status or quality of life of patients pre and post treatment? Will SHAs accept vague statements of good intent, usually evidence free, or will they put in place performance targets and appropriate management arrangements?

If SHAs ignore such central issues in their estimation of the supply capacity of their local health economies, they will not only condone well-established inefficiency but also inflate their estimates of the capacity investments needed to meet Mr Blair's targets.

On the demand side, there are parallel problems that may inflate SHA capacity estimates. In the short run, there is a need to remove a 'hump' of activity to drive waiting time and other targets down to the level desired by government. The capacity needed to do that may be different from the 'steady state' activity levels needed post 2005.

The private sector may be recruited to help remove the hump, but they may be reluctant to invest in three-year contracts when they want a 10-15 year payback guaranteed on their investments. The removal of the hump is essential to the next election strategy. It is unclear whether shipping folk abroad, hiring foreign doctors or buying overtime for NHS doctors is the most cost-effective policy. But there is a need to avoid cost inflation as these groups organise their cartels to exploit the taxpayer.

Or perhaps there will be no hump.The government has raised expectations and demand.

The ageing population needs running repairs.This increased demand could only be met by permanent increases in capacity.

But does it exist? Mr Blair, having increased NHS spending, may have built into the healthcare system increased levels of inflation. For instance, the 30 per cent increase in medical school activity will create a large new generation that will want jobs after 2010.

It is obvious that the SHAs have a nice task. If they perform badly in their analysis of local supply and demand conditions, they are likely to inflate their estimates of capacity needs to levels that are unattainable. If, on the other hand, they point up the great variations in activity between consultants and GPs nationally, they are obliged to require performance-management activities hitherto avoided by practically all NHS managers.

Hopefully they and their directors of health and social change will not avoid these challenges. If they do not, they will be unique in the history of the NHS. But that is what Mr Blair requires: getting the NHS to work 'smarter'was never going to be easy.Get ready to evaluate critically the capacity plans of the SHAs. If they flunk their task, they could destroy the NHS.

Alan Maynard is professor of health economics at York University.