NHS politics 'Would a decentralised NHS bring greater freedom for healthcare providers? Steve Dewar and Cyril Chantler explain how fewer constraints on managers could produce a more responsive NHS

Published: 14/03/2002, Volume II2, No. 5796 Page 24 25 26 27

It has become common to hear politicians and professionals call for a more decentralised NHS.

But what does this mean? What might the new balance between freedoms to manage and accountabilities for national, but locally responsive, health services look like?

A King's Fund report has diagnosed the NHS as over-politicised, excessively centralised and lacking in responsiveness.

1It emphasised the need to enable front-line staff, patients and the public to assert greater influence over how healthcare is managed and delivered.

It identified three approaches to achieving this devolution of power from the centre: a clearer separation of government from the delivery of healthcare, greater freedoms for provider organisations, and more patient choice.

So far, the desire of the political centre to direct reform has burdened rather than inspired many in the NHS.What freedom do healthcare providers have when targets, capital funding, staffing and even leadership values are being determined elsewhere?

A new organisational form One approach to developing new freedoms, incentives and accountabilities rests on a more permanent structural separation of the organisations that deliver healthcare from government and the central organisations that fund, direct and regulate. This would involve putting trusts into a new organisational form that could safeguard the local public ownership and accountability of the services.

Several formats could be considered - from the independent status of universities, to new 'foundation hospitals', or concepts such as the 'public interest company'.

2A new type of not-forprofit body would be able to manage the delivery of services in any way that met contractual and regulatory obligations, free from detailed interference or political control.

The new bodies would still receive funding from the NHS. A public interest hospital, for example, would still provide services via contracts with local primary care organisations and be subject to regulation. But there would also be significant differences.

Importantly, the new structural form would provide opportunities for the organisation to shape its own future.

With public and healthcare stakeholders on the board, it could foster a more direct accountability to the local community, balancing the responsibility to meet national regulatory standards with greater local responsiveness. It could also catalyse the development of new services to match local needs and compete for patients (the government is committed to providing choice over location of treatment by 2005).

3 New managerial freedoms The NHS, its organisations and their managers are being held to account. Rating systems and franchising arrangements are beginning to bite. But alongside this new accountability, managers may need to be given the space, the authority and the freedom to succeed or fail.

Instead, we find managers highly constrained.

They suffer the double whammy of extensive regulatory oversight and excessive central control.

A more autonomous status for health providers would mean fewer directives and less performance management. Instead, managerial responsibility against national regulation would be matched by managerial space in which to achieve improvement.

Currently, managers have little room to determine priorities - the new organisational form would give them greater freedom to establish local priorities.

Managers have little say over the budget. The new organisational status would allow them the freedom to raise money on the private markets, to generate and carry over finance, even to issue bonds, and decide in what services to invest.

At present, managers (and organisations) have few incentives to respond directly to patients and public. The new organisation, working alongside the introduction of financial flows to match greater patient choice, would give managers the freedom and the incentive to develop services that match patient needs. Services chosen by patients would bring the reward of greater income for future service development.

Managers are highly constrained in the employment of their own staff.Hospitals, for example, have to get medical job descriptions and appointments approved at local and national level.

The new approach would free managers to negotiate with professional organisations and find better ways to accommodate their concerns without stifling freedom over staff recruitment.

Managers now have little incentive to become 'public service entrepreneurs'. The new organisational identity could allow managers to be more entrepreneurial. It could provide not only the necessary freedom but also a more supportive longterm culture for organising, managing and taking risks to seek greater benefit for the community.

Of course, managerial and organisational freedom would be matched by new accountabilities.

Freeing managerial space by easing some rules (such as over finance or staffing) will mean a need for other types of process rules addressing, for example, issues of financial probity. Regulation may need to become more explicit, partly because the NHS would become more detached from day-to-day command and control.

Defining new freedoms, incentives and accountabilities is a slippery business. To what extent should the freedoms extended to these more independent bodies include the freedom to establish local pay and conditions for staff? Would local approaches need to respect national minimum pay rates, or might the extent of variation need to be constrained within some acceptable margin?

Organisational incentives will also need careful definition. Health secretary Alan Milburn has recognised that patient choice over elective surgery will mean 'developing new ways of money flowing around the system to sharpen incentives to respond to patients'.

4But while the incentive needs to be sufficient to provide a real reward, it cannot be so large as to threaten to destabilise a local healthcare economy. For many patients, accessing anything other than their local services may be difficult.

There is a common recognition of the excessive political involvement in the day-to-day detail of the NHS at the centre. But finding opportunities for meaningful local accountability forces us to confront the democratic deficit that often exists at local level. New organisational forms are only part of the picture. True devolution of power will require the secretary of state to take democratic responsibility for the source and extent of funding.

But more autonomous primary care trusts would be responsible for spending the money. Free from the traditional lines of accountability back to government, these trusts may have to develop new democratic accountabilities for their use of public money.

The government's proposals for foundation hospitals also hold out the possibility of a greater organisational separation of the delivery of healthcare from central direction. But more bravery may be required. It is still unclear if foundation status is to mark a permanent shift in organisational form.What is to happen if the organisation's star-rating subsequently falls?

If these freedoms are to reinvigorate the NHS, the ability of the new organisation to plan its own future lies at the heart of the change. The possibility of having this freedom taken back undermines that radical commitment and risks turning the policy into something much more centrally controlled and gimmicky.

The foundation hospital proposal could be the start of a more radical process to secure a permanent shift of power within a new framework of local accountability and national regulation. But without real separation from the centre, the new status and freedoms become minor - more of a temporary waver from orders than a real chance to develop new corporate pride and community ownership.

The UK health system is under enormous pressure.Giving providers greater freedoms will not be the only solution to these difficulties.The problems of lack of capacity, years of comparative underfunding and pent-up demand, represented by long waiting lists, mean we will have to be patient.

New managerial freedoms, direct engagement with greater accountability to the community, responding to new opportunities for patient choice - all will develop slowly.

Given the risks inherent in change and the complexity and unpredictability of healthcare systems, these ideas need to be discussed and tested.

Too often, reform fails to appreciate or evaluate its impact on patients and staff.Only experimentation and evaluation will allow a rigorous assessment of the best way ahead.

Freedom always sounds good, but to be in the public interest, freedoms for healthcare organisations need to be accompanied by a more radical reform of relationships between politicians, professionals and public. If we were at the point of nationalising the failed healthcare system that preceded 1948 today, what approach would best serve the public interest?

We do not believe a contemporary answer would entrust all the responsibilities for funding, delivering and regulating healthcare to government.

The development of new organisational freedoms, independent regulation and greater influence for patients, public and local communities has the potential for opening up an NHS future that has the capacity to inspire.


1The King's Fund.

The Future of the NHS: A framework for debate.

January 2002.

2Public Management Foundation. The Case for the Public Interest Company: a new form of enterprise for public service delivery.

June 2001.

3Alan Milburn. 'Redefining the National Health Service.'

Speech to the New Health Network. 15 January 2002.

4Department of Health.

Learning from Bristol: response to the Bristol enquiry. January 2002.

Key points

At present, NHS managers are highly constrained, suffering excessive regulation and central control.

More autonomy for trusts would mean fewer directives and less performance management.

Giving trusts a new organisational form, such as a public interest company or foundation hospital, might be reinvigorating and would not involve further reorganisation.

These new freedoms should be accompanied by new accountabilities, not solely to politicians but to independent NHS regulators, local communities and patients.

Devolved power and greater patient choice could produce a more responsive NHS. Its potential needs to be explored through experimentation and evaluation.

Steve Dewar is acting director, healthcare policy programme and Sir Cyril Chantler is senior associate, the King's Fund.