The NHS may not survive unless dramatic action is taken to manage investment cuts, the NHS Confederation has warned.

It says the recession is likely to mean real terms annual funding cuts of 2.5-3 per cent from 2011-12 and presents “the greatest ever leadership challenge for the NHS”. It acknowledges reductions in staff numbers are inevitable.

“History suggests that failing to deal with the spending squeeze will lead to problems large enough to call the whole NHS into question,” it says. “The NHS has survived three of these in the last 25 years. We cannot assume it will survive the next.”

The report, Dealing with the Downturn, calls for some significant changes in policy, particularly to elements of the payment by results system.

Large scale redesign of clinical services is likely to save significant sums but this would have to happen across “the entire patient journey” rather than in isolated organisations, which is often not encouraged by the system.

NHS Confederation policy director Nigel Edwards said previous spending squeezes had led to questions about the sustainability of the NHS model and wide ranging reviews of NHS management.

He said in the past, failure to respond to funding pressures had led to far reaching reviews introducing policies which had often failed. The same pressures had heightened questioning of the NHS’s principles, such as care free at the point of delivery.

“The slight worry is that some of the NHS’s principles might be the victim of a very sustained downturn in financing.”

He said: “If you want to maintain them then a whole series of big changes are going to need to be made.”

The report warns against resorting to “bad ideas” such as allowing waiting lists to grow, “salami slice” cuts and reducing public health spending.

Caution is also required in turning to mergers, structural change and some types of demand management.

Instead, there should be large scale service redesign accompanied by cost reductions, and resources focused on more cost effective treatments.

Pre-empting his speech to the conference yesterday, confederation chief executive Steve Barnett told HSJ that NHS managers must prepare for the financial downturn. “People have been used to managing during times of plenty and the big challenge now is to align a set of skills which you might now be used to using,” he said.

Downturn response

Yes

  • Improving quality and efficiency through redesign: addressing variation in practice, reducing errors, releasing productive time
  • Must be matched by significant costs being extracted through sweating assets, rationalisation and reconfiguration
  • Resource allocation: “rigorous examining” of health gain for cost

No

  • Growing waiting lists
  • Diluting quality: adds to costs
  • Indiscriminate cuts
  • Letting pay get out of line

Approach with caution

  • Merger and structural change: often the “first resort of those with limited ideas”
  • Demand management: learn from past failures
  • Price competition: compromises patient choice and potentially quality
  • Centralising support functions: value for money can be uncertain