New Audit Commission chair Michael O'Higgins has a lot on his plate as he waits for the health regulatory review and oversees the transition to a new inspection era ushered in by the local government white paper

It is a strange time for the Audit Commission, seemingly stuck in the waiting room for a train of opportunity that is just round a bend in the track. On one hand, it is still waiting for the much-delayed regulatory review that has now been through the McKinsey wringer but remains unpublished. On the other, it is about to hear back from the government on its major work on payment by results and reforming NHS accounting practice. It means the next few weeks could be very important ones for the commission, and its new chair, Michael O'Higgins.

Lacking the knighthoods of his many predecessors, Mr O'Higgins has already set out his stall as a solid and practical figurehead after the sudden departure of Sir James Strachan a year ago and the interim role of Sir Michael Lyons.

The big change in the commission's world is last month's local government white paper. As Dubliner Mr O'Higgins says: 'While we are waiting for the Department of Health regulatory review, in effect we have had part of the Department of Communities and Local Government regulatory review.'

The single biggest change is transition from the comprehensive performance assessment (CPA) to the comprehensive area assessment (CAA) - part of the push to a greater concept of 'place' in public service, as opposed to institution. As Mr O'Higgins puts it, where once the commission judged Birmingham city council, now it will judge Birmingham. As well as shaking up the relationship between the regulators, it also poses interesting challenges for other public bodies, not least because the white paper places a duty to co-operate locally.

It also changes the dimension of regulation. 'CAA is forward looking and risk-based, rather than backward-looking and performance-based,' he says. 'CPA commented on how well you had done in the past. This actually says how well are you prepared for the challenges coming in the future. It becomes about quite a sensitive judgment. High risk doesn't always mean bad; it could mean ambitious in the face of tough demographics.'

Mr O'Higgins argues that the forward-looking aspect means that it will drive certain types of partnership behaviour. 'My own view is that it will mean more of the intangibles, in terms of trust relationships, networks and a culture of leadership. Those things aren't a guarantee that a partnership will succeed but I find it hard to believe it can succeed without them,' he says.

He is sceptical of many partnerships that exist for the sake of existing and are short of outcomes aside from the date of the next meeting. The weakness is a lack of clarity. 'In the private sector there are a lot of companies who you would think would be very competitive who will actually work together to achieve certain things, but the defining characteristic of those partnerships is clarity about the win-win. That's what we need to ensure with local area agreements and local service providers.'

Mr O'Higgins is a strong advocate of learning from success rather than failure, which in turn changes what will be asked of the commission's local auditors - and their relationship with clients. The organisation has beefed up its policy and research department - that he says has been given 'less attention in recent years'. But it is the auditors, the 'local sales force' - who will be taking this best practice and adapting it.

'It's about making it happen, rather than tidying up afterwards. My impression is that they are very up for the challenge. I think they have suffered from the frustration of seeing things which were going to go wrong but not having the obvious channels, other than wait until afterwards, to rectify it.'

After a career in management consultancy, Mr O'Higgins is predictably passionate about information, both as used by an organisation and its customers. What he calls the 'fascinating public policy experiment' of payment by results and choice heightens that enthusiasm. 'Can we have markets that aren't price driven but information and choice driven?' he asks. 'Sixty odd years ago we suppressed not just price but information as well and now we are trying to reintroduce it.

'If I were running a facility I would want to know what the early warning signs were of a drop in business. Auditors have a part in that which extends beyond their traditional role of data quality and extends it into data interpretation.

'What would be the signal: referral flows, outpatient levels? There is no use waiting until the consolidated accounts show you've got a major revenue shortfall.'

He says a key measure that the culture is changing is that 'in a few years [trusts] aren't looking up to the commission, or the Healthcare Commission, or the government for advice but are talking to each other'.

'We don't have a culture where that data existed and where it had to be acted on,' he says, although he admits the private sector has no monopoly on it. 'We all saw the devastating effect on M&S when signals from consumers started being ignored. We've also seen what a recovery they have managed by finally taking the lessons about what consumers want.'

He is unimpressed by quite a lot of what passes for market research by public bodies, whether judging customer satisfaction with current services or support for future ones. 'I am suspicious of customer satisfaction surveys that, by their nature, make it too easy to fill in - tickboxes have their place, but what it doesn't capture is all the things the customer didn't know was possible, Mr O'Higgins says.

The same goes for the information patients themselves can use, whether from trusts or organisations like the commission. 'We find it difficult to know as patients where we sit in the spectrum of experience against the norm.' The key, he says, is comparison. 'I was very struck when I was working at Harvard University where an eminent scientist was diagnosed with a condition and given a 6 per cent survival chance. Using all his skills he researched the characteristics of survivors and succeeded in joining them.'

He returns to a retail theme when talking about the vexed issue of closing facilities - recent speeches have emphasised rescuing organisations rather than shutting them. 'The chief executive of Tesco doesn't close stores, generally; they turn them round, they change or improve management, or they rebrand them. People would hate the comparison with changing a full Tesco into a Tesco Metro, but organisationally the same thing is happening.' The difference is the lack of demonstatations and questions in the Commons this provokes, and Mr O'Higgins says the NHS still does not give enough attention to binding in local opinion.

While at PA Consulting, Mr O'Higgins chaired the independent panel which reviewed primary care trust reconfiguration proposals a year ago. It was criticised at the time for not imposing more of its will on plans. He argues that its influence was important but indirect.

'We had an anguished submission from Telford asking that they not be incorporated because of their good local relationships. Because the DoH set out clear criteria and the strategic health authority took it seriously - and the panel existing helped them take it seriously - the submission [that Telford feared] never came in. That was true in many cases. So by the virtue of being there it changed the nature of the game and made interventions less necessary because there was already dialogue.'

He gives other examples where the panel was more active - including Peterborough in the Cambridge submission - to make it truly coterminous. 'We wanted it to be coterminous. The balance is whether you listen to SHA arguments or sometimes to the local submissions. It is a judgment call on strengthening commissioning or local feeling about the strength of existing relationships

'We haven't got 100 per cent coterminosity but we've got a long way down the road.'

He says there was rightly no prescription on minimum and maximum size - 'but the smaller you were the more you were challenged on scale and commissioning and the bigger you were, the more you were challenged on being responsive to local needs'.

So did the panel have a pivotal role or not? Mr O' Higgins says: 'If you are an exam invigilator and the pupils are well behaved, have you done a job? Would they have been quite so well behaved if you hadn't been there? Maybe not.'