The ability to commission effective and efficient services is completely divorced from strategies to implement and provide cost-effective services, argue Angela Bate and Cam Donaldson

The ability to commission effective and efficient services is completely divorced from strategies to implement and provide cost-effective services, argue Angela Bate and Cam Donaldson

Over the past two years, we have heard of several hospitals in financial deficit. Some of these are flagship foundation trusts. In response, we have had 'remedy notices' issued by the regulator, announcements of 'turnaround teams' heading into 'failing' institutions, and most recently, doubts expressed about whether such turnaround schemes are working ( HSJ, 16 November 2006 p5).

In the grand scheme of things, the deficits are not a large percentage of the financial turnover of the NHS. However, the remedies and doubts do raise alarm bells about whether the lessons of history have been heeded in recent Government policy.

The turnaround teams have the onerous task (as Sir Nigel Crisp said in his press release of 1 December 2005) of &Quot;help[ing] the NHS identify opportunities to deliver services with greater cost-effectiveness ? they will help the local NHS improve patient care and achieve financial balance&Quot;.

Is this not the objective of all NHS organisations? And if some have not been able to achieve this then why, and what was expected to be different about turnaround teams that would enable them to do so?

Supply and demand imbalance

One view is that Government policies of foundation hospitals and independent sector growth, on top of the other supply-side oriented initiatives such as payment by results, have all been introduced too quickly and without due consideration of the effect they have on the demand side (or commissioning role). What is a PCT meant to do when faced with the political imperatives of meeting centrally driven targets, making the independent sector work and with the local foundation hospital chief executive banging at the door demanding that the latest service developments be funded so they can meet their payment schedule for their latest PFI?

A hands-off approach to the consequences of such policies was put forward last year by the then health minister John Hutton. This would mean PCTs will likely have only two options: go even further into deficit and call the Government's bluff in order to get bailed out, or get tough and start commissioning more aggressively than before. Perhaps, to some extent, the Bradford Teaching Hospitals suffered from the latter of these commissioning approaches.

It seemed at that point that no-one remembered Mrs Thatcher's government coming up with the same pronouncements about letting the market direct what would happen and ministers taking more of a hands-off approach. No-one also seemed to remember the Thatcher government lauding Guy's Hospital as a model institution (similar to Bradford?), meeting the needs of a deprived community while being financially prudent. Yet one of the main lessons from the Tories' internal market is that Guy's was the first casualty when the market went live in London in 1991.

The wrong impact

Given the population and number of hospitals in London, particularly relatively expensive teaching hospitals, this is precisely the place where one would have expected the internal market to have had an impact. Indeed, as the Guy's lesson shows, this is what happened. Almost immediately after the reforms were introduced, commissioners on the outskirts of London got tough and shifted resources out of central London hospitals to those in less costly and more accessible district general hospitals. These resource movements were sufficient to create problems with respect to the sustainability of some central London hospitals, especially Guy's, and led to the suspension of the internal market in London and a review of health services in the capital led by Sir Bernard Tomlinson. The review gave greater priority to community and primary care services, while London's hospitals were given more resources to enable them to cope with the changes. Eventually, hospitals were closed, merged or rationalised.

So, as it turned out, the Government could not keep its hands off. Nor will it this time. Why not? Because even if one argues that market forces are good in health care, it must be remembered that they are applied in a system with social and political as well as economic objectives. The 'social' and 'political' are where government comes in and where the regulator may have to take a back seat.

One thing is for sure. The market has been totally unbalanced with all the emphasis of policy on the black hole of the acute sector and no-one with the power to take a population perspective on the commissioning side. The ability to commission effective and efficient services is completely divorced from strategies to implement and provide cost-effective services.

In this respect NHS organisations, as the limbs that make up the NHS, are being severed by government policy - unable to come together in order to strategically plan for a population within the financial constraints.

Trouble ahead

This brings us back to turnaround teams. One is reminded here of the television series Troubleshooter, in each episode of which Sir John Harvey Jones (a former chief executive of ICI) would step into a failing company, examine the books and the strategy, make his recommendations then visit the company a few months later to observe the healthy turnaround. However, in one episode, when asked to this in a health authority, Sir John had to admit defeat.

We would predict the same course for the turnaround teams. They may achieve their aim in the sense of returning financial balance to the institutions concerned, but we doubt they will do so by identifying opportunities to deliver services with greater cost-effectiveness and improving patient care. In order to so they will have to do what all managers would actually like to do, but are prohibited from doing through Government 'interference'; that is, to scale back services. Note the recent examples of herceptin and joint operations for obese people. If turnaround teams are permitted to do this, why can we not allow health services managers, with more experience of the system and likely a better idea of where to 'cut' in ways that do least harm, do the same?

Turnaround teams may provide a short term resolution but a 'sticking plaster' is no long-term fix for a severed limb. In order to commission and provide services efficiently and effectively, NHS organisations need to be jointly accountable for the decisions made in managing the available resources. Is this what is being recognised by PCTs getting together much like the old health authorities and GPs once more being brought into the front line of commissioning?

What is needed is management framework that can provide the structure linking the limbs, holding them together so financial management and service improvements are considered side-by-side within a framework in which trade-offs can be explicitly recognised and debated. Yet in almost 60 years of the NHS, it seems that managers have been given neither the guidance nor authority to work with such frameworks.

Turnaround teams will not necessarily work with such frameworks either. Furthermore, if they do not leave any systems or frameworks in place the problems are likely to recur. Will turnaround then eventually go the way of Sir John's NHS experience?

Angela Bate and Cam Donaldson are research associate and health foundation chair in health economics at the University of Newcastle's Centre for Health Services Research