David Lock: A new and very different type of NHS in England

April 1 2013 saw the launch of a very different type of NHS in England.  The current government has grappled with the same problems as all previous governments, but imposed radical surgery on an ageing patient.

The previous government struggled with the problem of getting improved productivity and common high standards out of a largely monopoly service.  The NHS has always delivered its services through a mixture of employed staff and contracted private sector operators.  GP practices have always been private sector businesses that are paid by the NHS for the services they deliver, but without GPs ever being NHS employees.  How they swung the right to get NHS pensions is another story but just shows the negotiating brilliance of the BMA.  But competition plays only a small part in GP services.  There is no active recruitment by one practice of the patients signed up to the practice down the road (although maybe we will see this now).

The Labour government largely saw waiting list and waiting time targets, a tough and supervision regime inspection and better financial regulation as the way forward, using competition only at the edges.  It was partially successful and partially failed spectacularly as we saw with Mid Staffs.  It’s the age old question for politicians – how do they make public services perform better?

There are big beasts of influence within the NHS, and the major hospitals are one of the biggest.  The issue is often “how to deliver productivity from hospitals.”  Hence, for example, Labour brought in the independent treatment centre programme, when hospitals more or less told the government that it was impossible to get the waiting lists down for certain operations.  The ISTC programme was a waste of money because the patients did not flow to the ISTCs for operations.  But the primary reason is that NHS hospitals increased their productivity and hence they did the operations that the ISTCs were supposed to cover.  No one mentioned the awkward fact that these same NHS hospitals had taken a “computer says no” approach to this before.  But that was competition at the edges of the NHS, not at the centre.

The previous government was also inching towards an “Any Qualified Provider” scheme.  ACQ would have meant, for example, that anyone who was authorised by the regulator, the Care Quality Commission, could provide hip replacements and was prepared to do the operation at NHS rates could have NHS patients referred to them by a GP.  That would have been the equivalent for the NHS of a “vouchers for schools” approach.  However, this was also only competition at the edges.

In contrast to the previous government, we now have competition right at the centre of the NHS.  The model of NHS care that is commissioned by NHS bodies and delivered by NHS bodies has come to an end.  NHS foundation trusts (including Heart of England NHS Trust, where I am proud and delighted to have just been asked to take up an appointment as a director) are increasingly acting as public benefit companies that compete with each other and the private sector to deliver healthcare to the NHS market.  They are now – more or less – subject to the same competition rules as Sainsburys.  However unless foundation trusts behave like private sector companies expanding into new markets, the tendering process inflicted on the NHS will be a one way road from the public sector to the private sector.

Let me explain why I say that.  Surrey Primary Care Trust tendered a contract for the delivery of its community services.  Virgin Care (formerly Assura Medical) won the £500m contract to deliver community services across much of the county from 2012 to 2017.  The management and staff of the existing NHS service were transferred to Virgin Care and have continued to deliver services since 2012.  It has not been a disaster for NHS patients in Surrey, and most have noticed no difference.  But staff are now not NHS employees.  The services patients  get are dictated by the contracts that Virgin have with the PCT.  However perhaps this is not that different to the previous approach where service levels were subject to the limits placed on treatment by PCT policies.  However, when the contract comes up for tender in 2016, the NHS organisation that lost the contract will not exist.

It is possible that another NHS organisation will bid and may be successful.   But every time an NHS organisation that works under a single contract loses that contract, that NHS organisation will have nothing to do and so will die a death.  Thus the future for the NHS is fewer larger (and hence more powerful) NHS organisations, and a multiplicity of smaller and, I suspect, ever changing commercial providers.

The government believes that this type of competition across the whole of the delivery of NHS services will deliver a better deal for the taxpayer and for NHS patients.  But this is an ideological belief, a faith in the market.  As with all faiths, it lacks evidence.  The absence of evidence to support this approach has not restrained the current government’s enthusiasm for a market scheme for the NHS.  That is consistent with so much policy with this government across many departments.  A friend who is involved in an entirely different policy area, explained that the “government is an evidence free zone.”

There are a multitude of voices to explain why the marketisation of the NHS will be a disaster, and they are almost certainly right.  But – I say with my tongue firmly in my cheek – there is a silver lining to every cloud.  It will be a bonanza for lawyers.   Every contract will be crawled over by lawyers, disputes will be far more common, and m’learned friends will be fully engaged and well rewarded.  But all this comes at a cost.  The NHS has traditionally spent about 6% of its annual spend on administrating the system.  A market system, such as in the US, spends vastly more.  A study by Harvard Medical School and the Canadian Institute for Health Information determined that some 31% of US healthcare dollars went to healthcare administrative costs, nearly double the administrative overhead in Canada, on a percentage basis and vastly more than the NHS’s paltry 6%.

The NHS is now a market, and so the costs of running the system seem certain to rise.  The Conservative Party went into the last election committed to reducing NHS administration costs. and it also signed up to having no “top down reorganisation” of the NHS in the Coalition Agreement.  The international evidence is that introducing a market to the NHS massively drives up administration costs.  That means that there have to be even greater productivity increases so that more healthcare is delivered from the diminishing budget available to pay for doctors and nurses to deliver care to patients.  Speaking for myself, I just cannot see how it can possibly be done.  But the dye is now cast and the NHS is now a very different place.

David Lock is a barrister and QC, No5 chambers. He is a board member of of Brook Sexual Health, a member of the BMA Ethics Committee, and a honorary professor at University of Birmingham.

Competing interests: I am a member of the Labour Party and chair the West Midlands Branch of the Labour Finance and Industry Group.  I am due to become a non-executive board member of Heart of England NHS Foundation Trust which is due to start on 1 June 2013.  My wife is a doctor who is employed by Worcestershire Partnership NHS Trust.