Next week sees the release of the Ken Loach movie The Spirit of ’45, which describes the UK’s attempts to implement socialism through the ballot box between 1945 and 1951. Ultimately a failed project, this revolution has left one enduring and much-loved symbol, the UK National Health Service (NHS). In the same month as the release of Loach’s movie, the NHS is going to undergo what are generally touted as the largest reforms in a generation, the Health and Social Care Bill, which see significant market reforms introduced to the NHS, and a major reorganization of its hierarchy. This is all happening against a backdrop of unprecedented government austerity, recent reports finding significant failings in the way the NHS cares for patients, and a Conservative-run government with a very strong ideological bent towards radical experimentation with the UK’s institutions. It is also happening against the backdrop of a worldwide movement towards universal health coverage (UHC) which is even taking hold in the USA – given this global movement, and the UK’s central role as a model for that movement, it’s unlikely that even the most ideological of governments is going to attack the basic principle of the NHS: to provide healthcare on the basis of need, not ability to pay.

It’s easy to make predictions about how these reforms will turn out, without even analyzing the policy, because a cynical outside observer of the UK can always fall back on three simple principles: nothing in the UK works very well, the British government is terribly incompetent regardless of its ideological stripe, and you can’t improve healthcare by reducing the amount you spend on it[1]. However, I’ve written before about what I think will happen as a result of the new Bill, and the specific good and bad points I see in it; I won’t repeat these in detail here. For those interested in the Bill itself, the Guardian gives an outline of its main points, and since I wrote my post the Bill has been beefed up a little. The revised Bill includes a sneaky little clause that supposedly forces clinical commissioning groups (CCGs) to make all health services they purchase subject to tender, rather than allowing existing NHS services to be preferred providers. CCGs are organizations supposedly formed by doctors which are charged with disbursing government money to providers of healthcare – they are the main purchasers of health services after the reforms have been passed. By forcing them to open all non-emergency services to tender, the Bill will (it is claimed) force existing NHS hospitals and GPs to compete with private services for government money, ideally driving down costs. It’s not clear to me how the contracts between these services and the CCGs will be negotiated, and this aspect of the reforms gets my spider-senses tingling, because it just stinks of “a potentially good idea done badly.” Some of the background on the way the Health and Social Care Bill forces CCGs to use competitive tendering is presented in this opinion piece (but beware, huge amounts of this piece are just factually wrong or very misleading, so take everything it says with a grain of salt). Below are a few reasons why I think this particular competition reform is going to fail.

  • It puts family doctors in charge of paying family doctors: a Clinical Commissioning Group is meant to be a group of general practitioners (GPs, or family physicians in the American parlance) who will be given money by the government with the task of purchasing all health services for patients in their area. This is supposed to put the health service back into the hands of GPs. The problems here are two-fold and, I should think, blindingly obvious. Much of the money that these CCGs need to distribute will be spent on purchasing GP services, so it puts GPs in charge of purchasing services from GPs. This is a notoriously tightly-knit community with strong common interests, and I find it hard to believe the money will be dispensed wisely. The second problem with this plan is that GPs may be good doctors, but that doesn’t make them good at resource-allocation decisions, and often doctors are the worst people to decide how to spend money wisely. A good health financing system should find ways to efficiently and equitably enable doctors to make good clinical decisions. It’s not obvious to me how putting doctors in charge of the financing decisions is congruent with this. A lot of commentators in the Guardian are decrying the role of major accounting services, who are being contracted by some of these CCGs to handle the decision-making process[2], but to me this seems like a good thing: the further you can move the pot of money from a GP the better, in my opinion.
  • It seems to rely on bulk contracts: The NHS to date seems to have structured a lot of its purchasing decisions on contracts that offer bulk funding – that is, a hospital or GP contracts to provide a service for a specified fee, but the service is very generalized and not broken down into its particulars. In the case of GPs, this usually means they are paid a fixed amount per year to provide services to patients on their list, but no detail is specified as to how they should provide services or what they should provide – not even a minimum basket of services. This is why many GPs in the UK operate single-handed surgeries with inconvenient opening times, have very little time for patients, and don’t provide services (like chest x-rays or chlamydia testing) that are taken for granted as routine in other countries. These contracts don’t encourage efficiency, and when these types of contracts are negotiated with large providers (like private healthcare organizations or big hospitals) it’s likely they will be highly beneficial to the provider unless the CCG negotiating the contract has a very adept team of lawyers. Unless the new Bill includes very strong support for this contract writing framework (and see my further point below) then I expect we will see profligate misuse of funds as the providers take these naive and poorly-supported CCGs to town.
  • The financing system is not obvious: It’s not clear to me how the CCGs are expected to decide what is the most economically effective (or, for that matter, clinically effective) service, what benchmarks will be established for comparing services that they are accepting tenders from, and how they are expected to make contracting decisions. This isn’t all the fault of the people writing the Bill: within the field of health services management, there is still much dispute about how best to assess the quality of care provided by a large service. For example, in-hospital mortality might be considered an important measure of quality, but how does one account for the mix of patients and the severity of their illness in comparing two hospitals? Should one trust the figures the hospital presents, and if not who is the central provider of assessment services to which a CCG should turn when attempting to compare hospitals on this measure? And if two hospitals have slightly differing mortality rates, how much extra should a provider be expected to value the difference at? Can a provider make a judgment to buy services from a cheaper hospital with higher age/sex-adjusted mortality rates, or is that decision unethical on its face? Have CCGs got any expertise on these issues, or received any guidance? It could be that the Health and Social Care Bill provides extensive information on this, and supposedly the reforms will include the establishment of a new organization to help CCGs with this task. But the reality is that no one really knows the answers to many of these questions, and it’s not clear that the structure for health financing proposed by the Health and Social Care Bill is going to be invulnerable to problems because of them.
  • It lacks centralized guidance and pricing structures: At the moment there is a single contract that all GPs sign with the NHS when they provide services. Will this contract be used by the CCGs? This contract basically gives a fixed pricing system for obtaining GP services – if it is used, how can the CCGs claim to be operating a competitive tendering system? If it is not used, and GPs are to negotiate their services on the basis of the price negotiations, how are the CCGs going to decide the correct price? We’re not talking about a fully free market here, since most CCGs operate to purchase services within a given area and, in general, patients won’t be going outside that area for services, so there won’t be multiple CCGs competing in the area, and patients won’t be voting with their feet if prices are too high (in fact the patients won’t even see the prices). If the system is going to operate without market signals, then it’s going to need some very carefully arranged pricing mechanisms to ensure it doesn’t waste money. These are not likely to be most optimally set at the level of individual CCGs, but would be better off set by the government. It’s not clear to me that this is going to happen, or that the CCGs are going to get much guidance at all on how to fix prices. By way of comparison, Japan operates a system in which private hospitals and clinics charge patients for services on a fee-for-service basis, then charge the government’s insurance system for 70% of the total cost. However, the government maintains a strict schedule of service fees, so it’s extremely difficult for doctors to over- or under-charge. Essentially in this market the government provides a very strong centralized pricing guideline to keep the market at a stable price. The Australian government uses a similar mechanism through setting a minimum fee for GP services provided and allowing patients to vote with their hip pocket when choosing GPs. It’s not clear that the NHS will be using any such system, but in the absence of a strictly market-based mechanism for setting prices[4], how are the CCGs going to be able to choose what to charge, or even to know that they are getting value for money?

Given these concerns, I can see all sorts of disasters befalling the revised network of CCGs, including (for example) the possibility that they set up contracts that take up all their budget, only to find their area massively underserved with health services but no funds left to purchase more. What are they going to do then? How is the government determining how much money each CCG needs, and how can they be sure they have gotten it right? Does the government have any fallback position or plan B if over the first few years of the system the CCGs massively cock-up their purchasing decisions?

On the face of it the reforms appear to consist of a poorly-structured semi-marketization, to be managed by inexperienced and new organizations that have been given arbitrary budgets in an environment with very limited centralized guidance, to purchase services in a marketplace where even the experts are uncertain about how to define value for money or quality of service provision, but with an extremely limited set of real market mechanisms as an alternative way of providing pricing signals. It’s like a healthcare Frankenmarket. How can this story possibly end well? I predict we’ll know before the next election, and I suspect that the results of this grand experiment are going to form the obituary for this government.

—

fn1: well, theoretically you can – lots of governments have built health policy on “efficiency savings.” Practically, however, health systems improve by spending more to gain more, rather than spending less to gain the same.

fn2: I provide no citation for this because I can’t be bothered looking, but really this shouldn’t require a citation, it’s the factual equivalent of saying “the sun rises in the morning.”[3]

fn3: I know I know.

fn4: I don’t maintain here that these systems are necessarily the best, simply that they are a strict guideline and they do roughly seem to work.