Is turning the NHS into a complex network of social enterprises the right step?

THE title was hardly inspiring: but the impact will be profound. A report that has just landed on the desk of Health Secretary Patricia Hewitt provides an indication...

THE title was hardly inspiring: but the impact will be profound. A report that has just landed on the desk of Health Secretary Patricia Hewitt provides an indication of how the health service will be structured – and underlines just how significant the role of social enterprises will be in the new-style NHS.
‘Strengthening Local Services: The Future of the Acute Hospital – The Report of the National Leadership Network Local Hospitals Project.&#039 What a mouthful – but don&#039t let the jargon put you off. It is a report from a large team of key advisers pointing out what will happen to local acute hospitals.
The committee was appointed by the Health Secretary. Membership includes Professor Chris Ham, special adviser to former health secretary Alan Milburn and many other health thinkers and practitioners.
"NHS acute hospitals face a challenging and fast-changing environment," begins the report. "The introduction of PbR [Payment by Result], Practice Based Commissioning, choice and contestability – and the continuing need to improve the integration of services – will create important pressures for change in service delivery."
The report explains there will be much greater diversity of provision between local hospitals. It argues that Foundation Trusts, acute trusts and commissioners must recognise the changing environment. Without reconfiguring services many NHS trusts will become ‘unpopular, unstaffable, unsafe, unsustainable – resulting in service failure&#039.
A vision for breaking down the old monolithic NHS is offered. As part of the split between commissioners and providers, existing clinical staff could transfer to social enterprises (as is already happening with one Primary Care Trust), or the private sector, and contract with NHS commissioners; chambers of clinical staff could be set up in a similar way to lawyers and GP practices; or ‘clinical staffing trusts&#039 could be established to employ staff, or the staff could be employed by managed clinical networks, deployed where necessary.
Trying to put this in plainer language, this vision – a vision requested by the health secretary – portrays an NHS which is no longer Europe&#039s largest employer. We will see the break-up of the monolith and a thousand flowers blooming, or so we hope.
Given the problems in turning the Government&#039s NHS investment into productivity gains – a failure which has just seen the early retirement of the NHS chief executive – this proposal might seem only to be expected. But let us look a bit beneath the surface.
When Labour entered government in 1997, Frank Dobson was appointed Health Secretary. He was convinced that more central control and greater insistence staff should do the right thing, would lead to startling improvements. It didn&#039t – and this was a conclusion shared by Dobson&#039s successor, Alan Milburn, after he tried to do more of the same.
Eventually Milburn concluded the opposite approach would be more successful – aided by his observation of a small number of foundation hospitals in Spain, which seemed to be more effective by being given greater freedoms and flexibilities.
But Milburn could not convince the Chancellor to permit the full range of financial freedoms that Milburn believed they should have – and this may have been a factor in his premature departure from Cabinet.
What Milburn has left us with is possibly the most comprehensive about-turn in government policy that a Labour administration has ever presided over. It was a decision to convert a command-and-control system into a decentralised one, using market principles and mutual enterprises, where possible.
To put it mildly, the market principles are not bedding in easily. At the heart of these is the move to Payment by Results – hospitals paid according to the number of patients they treat. Logically, this could lead to the bankruptcy of small hospitals treating few patients, especially if the new private sector treatment centres cream-off the easiest cases at higher payment rates.
The PbR policy therefore conflicts with Labour&#039s commitment to ‘New Localism&#039 and serious political problems are in store when hospitals in the Lake District or Cornwall face the chop because they have ‘attracted&#039 insufficient patients.
Even more seriously, PbR is in major conflict with the Government&#039s use of the Private Finance Initiative to pay for the latest generation of hospitals.
PFI contracts require guarantees of revenue payments for 20 to 30 years in the future – yet the market reforms led by PbR and supported by Patient Choice mean that there can be no guarantee for hospitals of what income they will have in years to come. This is further confirmed by predictions that more treatment will be conducted in the future in GPs&#039 own practices and other small treatment centres (or even in patients&#039 own homes).
The whole principle of PFI has been placed at risk by the adoption of PbR and, to a lesser extent, Patient Choice. Yet without PFI, the Government appears to have no strategy to finance the new build of hospitals that are desperately needed today.
It is as if the personality tensions of Tony Blair and Gordon Brown are symbolised in a single policy clash. For Tony Blair read market reforms and Foundation Trusts, to provide personalisation, choice and value for money. For Gordon Brown read PFI and there is no prudent alternative in financing the hospitals.
The impact is policy paralysis. The PFI programme is in limbo and many observers believe that PbR cannot be effectively implemented – and may even be abandoned when Brown becomes Prime Minister.
Up and down England, cities are awaiting new hospitals which have not been approved because of the uncertainties on how to meet the future costs of PFI contracts.
Nor is this the only example of contradictory policies.
The pay awards agreed by the last Health Secretary, John Reid, have to a significant extent brought about the financial crisis that the current Health Secretary, Patricia Hewitt, is unable to bring under control.
If this appears a mess, we should not be surprised. Converting Europe&#039s largest organisation into a myriad of market driven social enterprises and private sector companies will, if it happens, go down in history as a conversion to rival the fall of a communist society.
Yet, to the outsider, the process seems to have not been fully thought through and never to have been consciously approved by Cabinet as a whole.
The probability is that the result will be a disaster, which even committed health workers operating through non-profit social enterprises will be unable to rescue.
To pursue the analogy with the fall of communist societies – these suffered widespread factory closures, mass unemployment and generalised corruption on their way to functioning market economies.
Perhaps the marketisation will not be a failure – but to convince me I need to see a thought-out policy that explains how the process is being managed.
My guess is that the Prime Minister&#039s policy advisers – one of whom has already left to run a company to reap the benefits of the new market – would respond that allowing the market to rule means that there can be no blueprint for managing the process. At which point I will put my head in my hands in despair.
For the first time since 1997, there is now the whiff of John Major about the current administration. It is a government that, for the moment at least, has ceased to project the impression of competence. Central to this lies the failure to manage properly the transition of the NHS into a diverse health economy.
Let us hope that it is not too late for a new leadership of the Labour and Co-operative movement to rescue the situation. But next time, perhaps ministers could have a route map before they embark on a dangerous and challenging journey.

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