Welcome to the first edition of our Warwick Business School Healthcare Newsletter.
Here at WBS we have one of the largest and most active research communities working in the field of health and care of any Business School in Europe. Through our alliances, partnerships, research collaborations and our alumni we are engaged in scores of activities, across the spectrum of health and care, and in most corners of the world.
In this newsletter we plan to connect you to this programme of work in a concise, accessible and relevant way. Each edition will showcase “in a nutshell” key findings from some of our own recent research. We will blog about contemporary challenges facing healthcare in different settings, and the evidence as to how they might be tackled. We will introduce you to new findings and knowledge from the work of others. And we will give you an opportunity to comment and to join the conversation with others.
We hope you find this valuable. Let us know how you would like it to evolve.
Professor of Practice, Warwick Business School.
Whither, or maybe Whether, Commissioning.
I remember 1st April 1991 well. It was my first day as Director of Public Health of a newly merged Health Authority in Birmingham. But for most people it was day zero of a revolution in the organisation of UK healthcare as the “internal market” came into being.
Until that day, a Health Authority like mine had been funded on the basis of the scale and complexity of the health services delivered in the geographical area for which they were responsible. In my part of Birmingham these “directly managed units” included many of the major specialist departments in a range of teaching hospitals, that cared for patients from across the West Midlands and beyond. With only one Medical School in a Region of nearly 6M people our services were large and dominant.
However, our resident population was small. With three other health authorities in Birmingham alone, the population for which we were responsible was around 300,000. And under the new reforms, our role was now to become “purchasers” of care for these people. We shared this role with a small number of GP practices that had applied to become the pioneer “fundholders”; in addition to continuing to deliver primary care, they would take responsibility for the management of a budget that would cover their prescribing costs, and the funds with which to buy, or “commission” a limited range of secondary elective care services for their registered population.
Meanwhile, the hospitals had to enter contracts with all of the health authorities and fundholders across the West Midlands and beyond, if they were to secure the resources to “provide” care to the patients referred to them, or who came as an emergency.
The ideas for this “internal market” had first surfaced in an occasional paper, commissioned by the Nuffield Trust, and written by the American health economist Alain Enthoven in 1985. He had played a prominent role in the establishment of Kaiser Permanente, the Health Maintenance Organisation (HMO) that was revolutionising care in California. The paper was short, very readable, and much of it could have been written today.
“The NHS enjoys widespread support in Britain, and it produces a great deal of care for the money spent. But given the tight limits within which it must operate, (it) will find it increasingly difficult to meet the demands placed upon it. (It) will need to find ways to produce even more value for money if it is to make effective new technology available to all who can benefit from it at the standards enjoyed in other industrialized democracies.
The NHS runs on the ability and dedication of the many people who work in it. But its structure contains no serious incentives to guide the NHS in the direction of better quality care and service at reduced cost. In fact, the structure of the NHS contains perverse incentives.”
A great deal has changed in the intervening 27 years, but, at least in England, the “purchaser-provider split” that emerged in 1991 has been a constant feature. The commissioning arrangements and the regulatory structures have evolved. But responsibility to purchase services for a defined resident population, deploying an allocated budget based on the size and characteristics of that population, has been a linchpin of our system.
Is that set to change? The requirement for all health and social care partners over a substantial area to develop a common Sustainability and Transformation plan may have changed the game. Just over a year ago Simon Stevens, the CEO of the NHS predicted that these would “effectively end the purchaser-provider split”. But since then, the details of the future arrangements for commissioning have proved elusive.
Over the next few editions of this newsletter we will look at the lessons learned from Commissioning in the NHS in England, and in the other countries that introduced similar reforms. We will hear from advocates, and those who have been underwhelmed by the experience, and will discuss the risks and opportunities if this approach to health service organisation is, indeed, drawing to a close.
 Enthoven, A “Reflections on the management of the National Health Service: An American looks at incentives to efficiency in health services management in the UK. Nuffield Provincial Hospitals Trust Occasional Papers 5. London (1985)
Management consultancy and inefficiency in the NHS: time for an urgent review
Kirkpatrick, I., Sturdy, A J, Alvarado, N, Blanco-Oliver, A and Veronesi, G. ‘The impact of management consultants on public service efficiency’ Policy & Politics http://www.ingentaconnect.com/ content/tpp/pap/pre-prints
- Spending on management consultants was associated with inefficiency equivalent to a small average annual loss of £10,600 per annum for each hospital trust, in addition to the fees already paid for these services (around £600 million over 4 years for all trusts involved in the study).
- The hospital trusts in the study each spent £1.2 million per annum on average on management consultancy fees (varying from zero to £5.6 million), equivalent to the average salary cost of 20 managers, 10 consultant doctors, or 35 senior nurses.
- Although a minority of trusts (one third of the top 25% of management consultancy users) achieved moderate improvements of efficiency, the impact on the population overall was negative – with management consulting expenditure leading to higher inefficiency.
- The results were analogous when using the two alternative measures of efficiency while also controlling for path dependency in performance.
- The study tested (through longitudinal data analysis as well as employing prior (lagged) values of consulting expenditure) for the possibility that it was inefficiency that led to consulting use and not vice versa (reverse causality) and found that this was not the case.
- Further tests revealed that management consultants had no significant impact on the quality of hospital services, in terms of patient experience scores.
Link to Core Article: https://www.wbs.ac.uk/news/six-reasons-why-the-nhs-needs-more-managers/