UK: IN SICKNESS AND IN HEALTH. - The conflict of evidence on the condition of the NHS is bewildering. The one thing that everyone agrees on is that it is impossible to judge how well it works.

by Simon Caulkin.
Last Updated: 31 Aug 2010

The conflict of evidence on the condition of the NHS is bewildering. The one thing that everyone agrees on is that it is impossible to judge how well it works.

Any report on the state of Britain's National Health Service in the 1990s will be a report on the state of the nation's soul. Straddling the fault-line between the welfare state and the enterprise society, central planning and the market, public and private, the discourse of care and the discourse of cost-effectiveness, the uncomfortable present and a simpler past, the NHS faithfully captures and amplifies the strains running through society as a whole. How otherwise can the baffling conflict of evidence over the current condition of British health care in general and the results of the 1991 reforms - as Margaret Thatcher boasted, 'the most far-reaching reform of the NHS in its 40-year history' - be explained?

Consider the following paradoxes. 'Pound for pound, the British taxpayer still gets the best health service in the world,' insists Peter Griffiths, deputy chief executive of the King's Fund, a health-care think tank - yet public opinion thinks the service (particularly in London) is falling apart. Health secretary Virginia Bottomley proclaims 'phenomenal achievements' against the targets of the Patient's Charter and in hospital productivity - but the press is full of stories of GPs unable to get urgent cases into hospital and helicopter flights to Leeds. Managers point out that doctors and (yes) nurses are doing comparatively well in pay terms - yet strike action is in the air over unprecedented swathes of the service and professional morale has hit rock bottom.

The NHS's proudest boast is that service is universal, comprehensive and free to everyone at the point of delivery - so why are dentists refusing to accept NHS patients and the chronically sick being assessed to contribute to their own care? Again, the main internal market reforms are variously described as a success, a disaster, a curate's egg, a sideshow or (mostly) impossible to judge; as leading to privatisation and commercialisation on one hand, increasing centralisation on the other. The one cardinal disadvantage of the NHS that everyone can agree on is that it is impossible to tell how well it works. Christine Hancock, the articulate general secretary of the Royal College of Nursing, says: 'One of the greatest failings of the reforms is not to have made them specific enough for anyone to judge.'

The aggravation factor is amplified by the sheer size of the NHS - everyone knows someone belonging to its often disgruntled 1.2 million workforce, the biggest in Europe - and the official decision not to set up a system to evaluate the reforms as they went along. This was partly, according to NHS chief executive Alan Langlands, because things were moving too fast. The air is now filled with the sound of grinding axes, all being honed with a different selection of facts and figures.

Essentially, there are two issues at the heart of the argument; one medical, one economic. Medically, how do we get the best possible health outcomes from all the available resources? And economically, is the market (or any other mechanism) the best way of getting value for the money spent? The basic issue is the same all over the world. 'Everywhere there's an issue of the balance between primary (GP) and hospital care,' notes Griffiths at the King's Fund (see box, p37). 'And that stems from the gap between supply, demand and public expectation. Current government funding can't match personal expectations of service on the one hand and burgeoning technology on the other. So how do we square the circle?' That depends on where you're starting from. Putting things in perspective, internationally UK health care stands out for its cost-effectiveness and universality. In 1992, for example, NHS spending of £42 billion was 6.7% of GDP, low compared with 8.2% for the OECD and 7.5% for the European Community. Yet broad health outcomes are comparable: Britons live as long as other Western Europeans, and infant mortality, like most other indicators, is close to the OECD average. The reason for the low cost is partly that funding via general taxation is administratively cheap; just as important, unlike the insurance-based systems which dominate Europe and the US, budgets can be cash-limited. (The 1948 commitment to unlimited free medical care for all lasted just one year before soaraway costs were capped.) The universality comes from what is a well-distributed network of 11,300 general practices, used by 98% of the population, which also help to contain costs by, again unlike other systems, being 'gate-keepers' to more costly hospital-based specialist and acute care. Almost all ill-health 'episodes' are self-treated or dealt with by a GP. Just 1% of all cases are referred to hospitals, which admit a further 1% of patients directly. But hospitals absorb 70% of all NHS costs, compared with just 6% for GPs. Two other plus points of the NHS, both sadly unharnessed, are its hugely dedicated though currently mutinous workforce and overwhelming public support. A further strength of the NHS - invariably left out of the debate - is its symbiotic relationship with a world-competitive pharmaceutical industry, whose development has been incalculably assisted by the excellent clinical base and judicious pricing regime of the NHS: the very model of the mixed economy - or, if you prefer, purchaser-provider split.

These are important advantages. Brian Jarman, professor of general practice at St Mary's in London, says: 'The NHS is one of the things we're good at. We have the best system of primary care, even if it is underfunded. And the structure of the service is good.' Many analysts agree. But the British system also has its minuses. One is a legacy of underinvestment - half of all hospital beds are in 100-year-old buildings, and the sector is less well-equipped than France or Germany, let alone the US. This is linked to a second problem. The founders of the NHS thought that there was a fixed amount of ill health that would rapidly be treated away, after which demand for health care would decline. Instead, demand shot off the top of the graph, where it was sandbagged by the squeeze on resources. Since treatment was free, the inevitable rationing could only take place through waiting lists which soon extended to years.

Compared with other countries, patient choice and responsiveness in the UK have also been underdeveloped. As Audrey Leathard, professor of inter-professional studies at London's South Bank University, tersely remarks in her book Health Care Provision: Past, Present and Future, the one person who has never been consulted about the shape of the health service is the patient. Other shortcomings have been resistance to change, lack of information about costs or effectiveness of treatments and hopeless misuse of nurses and other staff. In health outcomes, despite the proud commitment to equity, the health gap between manual and non-manual workers has disconcertingly widened. Leathard notes that as Aneurin Bevan's 1946 vision of an 'optimum' service faded, the NHS achieved 'the universalisation of the adequate: it rationalised the delivery of health care to assure a minimum of service provision for all'. This looks good until judged against the standards of the best. Greg Parston, director of consultancy at the Office of Public Management, sums up that in terms of flexibility, equipment and best practice the NHS 'is 30 years out of date'.

Enter at this point Margaret Thatcher. Health as such was not one of her priorities - but the NHS's huge demands on the public purse, its strong unions and professional vested interests were always going to attract her reforming zeal at some stage. Her first, and some believe crucial, prescription for bringing them into line was a dose of general management. Asked to report on how the NHS was managed, Sir Roy Griffiths, then managing director of J Sainsbury, replied in 1982 that it wasn't: 'If Florence Nightingale were carrying her lamp through the corridors of the NHS today, she would almost certainly be searching for the people in charge.' He advised the creation of a strong core management function in hospitals and health authorities, and an NHS management board (now the executive). He also argued forcefully that clinicians should be more involved in management.

While the Griffiths reforms were working through, however, they were overtaken by a funding crisis. A slowdown in hospital investment combined with tight cash limits on public spending and demographic pressures (an ageing population and a sudden increase in births) put unbearable strains on the system in the winter of 1987/1988. The hospitals couldn't cope.

The Government's response was a prime ministerial review and the watershed 1989 White Paper 'Working for Patients'. It had a clear choice, because cutting costs without touching the structure of health-care provision didn't work. It could either stop cutting costs or attack the structure. It chose the latter. As the OECD summed it up, it decided 'to squeeze more out of the system', launching a radical series of measures to shake up the supply side.

Parston's reading is that the results of the Griffiths reforms were so uneven that the Government felt obliged to introduce institutional changes to substitute for the lack of good management. Patients were actually an afterthought: government's real priority, he maintains, 'was to send in some hard men to sort out the hospitals'. Unfortunately, the change was bought at the cost of sweeping the rug from under the new managers just as they were addressing functional weaknesses and - even more important - coaxing the professions into accepting the need for change. The result: backs-to-the-wall resistance as doctors and nurses saw their suspicions confirmed by changes which were perceived as ideological and cost-driven - 'leaving managers stranded in the middle.' Parston warns: 'We shouldn't let the 1983 reforms be driven out by the mechanistic, institutional ones of 1991.' It's hard to overstate the radical reach of the 1989 White Paper, which went far beyond the modest experiments with market-based solutions suggested by its inspiration, the American health economist Professor Alain Enthoven. Instead, it broke up the old integrated structure into an internal or quasi-market with three new features. The purchaser-provider split was established instead of district health authorities organising and providing hospital services as in the past. They became purchasers or commissioners, using their funds to buy services for the local population from providers such as the new hospital trusts (below). In theory, the 'commissioning' role makes authorities take a much more strategic view of local health provision than in the past.

A second kind of purchaser is the GP fundholder. The practice is allotted its own budget from the centre with which to purchase directly certain hospital services, such as non-urgent surgery, for its patients. It thus by-passes, and to some extent competes with, the district purchaser acting on behalf of non-fundholders. Fundholding practices now cover around one-third of the population.

The third new feature is the hospital trust. Hospitals and other community service suppliers (providers) were given the opportunity to become self-governing trusts competing with each other (and private and directly run units) for purchasers' contracts. Trusts are accountable to the NHS executive and are expected to break even. Within this constraint, they have far greater freedom to manage their own affairs than in the past.

Champions of reform such as Bottomley insist that these changes should be seen in a yet wider strategic and structural perspective. The view should take in new policies for community care, the Patient's Charter ('the first written constitution for patients') and above all the Health of the Nation strategy - the first attempt to set national priorities and targets for health improvement over a wide range of headings. In this context, claims Bottomley, the great advance of the reforms is that they offer an incentive to improve and a lever of change.

Thus, according to Bottomley, under the purchaser-provider split, 'the health authority now assesses the need of the local population and distributes money in contracts for both quality and quantity, which it then monitors. In the past the allocation was institution-driven; now it's population-driven. Contracts are a mechanism for revealing progress year on year and identifying areas for further improvement. This is a profound and dramatic change.' What's more, she adds, the immediate results 'have far exceeded what I hoped for five years ago': hence the revised Patient's Charter cutting maximum waiting time for non-urgent operations to 18 months. She singles out 'a dramatic rise' in immunisation rates and cancer screening (thanks to a new contract with GPs), improvement in outpatient targets, shorter hours for junior doctors 'and 3000 more people a day treated than before the reforms'.

Few people would deny that the NHS has seen benefits since 1991. It's now rare, as Hancock concedes, to encounter a really grim hospital front of house. Staff are more patient-friendly, and the improvement in waiting lists is welcome. At the British Medical Association, Professor Vivienne Nathanson admits that many doctors 'are finding things that are interesting and exciting (in the reforms). Some GPs have adopted fundholding because of the ability it gives them to do new things.' Even hospital consultants, deprived of their god-like status in the new dispensation, accept that the changes have introduced a new responsiveness to patients. 'Take outpatient clinics,' says Anthony Hopkins, director of research at the Royal College of Physicians. 'They're hard work, time-consuming and unglamourous. In the past they often started late while patients sat around waiting, or the records got lost. That can't happen any more - they'd lose the contract.' At the level of the units, there is an unmistakable sense of liberation among the managers of hospital trusts. 'Fundamentally, the dismantling of centralised bureaucracy and being in charge of our own destiny is the best thing,' says Jan Filochowski, chief executive of Poole NHS Hospital Trust. A few miles along the coast, Stuart Marples, his equivalent and rival at Bournemouth and Christchurch, agrees. He adds that the focus on local needs is much sharper than before. Both hospitals have cut their waiting lists to six months maximum, both units have involved doctors in management, and 'Yes, we do compete vigorously with Bournemouth,' says Filochowski. 'We always have done - the difference is that the previous system didn't acknowledge where the loyalties lay. This is healthier.' Across country in the West Midlands, NHS regional director Brian Edwards suggests that the new arrangements 'have allowed some very powerful and challenging new ideas to emerge'. He recently announced that the region had wiped out its backlog of patients waiting more than nine months on hospital lists. That would be the new maximum. As in Trent, Edwards's previous region, West Midlands is attracting attention with excellent results. These arise from innovations such as right-first-time and one-stop testing clinics, which, mirroring industrial experience, are cutting costs as well as dramatically improving patient service. There is more to come, Edwards promises: 'The system adapts very quickly. GPs aren't saying how wonderful that waiting lists have come down, they're saying, "Six months is disgraceful, if you can't do better than that we'll find someone who will." Now we're contemplating whole areas where there may be no waiting lists at all. The challenge is to keep the momentum going.' On the negative side of the ledger, no one disagrees where the main problems of the new-style health service lie. There's a 'democratic deficit' among the providers. 'Ninety-five per cent of hospitals are trusts. There's a big issue of lack of accountability. There's no democratic overview - they're barely accountable to anyone,' claims Leathard. The department's recent guidelines on openness and new quarterly reviews are welcome but do not entirely disarm old gibes about the Department of Stealth and Total Obscurity. There is nothing to prevent trusts (and health authorities) continuing to take major decisions in private. And 'it's totally wrong that there should be gagging clauses in contracts preventing doctors from speaking to the press,' fulminates Jarman, although he blames the Government rather than the reforms.

The second problem area is equity. Does the new system lead to a two-tier health service as fundholders buy their way to the front of the queue? 'There's now enough evidence to show that "two-tierism" exists,' claims Hopkins at the Royal College of Physicians. This may to some extent cure itself as more doctors become fundholders (two-thirds of the population will be covered by fundholding practices by the next election) and determined non-fundholders figure out ways to compete. That still leaves nasty hints of 'cream-skimming', in that fundholders find excuses not to register the poor and ill on their lists, although cases are so far unsubstantiated.

The third big question mark is transaction costs. Splitting the NHS up and having its components contract with each other is 'enormously expensive - administration costs have increased dramatically,' says Angela Coulter, director of the King's Fund Centre. The market increases bureaucracy as providers are forced to write individual invoices. This is a main cause of complaint among doctors. When one hospital scrutinised an outpatient department it was horrified to find that dealing with one patient took 12 minutes of clinical time but 78 of administration, involving 120 tasks and 15 staff. The nightmare scenario exists in the US, where health-care form-filling reportedly consumes 1% of GDP, or more than the entire cost of the NHS. The actual extent of the administrative overhead is disputed, officials predict a fall-back after heavy start-up costs and Langlands insists that it compares well with industry. But many analysts believe that it is the management of change which has kept overall health costs rising, by absorbing all the extra resources made available in the early 1990s.

The final and most serious of the reforms' shortcomings, however, is the failure to engage the hearts and minds of both the public and the NHS workforce, particularly at lower levels closest to the patient. Bottomley laments the perverse vested interest of the health service in running itself down in the hope of attracting more funds. But the current malaise goes deeper. There is a pervasive feeling, forcefully expressed by Nicholas Winterton, the Conservative MP for Macclesfield who was removed from the chair of the House of Commons select committee on social security for his dissenting views, that 'the concept of a national health service is being undermined. It is becoming a cost-driven, not a care-driven service.' 'All NHS changes, but this one in particular, have disregarded the management of people,' charges Hancock. 'It's the biggest weakness.' Healing is after all the ultimate collaborative venture - studies show that motivated staff help motivated patients get better faster, 'but there doesn't seem to be any understanding of that'. Hancock argues that the performance language used by managers has so alienated doctors and nurses that people have become deeply suspicious of what would otherwise be thought of as advances. For instance, shorter hospital stays are in principle a good thing - but people have learned to perceive them as financially rather than clinically driven. Similarly, local pay, however logical from a management point of view, hasn't a hope of acceptance so long as it's viewed as just another step from a job-motivated to a money-motivated service.

Where does that leave us? After all the sound and fury, the attempts at systematic as opposed to anecdotal evaluation are non-committal. Two years ago, Julian Le Grand, professor of health policy at the London School of Economics, found little change of any kind that could be attributed to the reforms. He pointed out that subsequent changes superimposed on the structural reforms made it impossible to link causes with effects, while given the large injection of resources in the run-up to the last election it would have been astonishing if the NHS hadn't improved.

More recently, the National Audit Office reported that the internal market had yet to bring real efficiency savings because, in the absence of a central price database, purchasers had little means of knowing what prices they should expect to pay. According to Chris Ham, director of the Health Services Management Centre: 'The balance sheet is about even. There are some pluses and quite a number of minuses, although I'd want to emphasise the former. As to whether the internal market is better at delivering improvements than the old integrated system, the jury is still out.' So what next? Filochowski at Poole observes: 'If you look at what was being said five years ago, the break-up of the NHS hasn't happened: it's still free at the point of access, available according to clinical need, not ability to pay. It's fundamentally the same NHS.' Indeed, the emerging agenda may not be so much about further changes as about finding a shared language to describe what has actually happened, without either committing to yet more institutional change or freezing the situation as it is. Already, as Coulter at the King's Fund Centre points out, there has been a marked shift in the terms of the debate since 1989. The radical initial language of reform was about turning health over to the market - why else have one? But the message of the NHS is that the British can only absorb a bit of the market at a time. Like the 'enterprise culture' as a whole, a truly competitive health marketplace begins to look like a blip as official terminology moves to the more moderate 'planned' or 'managed markets' - which could easily come from the lexicon of New Labour.

Which is just as well, since the sense of battle fatigue, particularly among the health service infantry, is palpable. Says Coulter: 'It's time to stop thinking about organisations and start thinking about patients' needs.' That feeling is widespread. In the West Midlands, Edwards accepts that the evolving changes can be seen as either exciting or threatening, depending on the point of view. 'I'm reasonably confident that we can shape the ideas to convince the profession that they can improve clinical services,' he says. 'Managing that chemistry is going to be the secret of success.'

-This is the first of two articles on the NHS. Next month Simon Caulkin looks at what's needed in a health service for the 21st century.


1988 1989 1990 1991 1992

Hospital services 15,771 18,037 19,557 21,840 24,790

NHS trusts - - - - (24)

Family health services 4,272 5,386 5,681 6,275 6,977

Administration 155 195 208 264 295

Central health 492 665 756 847 1,019

Total NHS spending 20,689 24,283 26,202 29,226 33,057

% of all public services 14.5 15.6 15.0 15.1 15.6

1993 1994 *1995 *1996

Hospital services 27,048 28,574 28,711 29,682

NHS trusts 222 323 563 608

Family health services 7,466 7,403 8,680 9,148

Administration 352 324 314 315

Central health 1,114 1,021 1,040 1,078

Total NHS spending 36,202 37,645 39,308 40,831

% of all public services 15.6 15.4 15.6 15.5

* Estimated figures

Source:Institute of Health Economics


1970 1975 1980 1985 1990 1992

United States 7.2 8.1 9.3 10.5 12.3 13.5

Japan 4.6 5.5 6.7 6.5 6.9 7.1

Germany 6.0 7.9 8.7 8.5 8.6 9.1

France 5.9 6.8 7.7 8.2 8.9 9.2

Italy 5.3 5.9 7.1 6.9 8.2 8.4

UK 4.4 5.4 5.9 5.8 6.3 6.7

Canada 6.9 7.1 7.4 8.4 9.3 9.9

European Community 4.9 6.2 7.0 6.9 7.3 7.5

Source: OECD.

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