May I put a simple question, to which I might know the answer, to Mike Farrar? You represent the people who administer the NHS and most health providers across the UK. What is the feeling apropos the situation we are in? Would you welcome a prolonged legislative bout going into December, or would you like Parliament to make up its mind one way or the other on what it wants to do with this legislation?
Mike Farrar: It would be fair to say that our members believe that we are in a better place now than we were before the pause. There was a good deal of concern about that. It is also fair to say that, although we live in a political democracy and we all support and welcome political debate, the NHS is rather worried about the extent to which the real issues it is facing on a day-to-day basis are not going away. In fact, the uncertainty of some of the key players in the system is very distracting.
I have used the phrase that we have been a bit in the woods trying to separate the wood from the trees as the forest fire is burning, and our members can see that. We are looking for real certainty and a real direction of travel, but the amendments raise important issues about how this will work in practice, which needs to be understood properly. The Committee needs to have a sense, perhaps from the evidence it is taking today, of the areas that need to be sorted before the NHS has the degree of certainty that it needs.
Mike Farrar: The sense we have from our members is that the key decisions that need to be taken in the next two years will be seminal for the future of the national health service. A number of the reforms will have a future impact, but some of them will not take effect until 2013. Our worry is that in the short term some of the people taking decisions are doing so without understanding what their position will be in the future or, indeed, whether those organisations will be around to deal with the consequences of those decisions. We recognise the immediate issue that the NHS faces in managing the financial crisis. Think about re-profiling services, think about where capacity needs to come out of the system and think about where pay deals might need to be done with staff to support job security against the overall costs. There are a lot of immediate issues that have to be tackled. At the moment, many of the people who are in place are uncertain of their accountability for some of those decisions. That is a worry for our members, yes. It is a significant worry.
Mike Farrar: One of our difficulties—and I think that a number of people will say this today—is that the amendments were tabled on Friday. Given their complexity and the huge number of them, plus the fact that we only got the very helpful document from the Department at teatime yesterday, all I can say is that I will give you to the best of my ability today my interpretation of the views of our members on those issues. In the fullness of time, we may start to understand the issues more, particularly as we need to see the whole thing together to understand a number of them.
It is not just about the individual elements—for example, understanding the nature of a regulatory system against the nature of the accountability of the commissioning consortia—as they play together with the commissioning board. Some of that will emerge in the fullness of time. We know that some issues will not be discussed until Report, which is significant in terms of failure. All I would say today is that I can answer to the best of my ability with the time that has been available, but it may be that there should be future opportunities to bring us back and ask us further questions, should you choose to do so, when we have had a chance to consider the measures. This is a very complex set of changes.
Professor Ham: We would echo that. We have had very little time to get our head around the amendments and how far they carry forward both what the Future Forum said and what the Government’s response was. The document that came out yesterday teatime was very helpful. Our briefing on the Bill and the amendments is based on a very fast reading and appreciation of what we had over the weekend, not taking account of yesterday’s document, so I enter the same caveats as Mike.
Dr Dixon: Yes, or, quite apart from the quality premium, if they make savings, as in fund holding, can they keep them? Should that be in the legislation or should it be in the regulations? There is a whole set of other things, which could include governance as well. They are two small examples.
My point is about wider policy making. If a full thought-out policy was put before us, it might be better and easier to look at what was appropriate in legislation and what should be in regulations. It is a question of time and the scope of ambition of any legislation.
I have a question to Mike Farrar. You said that you members feel that they are in a better place. Clause 65 of the original Bill said that any merger between NHS trusts or a merger between NHS trusts and another business could be referred to the OFT or the Competition Commission. That provision remains unaltered by the amendments tabled. Do you think your members would be happy with that?
Mike Farrar: When I was referring to the overall perspective, I was taking a general view. We have some questions to raise on elements of the amendments.
On mergers and acquisitions, our sense is that sector-specific oversight is better than general oversight, given that the nature of health is different from that of other industries. Our people would support a more practical approach to supporting relationships between organisations, not just mergers and acquisitions; it is about being able to support organisations working together to become more efficient and to improve and maintain quality standards. Our experience to date in the health service has been that those kinds of processes have been very lengthy, they cost a lot and it takes an awfully long time before you get better value for patients. The general, rather than the specific, point to make is that we need something that is sensitive to the needs of the health service, and effectively to understand that, in some cases, you will have to bring together providers and you should be able to do that swiftly, transparently and clearly so that patients benefit.
Mike Farrar: Ultimately, there is a view that if the health sector regulation is invoked, there is always a question whether it could be challenged later at a higher level. I am not certain that this is buttoned in the legislation. It may get tested in the fullness of time, but I am not entirely certain that the OFT would be a player. I assume—I am aware that this is hypothetical—that the OFT is the backstop if someone feels that the actions of a sector-specific regulator have not dealt with their issues appropriately.
Could I put this to the other two witnesses? Your written evidence states that competition has changed in the last few weeks, but this Act remains—clause 65 refers to part 4 of the Enterprise Act 2002. Are you comfortable that this and other clauses related to competition remain in the Bill, or do you think there has been a fundamental change in terms of using competition law in NHS reconfigurations and services?
Professor Ham: There has not been a fundamental change because the law is the law. Economic regulation takes place within the framework of the law.
The first question is whether there is a role for competition in health care, particularly in the NHS. If the answer to that in policy terms is yes, inevitably you need to have some way of regulating the market in health care. The next question is: do you expose the NHS to the existing economic regulators, such as the Competition Commission and the OFT, without a sector-specific economic regulator, such as proposed in the Bill, which might, if it works well, have a detailed understanding of the complexities of health care and the need to apply competition principles in a way that is sensitive to those complexities? Given that the policy says, yes, there is a role for competition and you have to some way of regulating the market, our view is that it is better to have Monitor as the economic regulator with concurrent powers with the OFT and the Competition Commission than not to have a sector-specific regulator. People will differ on the answer to the first question, which is whether there is a role for competition.
Dr Dixon: I completely agree with that. The Co-operation and Competition Panel has been applying the principles of the Competition and Enterprise Acts. There has been quite a lot of tranquillity—it has been accepted. I agree that there ought to be a sector regulator. Health care is different from other businesses and industries.
I should like to ask Professor Ham about reconfigurations of hospital services. In the previous session, we heard from Professor Field that the whole Bill is focused on a move from a hospital-based system to a more community-centred, preventive role of delivering health care. He felt that the Bill in its previous incarnation went some way towards achieving that goal and that the Government’s amendments had moved that means to that end forward. In its written evidence the King’s Fund states that it remains
“concerned about the lack of clear responsibility for driving forward major reconfigurations of hospital services.”
Could you expand on that? It will clearly be a fundamental issue in the coming years.
Professor Ham: Absolutely. We fully endorse what I believe Steve Field said this morning. We need to move as quickly as we can towards less emphasis on services being delivered in acute hospitals to making a reality of prevention, consistently high standards of primary care, andmore carecloser to home. We have argued that over many years and it remains an aspiration rather than a reality. Inevitably, that means looking at the current organisation of hospital and specialist services and taking some tough, but necessary, decisions about concentrating some of those services in fewer hospitals. First and foremost, that should be done on quality and safety grounds, because that is a better way of getting word-class outcomes, to which I suspect we all subscribe. The debate about paediatric heart surgery is one example of that, and the concentration of specialist stroke services in fewer hospitals to get better results is another example.
Our concern, against a background of generally welcoming what the Future Forum has said and what the Government say in their response about the modifications to the Bill, is that if you add in the changes, particularly in relation to the powers of the health and well-being boards, the as yet ill-defined role of the new clinical senates and the role that clinical networks might have, there are more checks and balances built into the modified Bill than were in the original Bill. That could bring some benefits such as a bigger role for local authorities and community involvement in some of those important and complex decisions, but it is likely to slow down some of those decisions at a time when the NHS needs to move really rapidly to grasp the nettle of how we can improve outcomes by reconfiguring hospital services, in particular, to deliver better care on quality and safety grounds. Our concern would be the risk of too much bureaucracy being built into the process, rather than too little.
Mike Farrar: That is one of the concerns, which we raised in our evidence, about the relationships between the players that are now making decisions at local level, and we echo the point that Chris just made about the potential for several organisations effectively to have to agree on a particular course of action. It is not at all clear what the hierarchy is. For example, we do not support, as is currently set out, the notion that clinical senates and clinical networks would effectively be part of the national commissioning board. We think that they should play an advisory role to local consortia, to emphasise the localism of decision making.
We also worry about the default position wherein consortia are not ready to take on budgets and they are being deployed by a national body. Again, there is a risk that, in that organisation trying to have relationships with health and well-being boards and its clinical senate, which, by the way, it also hosts, there is an enormous amount of confusion when it is supposed to be setting the strategic framework and then holding people to account.
Mike Farrar: I think there is potential for significant bureaucracy unless it is clear what the relationships are and there are mechanisms in place—it may well be, coming to Jennifer’s point, that they are part of the regulations rather than the Bill—that actually establish how decisions can be taken speedily in the interests of patients.
Professor Ham: To add briefly to what I said before, it is a more complex Bill than the original draft, because it has taken on board many of the recommendations of the Future Forum. Equally, it will lead to a more complex—you may want to call it more bureaucratic—structure than was originally proposed. Some of that is beneficial, and some of that will have the effects that I was describing and will slow down necessary decision making. Once the dust settles on the recent debates, I hope it will be clear how we can avoid that risk of everything being slowed down, because there are so many players on the pitch, where we need to act quickly to take some really important decisions.
Dr Dixon: I take that point. If you look at some of the more successful attempts at reconfiguration, more involvement of local groups was necessary in order to get change. Some of the unsuccessful ones have been those where they have communicated less and involved fewer people, so, paradoxically, it could have the opposite effect.
The only thing that I would add to what was just said is that the Bill is more complex and may therefore cost more. These commissioning groups are operating within a very stringent—too stringent, actually—management resource.
Professor Ham: I think that the impact on patients will be much more felt from the Nicholson challenge and finding the £20 billion of efficiency savings in the next year or two, rather than from the effect of the Bill and the reforms in the medium term. We are already seeing the pressures of that on the ground—we are only three months into this financial year, the first of four years of real financial pressure on the NHS—and add to that the pressures that we know about of social care impacting on services for older people, too.
Our reading is that we are moving into a period in which this is bound to impact on patient care. However well managed the NHS is, and whatever scope there is for being more efficient with £105 billion of public money, the likelihood is that over time there will be pressure on maintaining the waiting time improvements that we have seen in the past decade. The Prime Minister has made a clear commitment that that will not happen, but the financial pressures may drive it to happen. We may find, therefore, that patients have to wait longer for their care if we cannot move quickly on some of the reconfigurations that we need to make on quality and safety grounds, particularly those impacting on maternity and A and E services.
These are complex and difficult issues. The challenge will be whether we can really give a copper-bottomed guarantee to the populations we are serving that they will be treated by services that are safe and deliver the quality of care that we expect and that they have a right to expect, too. That is not primarily an issue of money, although money will underpin the quality and safety challenges.
Mr Farrar, in your opening statement you referred to the fact that people are trying to make decisions in a period of uncertainty. I know that is difficult, and it is a concern that we all share. It is probably inevitable in any large period of managing structural and organisational change. Would you agree that, if anything, that is an argument for not spending too long navel gazing about what we are going to do and for actually saying, “Once you make the decision, the impetus is then to get on and implement the changes quickly to reduce that period of uncertainty”?
Mike Farrar: This is the fourth reorganisation of the national health service in the past 12 years, but it is the biggest. The people on the front line who are trying to take decisions feel rather confused, but there is a sense in which they feel they are doing a good job of improving the NHS.
This rather took people by surprise at first. There are some good reasons why you should be reforming health services on an ongoing basis. Many of those reasons are about trying to engage people and requiring primary care to be more engaged. Most of our members support the principle of primary care being responsible, particularly given that when GPs make decisions on referrals and prescribing they are effectively the major spenders of the budget. So that is a sensible move, as is the move on local authorities having more responsibility, alongside the health service, for health improvement. That is the 15 to 20-year type of benefits that you get out of that.
Our members want to find some real clarity and certainty, but they want to find clarity and certainty in a system that works. So this business about pace is very important, but, equally, it is important that the decisions that are taken on the complexity are clear. There is no point in running very fast if you run into systems in which nobody is quite certain whether the clinical senate can second-guess a consortium or whether a health and well-being board can appeal to the NHS commissioning board if a system does not reflect local need.
There are two responsibilities here: one is to move at pace, but the other is that the legislation is as clear as it possibly can be, so that as we enact it everybody understands the decisions that are made. The decisions should not be subject to appeal or somebody saying, “Well, that’s not the way the system should work.” We need real clarity, and we need pace.
Professor Ham: Pace needs to be judged according to the ability of the new clinical commissioners to take on the responsibilities being offered to them. I could point you to some parts of the country in which the GPs, because they have been in the pathfinders, are almost ready to go. Why would we hold them back? There are some excellent examples around the country, but there are many others, often next door, where that is not the case. So pace has to be judged in relation to the ability of people to take on the responsibilities being put in their direction.
In their response, which the Committee only received yesterday tea time as well, the Government identify how they would assuage concerns about cherry-picking of particular services. One of the ways in which they suggest that that might be done is through a more complex tariff system. Both Mr Farrar and Professor Ham have raised concerns about the new bureaucracy and the complexities that that will bring into the system. Have you given any thought to how commissioners will cope with that, given that their admin costs are capped elsewhere?
Mike Farrar: Cherry-picking is a very complex issue. The current tariff does not reward accurately the costs of care. From the work that we have done with our members, there is quite a wide range of things, such as older people’s care and general surgery, that, generally speaking, are subsidised by some of the more sporadic elective pieces of work, such as cochlear implant, where trusts can often effectively do better under the tariff arrangements.
That is quite a significant set of complex interrelationships, and if you start allowing individual bits of service to be taken away, you can destabilise services. We think that the tariff is the right way to do it, but we know from the tariff to date that a couple of times when it has been road-tested in its current form it has had to be taken back and adjusted. Going for a more sophisticated tariff probably is the right solution, but we do not underestimate the effort that it takes to do that.
We do not think, however, that you can restrict patients to receiving care from a poor-quality provider, and therefore we think that you have to attack this. There are two principles at stake here. One is not destabilising important services that have co-dependencies and relationships. The second is making sure, as far as we possibly can, that patients can always have the option to get the best provider. This is quite technical and difficult, and it is easy to get perverse consequences. We feel that we need to work quite hard on this issue.
We saw in the Government’s document yesterday a statement of how they might tackle that through things such as trying to redesign tariff and go for a more sophisticated tariff, but the devil really is in the detail and it takes a lot of testing and a lot of understanding. The situation in a large teaching hospital regarding what it is subsidising and what it is benefiting from might be different in a district general hospital, in a rural area or in community services. This is quite a complex area, and we would certainly counsel a significant investment in understanding and developing it. We suggest bringing our members in to play rather than doing it in an academic way, because our members can reflect from their current experience where you are getting some of these variations.
Professor Ham: You asked about commissioning groups—their ability and the management cost constraints on them. I would say that it would be totally inefficient and the wrong way to go to expect 200, 300 or however many clinical commissioning groups to find local solutions to refining the tariff to avoid cherry-picking. That needs to be done properly once by the NHS commissioning board to create some national, off-the-shelf solutions that commissioning groups can pick up and adapt.
The second point is the management cost constraints. We do not see why you should set an artificial limit on how much of the commissioning budget commissioning groups should spend on management costs. If they choose to spend more because they see that as a good way of getting the support that they need, why not let them?
The dilemma with that, which you have highlighted previously, Dr Dixon, regarding Professor Ham’s question about why we should cap admin costs, is that presumably that money might otherwise go into patient care. You have identified in the north American study, however, that the failure rate was because not enough investment went into that area.
May I pursue the point about tariff with Dr Dixon? In the amendments, the Government are clearly seeking to create a more sophisticated national tariff. In so doing, they are trying to do what they say they want to do, which is to prevent price competition. In a new NHS, where we have this more labyrinthine set of rules about setting tariff, is there anything in the amendments that you have seen that would stop price competition? Is it not actually more likely?
The substantive change on the face of the amendments is that commissioners have to publish information when there is a variance from tariff, so is having that new information in the system and in the public domain not more likely to mean that there will be price competition in the NHS, once a whole variety of different prices is out there in the public domain?
Dr Dixon: As far as I can see, the spirit of the Bill is that there should not be price competition. There is still the option in there for price flexibility under certain circumstances, and that is probably as far as can be gone with this issue. I am clear that the spirit is not to have price competition, but there is scope for price flexibility.
Dr Dixon: Apparently, there is price flexibility below a tariff, but if that is the case, providers have to make more information available about the outcomes and quality of that service, and I think David Nicholson was clear about that in his evidence to one of the Committees. That is broadly the intention, but it would have to be assessed regularly to make sure that it was not being abused, which is another reason to have a sectoral regulator that would monitor that issue.
Professor Ham: It is not as though we are starting from a position where there is one uniform set of prices for a certain range of services all over the country. Mike can comment on this in far greater detail, with more authority than I can, but at the moment, PCTs and, to some extent, practice-based commissioners negotiate on price and the cost of services locally. They do not call it price competition, but they do deals with their local providers, which may well be below the national tariff or about services that are not currently included in the tariff.
But at the moment, they are not obligated to publish the prices that they have struck with the provider. The Bill envisages a world in which they will have to publish what that varied price is and why it is a different price. Is that not more likely to lead to price competition across the NHS, as people chase the lower price?
Dr Dixon: More broadly speaking, the idea of the clinical commissioning groups taking on responsibility for the quality of primary care is a very positive move. In scrutinising expenditure on the budget for hospital care, they will have an incentive to be looking at out-of-hospital care provided by practices that are on their patch. For the first time, that creates a really nice mechanism for proper peer review of the quality of primary care locally.
May I just add that the biggest issue facing the service is provision? It is not directly addressed in the legislation—nor should it be, probably—but the quality of primary care and the administration around that is at least addressed indirectly through the commissioning consortia.
Professor Ham: We have always been concerned about the proposal—as far as I understand it, this has not changed—that responsibility for commissioning primary care provision should rest with the NHS commissioning board. It would probably be done through the regional offices—clusters, or whatever they are to be called in future—and the concern is that they would not have the depth of understanding of current standards of primary medical care provision to be able to exercise that power effectively.
That is not to say that PCTs in the current system have done a fantastic job. However, there are some notable exceptions, where PCTs have used the levers available—Tower Hamlets is a really good example—and have got in there among the practices to improve quality and reduce the variability of primary medical care provision. We do not see why that should not be a clear responsibility of the clinical commissioning groups, working in association with the NHS commissioning board, because they will be much better placed to understand what is currently delivered, where the weaknesses are, and they have the right kind of expertise to exert peer pressure on poorly performing practices to improve. That has to be a key part of the future.
Mike Farrar: Our sense is that there are some very positive things for the development of primary care, but some things to watch out for. A positive development around primary care is effectively giving clinical commissioning groups the resource to deploy around secondary care; the way in which they will become managers of demand is largely by developing alternatives to secondary care. In our view, there are some issues about supply-induced demand that can be tackled, but an awful lot of the way that we can deflect work from secondary care is by having an alternative available. In fact, a lot ends up in hospital because there is not primary care.
I very much agree with the point about peer review of primary care. There has been data available to help us look at primary care and we have probably not exploited that to its full potential. We could do more and should do more. We very much support the view that Chris just expressed. It is very important that the clinical commissioning groups have a relationship with their practices. If primary care contracting is too remote from them, first, you will not get the local understanding that you need; and secondly, you will not have the leverage over practices that are behaving in an aberrant way in the sense of not complying with some of the things that the commissioning group might think are sensible. They are all potential positives if we can do the latter.
The downside, and one of the things that was a significant concern to me in my previous role in the north-west, is that we were struggling to have primary care capacity sufficient to do the work that could and should have been done in primary care. Clearly, taking some of that capacity away from primary care provision into the commissioning arrangement could detract from your key principle. Therefore one of the things that is worth giving due consideration to in the implementation of this is where will that capacity be sourced and is it a catalyst for bringing more multi-disciplinary work into primary care? Are there things that we can do to deflect work away from primary care? But that resource is very precious at the moment in terms of providing high-quality primary care, particularly in deprived areas with high health need.
As a quick follow-up, going back to the point that you all made earlier about the need to take difficult decisions about hospital services, do you think the Bill makes that harder or easier?
Professor Ham: I think it will be more difficult to achieve reconfigurations at the necessary speed because there are more checks and balances that, for good reason, have been built into the modifications to the Bill. So I think that will slow down. I take what Jennifer said earlier. Sometimes that may result in better decisions, but frankly we do not have the luxury of time and many of these decisions that are around on reconfiguration have been around for a long time.
Mike Farrar: I do not believe that the Bill will fundamentally change the way in which this operates at the moment. The big issue on reconfiguration of services is largely about the extent to which we communicate with the public about change. One of the silver linings to the cloud of the big political debate, if I can put it that way, has been that at a political level there is more engagement with some of the difficulties around the health service and making changes.
I have talked to some MPs who understand in private the case for change, but feel compelled later on to take a rather different public stance. That does not help any of us. It would be enormously helpful if, on the back of this debate about health services, we could have a significantly more mature conversation, with political leadership and the NHS working together to put the case for change.
To follow up on that, the King’s Fund put out a good report recently on incentives in the NHS. It found that the current system of incentives does not really incentivise dealing with health care inequalities, as set up around the QOF payment, or with the big challenge of supporting people living longer with many medical co-morbidities. The focus is now on commissioning boards, so, to start with Professor Ham, do you think that it is a good way to tackle some of the key issues around health care inequalities and to deal better with looking after people in the community and preventing unnecessary acute hospital admissions?
Professor Ham: Yes, if two conditions are fulfilled. First, the commissioning outcomes framework, which has not been mentioned so far, will reward clinical commissioning groups depending on how well they perform, and it could create the right kind of incentives for clinical commissioning groups to focus exactly on tackling health inequalities and avoiding avoidable hospital admissions. We do not yet know what will be in the commissioning outcomes framework, so we, and I am sure you, will follow that very closely to see what the groups will be rewarded for. What gets measured gets managed, and clinical commissioning groups will be no different.
Secondly, the relationship between the new public health function located in local government and the clinical commissioning groups will be critical. Primary care teams are in many ways the foot soldiers of public health and prevention. Putting public health into local government could bring some real benefits, but we must ensure that it does not detach public health from primary care, because we need the two to work together to address the agenda you have identified.
Dr Dixon: On whether the Bill helps, there is a risk on the commissioning side that CCGs will be pretty inert, apart from in one or two go-ahead areas. Remember the phrase about practice-based commissioning—it is a corpse in need of resuscitation, or not. The big risk is that commissioning will not fire, so what is in the Bill to fire up the provider side, which should be integrating to provide the seamless care we all want? There is the promise of integration—the promotion of it—but not much else. It probably rests with the payment mechanism that is constructed around the providers to help fire up and motivate them to provide more out of hospital care. To return to the red tape and the complexity on the commissioning side, there is a risk of inertia on the CCG side that will not act to promote the integration we want.
I want to ask about the voluntary sector, following the questions Mr Smith asked about price competition. With the Government’s Work programme, the voluntary sector has had problems getting its services commissioned. Obviously, it plays a vital role in the provision of high quality social care services, so are you concerned that it could face similar challenges in bidding to provide services from this Bill?
Professor Ham: We have just produced a report with the National Council for Voluntary Organisations on precisely that issue, which we will be happy to send the Committee. It raises not only the opportunities from the Bill and the reform programme for the voluntary sector to play a much bigger part, but the risks. It will come down to how clinical commissioning groups see the voluntary sector. If they want to use their resources to bring in the voluntary sector more significantly, I think that will happen at a local level. It is about how the groups operate, rather than how the Bill is framed.
Mike Farrar: There is a hugely important role for the voluntary sector. It has a way of engaging people that should be part of the transformation of the service, so that it can deal with the long-term financial challenges by engaging people more in thinking about their own health and use of resources. Through the process of implementation, we should ensure that we support the voluntary sector to be a bigger provider of services over time to the health service. I do not think that it is necessarily supported or otherwise by the legislation at the moment. The biggest challenge for the voluntary sector is the short-term contracting and financial pressures on the system. We should try very, very hard to secure a long-term position for the voluntary sector as a provider of health and social care.
That brings us to the end of our allotted time for the Committee to ask questions to these witnesses. I thank them very much for giving their evidence this morning. We now move on to hear evidence from Monitor, the Foundation Trust Network and the Local Government Association.