News / LATEST: White paper heralds radical change

Health secretary Andrew Lansley has proposed a far-reaching overhaul of the NHS in England in a white paper that will phase out strategic health authorities and primary care trusts, hand commissioning to GP consortia and allow all employers to negotiate local pay agreements.

The new NHS Commissioning Board, which has been trailed heavily by the coalition government, will be responsible for the structure of the payment system and calculate GP practice budgets, while Monitor, as the economic regulator, will take charge of pricing. Payments will be conditional on quality. Each GP consortium will have an accountable officer and consortia will be held to account by the NHS commissioning board. The paper added that the government will consult on removing the cap on foundation trusts' non-NHS earnings. The white paper, Equality and excellence: liberating the NHS, added that all trusts should be foundations within three years.

Main points

The new economic regulator – Monitor – will be responsible for pricing, the government’s white paper has confirmed. However the structure of the payment system will become the responsibility of the new NHS Commissioning Board.

The white paper listed a number of specific developments – some of which were already in the pipeline – including implementing mental health currencies for adult mental health from 2012/13 and developing currencies for child and adolescent services. Payment systems to support talking therapies are also planned and currencies for adult and neonatal critical care will be mandated from 2011/12. Tariffs will be moved rapidly to a best practice basis with ‘an increasing number’ introduced each year ‘so that providers are paid according to the costs of excellent care rather than average price’. Commissioners will also be able to pay quality increments and impose contractual penalties.

The government plans to establish a single contractual and funding model for GPs ‘over time’. Drug companies will be moved onto a value-based pricing system after the expiry of the current payment scheme.

GP consortia will have a high degree of freedom but will be accountable to the NHS Commissioning Board for their management of public funds, the white paper said. They will be given incentives for good financial performance and will be required to take part in risk pools that will be overseen by the commissioning board. There will be no government bailouts for consortia that fail and a failure regime will be laid out by the Department of Health.

Consortia are due to be in place in shadow form during 2011/12, taking on responsibility for commissioning in 2012/13 and taking financial responsibility from April 2013. Commissioners will be free to buy services from any willing provider, but they will not commission GP or other family health services. Every GP practice will be a member of a consortium as a consequence of holding a patient list.

Practice-level budgets will be calculated by the commissioning board and allocated to consortia for the first time in late 2012 for the 2013/14 financial year. The white paper does not put a figure on the number of consortia, but it says the size must be sufficient to manage financial risk, allocate accurate resources and commission services in conjunction with local authorities. Consortia will be able to decide which activities they provide in-house, and which they buy in from public or independent sectors, including aspects of financial management and contract negotiation.

NHS employers will be given the right to determine pay for their own staff. Currently, only foundation trusts are allowed to do so, though the paper acknowledged many providers were likely to want to use national contracts as the basis of local agreements. The government said in future the main incentives for good financial management and efficiency would be tariff setting and transparent regulation and ‘not central government control on providers’ pay and internal processes’. Future pension arrangements would depend on the outcome of the review of public pensions by Lord John Hutton, but the white paper said the government was committed to ensuring solutions were fair to the NHS workforce and the taxpayer.

Foundation trusts could be given greater freedom on income, governance and mergers. The paper promised consultation on abolishing the ‘arbitrary cap’ on the income from other sources (such as private patients). There are also likely to be moves to enable FTs to merge more easily. The ability to tailor governance arrangements to local needs will also be explored. Employee-led membership is one of the possible new governance options. However the white paper stresses FTs ‘will not be privatised’. A three-year deadline has been set for achieving an FT-only economy, with the government promising to repeal the NHS trust legislative model. A new unit in the Department of Health will drive progress and oversee strategic health authorities’ responsibilities for providers.

Current foundation trust regulator Monitor will expand into a wider economic regulator for the health and social care sectors under plans set out in the government’s white paper on health. Under the already trailed change, Monitor would assume three key functions. It would promote competition, taking on powers such as those exercised by OFCOM and OFGEM to apply competition law to prevent anti-competitive behaviour.

It would also have a role in price regulation, setting ‘efficient prices or maximum prices for NHS funded services’. Its third function will be supporting the continuity of services alongside the new NHS Commissioning Board. Monitor will have a number of levers to ensure essential services are maintained. These will include powers to protect assets, authorising special funding arrangements for essential services that would otherwise be unviable, powers to levy providers for contributions to a risk pool and the ability to intervene in the event of failure (including power to trigger a special administration and regime). A consultation paper setting out the government’s proposals on foundation trusts and economic regulation is promised before the health bill is drafted.

QIPP (quality, innovation, productivity and prevention) will continue with even greater urgency, but with a 'stronger focus on general practice leadership', the white paper said. SHAs and PCTs should devolve the leadership of QIPP to GP consortia and local authorities as soon as possible, wherever they are willing and able to take on this responsibility. SHAs and PCTs will be required to have an increasing focus on financial control during the transition to the new structure and they will be supported in this task by Monitor. However, the Department would reserve the right to increase financial control arrangements during the transition period in order to maintain financial balance.

The National Institute for Health and Clinical Excellence will ‘rapidly expand its existing work programme’ to create a comprehensive library of standards for all the main pathways of care, under proposals set out in the government’s white paper on health. Three quality standards have already been published covering stroke, dementia and prevention of venous thromboembolism. Some 150 are expected to be produced over the next five years. Under the standards programme, set up under the previous administration, each standard will provide a set of five to 10 specific quality statements and associated measures. The standards will develop to cover areas spanning health and social care. The health bill will also put NICE on a firmer statutory footing, securing its independence and core functions and extending its remit to social care.

The government has conceded that cutting administration costs will only deliver a small part of the savings needed in the NHS over the coming years. The government’s white paper on health underlines that NHS bodies will need to achieve ‘unprecedented efficiency gains’ to meet demographic and technology changes and to improve quality and outcomes. These savings requirements have been estimated at between £15bn-£20bn over the next four years. ‘Large cuts in administrative costs will provide an important but still modest contribution. In the next five years, the NHS will only be able to increase quality through implementing best practice and increasing productivity,’ it said.

However the white paper reinforced the determination to reduce management costs by ‘more than 45%’ over the next four years – which would require ‘radically simplifying the architecture of the health and care system’. With health secretary Andrew Lansley widely reported as claiming the changes would save £1bn, in fact the white paper only claims that PCT administrative costs are currently over £1bn. While PCTs will be abolished, the white paper makes no allowance for increased costs incurred by GP consortia taking on commissioning duties.

Nicholson letter

NHS chief executive Sir David Nicholson has written to NHS chief executives setting out plans to lead the implementation of the government’s white paper Liberating the NHS. He said that as the NHS moved at pace to make the government's vision a reality, it was vital that it continues to deliver on quality, finance and performance, as well as make the required productivity savings of £15bn-£20bn. The letter sets out the initial steps that are being taken at a national level and provides a framework within which strategic health authorities can lead the process regionally. It also includes initial actions that commissioners and providers need to take as part of state of readiness for 2012.

The Department will strengthen its assurance mechanisms to keep a tight grip on finances during the transition to the restructured NHS set out in the government’s white paper on health. In his transition letter to the service, NHS chief executive Sir David Nicholson said that this would include specific monitoring and accounting in a number of areas including the ‘detailed application of the 2% non-recurring funds to support delivery of change’. These arrangements would also cover financial support for named organisations and the deployment of other regionally lodged funds. Elsewhere Sir David is reported as suggesting the Department could ‘take powers’ over the 2% non-recurring funds, which amount to some £1.7bn.

The letter adds that the Department will establish monitoring and reporting mechanisms through the strategic health authorities to ‘gain assurance that local organisations are managing the transition period effectively and efficiently’. Regional QIPP plans (quality, innovation, productivity and prevention) will become QIPP and reform plans.

The Department has also mapped out a timeline for the key milestones that will need to be achieved to deliver the new structure for the NHS set out in the white paper on health. Additional consultations – covering the NHS outcomes framework, commissioning, local democratic legitimacy and providers/economic regulation – will be published in July. The health bill will be published in October. The timeline, components of which were detailed in the white paper (section 6.11), also makes commitments to provide details of NHS allocations in October both this year and next.

White paper reaction

The media pounced on the Department’s focus (in the transition letter) on the 2% of PCT funds that are required to be spent non-recurrently this year to ‘support delivery of change’.  The BBC translated this as the NHS setting aside £1.7bn to pay for the reforms. Shadow health secretary Andy Burnham was quick to react. ‘It is scandalous that the government is wasting £1.7bn on an unnecessary and dangerous reform. When times are tough every available penny should be going into patient care. It clearly shows the government has got its priorities wrong.’

NHS think-tank the King’s Fund has assessed the deadline for GP consortia to take full financial responsibility for commissioning by 2013 as ‘very ambitious’. It added that achieving this target would depend on ‘appropriate support being put in place’.

In a statement on the government’s health white paper, King’s Fund chief executive professor Chris Ham said that the ambitions for a more patient-focused, clinically led NHS were the right ones but that the impact of the reforms would depend on how effectively they were implemented. ‘While some GPs will seize this opportunity, many others may be reluctant to come forward and lack the skills needed.’

Professor Ham welcomed proposals to strengthen links between the NHS and local authorities, adding that stronger integration was ‘essential’ not just desirable. But he highlighted the challenge of implementing the wide ranging reforms while ensuring necessary productivity improvements are achieved.

The transition to GP commissioning over the next three years will require careful management to ensure implementation does not affect patient care, according to NHS Confederation policy director Nigel Edwards. He warned there must not be a talent drain from primary care trusts, as strong leadership at a local level was needed. Mr Edwards said the NHS would still have to make efficiencies of up to £20bn and, while the estimated £1bn saving from the reforms would help; achieving the remaining £19bn would require difficult decisions.

The white paper was a serious attempt at lasting reform that would change the relationships between the government, the NHS and the public. And he added: ‘Many people working in the NHS will welcome the principle of judging the performance of the NHS on health outcomes. But it is important to acknowledge that the clear targets set for the NHS over the last 10 years have delivered significant improvements to patient care.’

Plans to link outcomes to NHS funding will need to be carefully thought through to ensure that any payments are a true reflection of the activity and cost involved, said British Medical Association council chairman Hamish Meldrum.

Dr Meldrum said the white paper’s proposals would have a substantial impact on the NHS and patients. Doctors were ideally placed to determine the health needs of their population. However, he warned new responsibilities must not disrupt patient services or waste healthcare professionals’ time. He supported moves to improve performance measurement. But he said: ‘Although giving patients more information about their care is to be encouraged, we need to be very careful about how we use any outcomes-based data to ensure it is meaningful to both the profession and patients.’ ?

The white paper puts patients first, trusts the professionals who care for them and removes ‘layers of stifling bureaucracy’, the National Association of Primary Care (NAPC) said. NAPC chair Johnny Marshall said the proposals offered an opportunity to transform the NHS into a service fit for the 21st century.

The paper was also welcomed by the NHS Alliance, which said it would allow GPs, managers and other clinicians to work together to improve patient services and make the best of limited resources. NHS Alliance chief executive Michael Sobanja added that PCTs were not failures and talent must be retained. ‘We all have a responsibility to maximise the return for taxpayer investment in health and healthcare and there are no exceptions. Some will drive the train; everybody else must be on the train with a clear destination – improved health, reduction in health inequalities and supporting self care. World class commissioning may be dead – striving for world class health care is everybody’s business in the future NHS,’ he said.

However, health service unions have slammed the government’s health white paper, saying its proposals were untested, risked distracting and demotivating managers who will be key to the success of the plans and could prove to be a ‘Trojan Horse’ for privatisation.

Managers in Partnership chief executive Jon Restell said primary care trusts and strategic health authorities would be distracted from both day-to-day delivery of care and the £15b-£20bn efficiency savings programme. However, he added the restructured NHS would still need good managers. 'Management is critical for good healthcare. None of the white paper's ideas will succeed in practice without good management by clinicians and specialist managers working together on the ground, a point we will push home at every opportunity,' he said.

Unison head of health Karen Jennings said staff would feel ‘badly let down’ by plans to extend local pay bargaining across the NHS in England. ‘If the NHS is to be more efficient it needs to have stability. People in fear of their jobs, or how they are going to be able to deliver services, cannot be expected to make informed or rational decisions. This is no way to take patients or staff with you,’ she added.

David Fleming, Unite’s national officer for health, had questions over the level of transaction costs in the new system and GPs’ ability and willingness to take responsibility for commissioning. ‘This is an untested, expensive Trojan Horse in political dogma that will give private companies an even greater stake in the NHS,’ he added.

Royal College of Nursing chief executive and general secretary Peter Carter warned the reforms could change the relationship between nurses and patients. ‘In these tough economic times, it is more important than ever that public money is spent wisely. A robust system will be essential to ensure those holding the purse-strings, as well as managers and politicians, are fully accountable and that every penny is spent with good patient care in mind,’ he added.

It is unlikely the white paper reforms will cut management costs by 45%, according to James Gubb, director of the health unit at think-tank Civitas. ‘With potentially as many as 500 commissioning organisations replacing 152, transaction costs, for one, will almost certainly increase. Many people, too, will end up reapplying for their old jobs in the new structures,’ he said.

He argued that the government should be trying to increase clinical involvement through existing structures and developing their commissioning skills. ‘To complement moves on the provider side, instead of effectively eradicating PCTs, the coalition government should focus attention on developing PCTs' commissioning skills and getting behind them as vigorous, impartial, purchasers of care, able to exert pressure on providers to improve, or to switch services where necessary to new innovative ones (NHS or non-NHS) without fear of backlash,’ he said.

Nuffield Trust director Jennifer Dixon said GP commissioning had potential to shift care out of hospitals and reverse the rising trend in avoidable admissions, but she warned it was risky handing over such a large proportion of the NHS budget to GP practices, particularly with the urgent need to make efficiencies. ‘GP commissioning consortia will need huge investments in their management if they are to transform themselves from convenience stores into the Tescos of the health service – delivering and commissioning, at scale, high quality care for patients and challenging large hospitals,’ she added.

Consultants Tribal said the paper’s overall vision was ‘compelling and logical’, though final details had to to ensure local health systems did not suffer during the transition period. Kingsley Manning, Tribal business development director for health, said: ‘This white paper could amount to the denationalisation of healthcare services in England and is the most important redirection of the NHS in more than a generation, going further than any secretary of state has gone before. A cornerstone of the white paper's argument for such radical change is the NHS’s comparatively poor outcomes. The old certainties are gone: the NHS cannot be protected from economic reality any longer.’

Professor Sir Neil Douglas, chairman of the Academy of Medical Royal Colleges, has called for a gradual introduction of the changes outlined in the government’s white paper on health. He said the academy welcomed many of the proposed changes. ‘The idea of greater involvement of doctors in determining care delivery is welcome. We look forward to the challenge of doctors being central to further driving up the quality of care.’

However he added a note of caution. ‘The NHS has been subject to constant overhaul throughout its 60 year history, sometimes this has benefited patients, and sometimes it has not. The academy calls on politicians, policy makers and civil servants alike, to ensure that this time, the changes, when and if they come, are implemented gradually and only when the evidence base is certain.’

Some individual colleges also added comments. For instance the Royal College of Obstetricians and Gynaecologists welcomed the central role of the NHS Commissioning Board in commissioning maternity services and education. ‘It is welcome that the government accepts that the commissioning of maternity services is not as straightforward if carried out by a consortia but needs instead to be centrally allocated,’ it said.