News / News analysis: Small can be beautiful

Small district general hospitals do not perform any worse clinically than larger organisations. But there is evidence they may be starting to face greater financial challenges. These are the high-level findings from Monitor, which concludes that size is likely to become more of
an issue as hospitals face greater pressures to recruit staff to further improve the quality of care.

Hospital size has jumped into the headlines recently, with NHS England chief executive Simon Stevens, in his first interviews in the job, suggesting centralisation is too often seen as the answer. ‘Other countries have found it possible to run viable local hospitals serving smaller communities than sometimes we think are sustainable in the NHS,’ he told the Daily Telegraph.

In fact, Monitor’s work predates Mr Stevens taking up his post, with the regulator launching the review last October after preliminary analysis suggested smaller acutes tended to be more financially challenged.

Monitor economists subsequently analysed a range of clinical and financial indicators to test whether any special factors affected the performance of smaller hospitals. They looked at 142 general acutes – defining small as having income under £300m (in 2012/13), although it further subdivided small into income less than £200m (30 trusts) and £200m-£300m (45 trusts).

To the non-economist, the bulk of the report makes for hard reading. Monitor acknowledges its assessment of quality – which it uses to test the link between size and outcomes – is high-level. And on finance, it recognises there are other issues influencing performance – the amount of work funded under the national tariff, for example.

Foundation Trust Network head of analysis Sivakumar Anandaciva said this was important. ‘The association between poorer financial performance and higher exposure to tariff prices Monitor has found is particularly telling and applies to all trusts. The FTN hopes this will inform the development of pricing to ensure all NHS providers are reimbursed fairly,’ he said.

The Monitor report continued: ‘We may have started to see a trend towards smaller providers performing worse financially.’ More intensive staffing models are emerging, in part as a response to quality reviews, the European working time directive and the push for seven-day services.

Monitor suggests smaller providers will find it increasingly hard to keep pace with these changing expectations, which could raise fixed costs and the minimum efficient scale of a service. It cites the HFMA work on seven-day services to support this argument.

Consolidation of services is another driver with evidence of links between volume of activity and outcomes, particularly in the surgical treatment of high-risk patients with complex needs. The impact on smaller hospitals will depend on whether they deliver such services or operate below the recommended volume threshold. Monitor’s analysis suggests that reducing some services at some small providers could improve their financial performance, although this would need to be balanced against other issues, such as the ability to recruit consultants.

Moves to provide more care in community settings could also have a more significant impact on smaller acutes, according to Monitor, as they may be less able to reduce costs.

Redesigning services

The report says the best response for small providers may be to redesign services. This could mean working differently with community providers to deliver better out-of-hospital care or refocusing activities towards co-locating with primary, community and social care alongside delivering lower-risk urgent and elective care.

Monitor said most providers it spoke to had strategies to increase integrated care pathways. The report noted examples of service redesign already happening – a new emergency care centre at Gateshead Health NHS Foundation Trust and broad collaboration at the Yeovil District Hospital and Somerset Partnership foundation trusts for complex conditions.

Monitor points out that providers are responding to staff shortages in other ways, such as recruiting internationally, redesigning existing roles and making joint appointments with neighbours.

Network solutions and collaborative working arrangements are also seen as important and new technology has a role to play. The report cites Airedale Hospital NHS Foundation Trust’s telehealth centre (see page 16), which led to significant reductions in A&E attendances from care homes and chronic obstructive pulmonary disease patients in the past 12 months.

Monitor chief executive David Bennett said: ‘Bigger isn’t always better and just merging or taking a one-size-fits-all approach to local health services is not the answer. We need to achieve the right balance between risks to quality and risks to access, and consider other constraints, such as the impact of clinical specialisation, to make sure patients continue to benefit from the local hospitals that they value so much.’

NHS Confederation chief executive Rob Webster said models of care rather than size was the most important factor. ‘The evidence published by Monitor shows no significant correlation between quality of care, size and financial viability. This endorses the view that new models of care, rather than different structures to deliver such care, are now required by the system.’

Small acutes may be beautiful, but to remain viable, some will have to change.