Posts Tagged ‘Commissioning’

What has been the impact of the market in the NHS?

By Mike Broad - 9th March 2010 10:04 am

A new study, by think tank Civitas, has questioned the achievements of NHS reforms in introducing competition and driving performance.

NHS ‘internal’ or ‘quasi’ market policies in England have aimed to promote competition among providers in the hope of replicating the benefits markets have been known to bring about in the private sector: decreases in cost, and increases in efficiency, quality, innovation, and provider responsiveness.

In 2002, the government introduced a new round of market-based reform within the NHS, which was initially focused on increasing choice for patients, decreasing waiting times, and improving quality of care.

Demand-side changes saw the creation of the primary care trust to perform a purchasing role similar to that of health authorities; and practice-based commissioning, a re-incarnation of GP fundholding but focused on community-based and specialty services rather than elective care. Patients were also given a choice of elective care provider (including non-NHS providers) at the time of referral.

Supply-side changes included the introduction of quasi-autonomous foundation trusts, and the encouragement of provider plurality. Market-based changes to the secondary care payment system took the form of payment by results (PBR).

The study, called The impact of the NHS market, involved a large-scale literature search on the effectiveness of these policies.

So how have the reforms worked? A summary

Patient choice studies show the percentage of patients who recall being offered a choice of hospital for their first outpatient appointment was 47% in March 2009, up from 46% in December 2008 and 30% in June 2006.

Eighty nine percent of patients offered a choice are able to go to the hospital they choose. Choice has contributed to decrease waiting times for elective surgery. There is disagreement among researchers on whether choice has had a positive or negative effect on equity. Fear of the impact of patient choice (rather than actual impacts of patient choice) has led some NHS providers to advertise services to both patients and GPs. In practice, the uptake of choice policy is not yet widely realised, and degree of implementation varies geographically.

The Choose and Book system may not be enabling as much choice as expected regarding appointment date and time and number of providers offered; GPs may use the system as an online tool to make referrals as usual. Patients and GPs desire more information on provider quality.

Neither strong theoretical nor empirical support exists on the benefits of secondary care provider competition; studies exist citing both improved and harmful outcomes.

Contestability, or the threat of competition, may be driving up efficiency but at the expense of inter-professional and inter-organisational collaboration. Competition is fostering development of more business-like cultures in NHS hospitals. Various impacts of competition policy have been seen on health economies, such as attraction of top quality nursing staff to private providers, confusion of PCTs and NHS providers over the nature of their relationships, and resentment among medical professionals toward local ISTCs regarding lack of patient treatment data.

ISTCs provide equal if not better outcomes than NHS providers, and receive higher levels of patient satisfaction; however, they treat a healthier case-mix of patients than NHS providers (as was intended by their contracts). ISTCs may have negative effects on NHS surgical training.

Increased autonomy over certain governance and finance decisions may not currently be a strong enough incentive to encourage further applications for foundation trust status. Many lay governors and directors of foundation trusts are finding their roles ambiguous and difficult to define. Many perceive that they have made little impact on the decisions of the trusts to date.

However, evidence does show gradual increased involvement of both governors and the public in their activities. Foundation trusts have generally performed well financially and have generated surpluses; and they have been high performers in routine NHS financial and quality measures when compared to NHS trusts.

Surpluses have, however, been modest in relation to total revenue; and many were among the highest performing NHS trusts even before status conversion. Little robust evidence exists to suggest foundation trusts are using their new status to innovate in a significant way.

Payment by Results has been fully embedded across the NHS since 2008. Unit costs fell quicker in hospitals once PbR was implemented, although administration costs increased. Hospital activity increased as PbR was implemented. No association has been found between PbR and quality of care. Where increases in efficiency were found post 2002 (for example, the increase in number of elective surgery patients treated as day cases, decrease in the length of inpatient stays, and reductions in avoidable admissions), authors note other policies and trends have also encouraged such results.

Many hospitals have improved financial management and have a better understanding of patient costs since PbR implementation, yet a substantial agenda of cost improvement remains for the NHS. Mixed evidence exists on prevalence of hospitals ‘upcoding’ procedures in order to get paid more.

The fact that the PbR tariff for a procedure is set at average cost encourages hospitals to become ‘average’ rather than aiming to operate at the level of the most efficient hospitals. Being paid per case through PbR produces adverse incentives for hospitals to increase activity beyond affordable levels and possibly induce demand inappropriately.

Practice-based commissioning implementation is slowly advancing. It is being led by a few enthusiastic practices working with supportive PCTs. Variation exists in the quality of local relationships and levels of PCT support; with resources and experience often limited at both PBC and PCT level. Incentives and infrastructure used to support PBC are not sufficient to engage most GPs in commissioning. And many PBC consortia are more interested in self-provision than commissioning new services.

PCTs lack the necessary skills to purchase effectively; poor local management of resources was noted. PCTs do not always take full advantage of their potential power in the purchaser/provider relationship. Only weak incentives exist for PCT managers to break historical patterns of purchasing. The World Class Commissioning programme is too new for its impact to be determined.

In conclusion

Many researchers found difficulty in attributing improvements specifically to market-based reform. Improvements in NHS care, such as major reductions in waiting times, have more often been attributed to ‘targets and terror’ together with increased spending, than to competition. Lack of a stable policy environment de-motivates staff. As yet, there is a lack of patient and public understanding and support for market-based reform. And many desired outcomes have not yet been achieved, such as innovative models of patient care.

Although there are presently very few studies that evaluate the cumulative effects of market reform, there is an abundance of research on the effect of individual policies. While evidence on the impact on quality of care is mixed, research has found attributable impacts in the form of reduced waiting times, improved access for patients, and increased provider efficiency.

However, potential confounding factors (such as simultaneous increases in funding and pressure from enforced targets), along with weak monitoring strategies, make attribution to market policies alone questionable.

The market reforms of the past 20 years have had unmistakable effects on the culture of the NHS. In particular, the introduction of competition has developed a system-wide awareness of costs, efficiency and accountability. However, the reforms have not been proven to bring about the beneficial outcomes that classical economic theory predicts of markets, including provider responsiveness to patients and purchasers; large-scale cost reduction; and innovation in service provision.

Many researchers have attributed this to the failure to create a true, functioning market, as well as a lack of a stable policy environment to inspire staff commitment and enthusiasm. The available research indicates that the NHS may have found itself in a lose-lose situation - having taken on the extra costs of competition without experiencing the benefits.

Providers should open books to scrutiny

By Mike Broad - 21st December 2009 6:39 pm

All companies and organisations contracting for the NHS should open their accounts to public scrutiny to encourage financial transparency and ensure the NHS is getting value for money, claims a leading think tank.

With costs in secondary care rising at more than double the rate of primary care, the NHS Alliance claims that it would allow commissioners to establish whether acute hospital providers are delivering more services or simply are being paid more as a result of payment by results arrangements.

Dr Michael Dixon, chairman of the NHS Alliance, said: “The Blair administration abolished old fashioned prejudices between public and private and concentrated on support of whatever option is best for patients.

“Equally, the issues over MPs expenses and bankers bonuses have changed the scene and the public want to know who is being paid for what - in public services that should be their right, especially at a time when we are looking at public ownership of banks and private ownership of some frontline NHS services.”

In terms of tenders, the NHS Alliance believes that providers submitting their bids should abide by the same rule and should also be required to demonstrate how they will deliver the service within the budget put forward in their submissions. This would help commissioners to establish if the proposed tender is cutting too many corners or is based on unreasonable financial assumptions.

Dr Dixon added: “It is not unusual for bidders, after they are awarded the contract, to ask the commissioner for more money when they realise they cannot provide the service at the cost they tendered for. This is hardly fair to bona fide competitors. We need a system that exposes bidders who are loss leading and using other tactics to gain market entry.”

Read a guide to NHS finance.

“A full blown market could bankrupt the NHS”

Pulse - 23rd October 2009 3:49 pm

NHS Alliance chair Dr Michael Dixon has warned of the dangers of creating a full blown market which he said could bankrupt the NHS.

In his speech to the annual NHS Alliance conference in Manchester, he warned that reliance on the market would be too expensive in the current climate, with the NHS unable to afford so much excess capacity.

His comments came in response to Conservatives proposals to put GPs at the centre of a new practice-based commissioning marketplace.

Dr Dixon said: “There is a danger that we may go for too much market and render the NHS bankrupt. A free market requires excess capacity. That is expensive. Also, a full blown NHS market turns the patient, who was simply a tin of beans in the old system, into a pot of gold in the new. A pot of gold everyone wants a part of.”

In a keynote speech to delegates, Dr Dixon highlighted the benefits of “cooperative commissioning”, and said that, with the general election looming, the NHS is going through a phase of “policy impermanence”, with ministers and director generals of commissioning changing almost as fast as the weather.

Read more at Pulse.

Rules on market testing “unclear and misguided”

By Francesca Robinson - 21st October 2009 11:26 pm

The Government has been accused of insulting doctors and other staff working for private providers of NHS care by introducing new rules on market testing.

The jibe follows new guidance to commissioners that NHS organisations must in future be designated the ‘preferred providers’ of care. The new policy was announced by health secretary Andy Burnham last month.

In a letter to PCTs and SHAs, NHS chief executive David Nicholson says existing providers must be given an opportunity to improve before others are given a chance to tender. It will be the job of the commissioner to test whether these services provide “best value and real quality”.

“This will ensure everyone knows where they stand and services will stand or fall on the quality of the services they provide,” says Nicholson.

Previous Department of Health policy has been that “any willing provider” should be considered when commissioning services.

David Worskett, director of the NHS Partners Network, the organisation that represents private providers working within the NHS, described the policy as a retrograde step. 

He said: “It is worrying and insulting for staff working for private providers of NHS care - many of whom are on secondment from the NHS, who achieve productivity up to 30% higher and higher patient satisfaction - to be told they are not the preferred provider. I think that is actually a rather shabby way to treat these people.”

But he said staff should not fear for their jobs because the policy would fall foul of the principles of competition. “These rules make it absolutely clear that PCTs should not take a decision which restricts choice. If a contract were to be re-let to somebody else on grounds other than quality and cost then it would be an unjustified restriction of choice and could be referred the the Competition and Cooperation Panel and overturned.”

Worskett said the announcement had been more about politics and appeasing the unions than about healthcare. “The guidance is so vague and unclear and the concept so misguided that in reality PCTs will carry on making the right decision in terms of who the provider should be,” he declared.

Shadow health secretary Andrew Lansley accused Andy Burnham of putting party politics above the best interests of patients.

Conservative Party policy is to open up the provider side of the NHS to a “proper” tendering process between NHS, the independent and charity sectors. “We think competition is the way to incentivise organisations to up their game,” said a spokesperson.

The BMA said the new guidance reinforcing the status of the NHS as preferred provider was a “positive sign” that the government was listening to their concerns about the increasing commercial involvement in the NHS.

But Dr Hamish Meldrum, BMA council chairman, warned: “There’s still a long way to go before we turn round the market philosophy that for so long now has been part of day-to-day working life in the NHS.”

Meanwhile, the only Scottish ISTC, which provides elective surgery to patients from three health boards in Angus, is being brought back under full NHS control.

“Overhaul” Payment by Results to save money

By Mike Broad - 3rd August 2009 10:25 am

Payment by Results has inflated NHS costs and needs radical overhaul, an influential body has claimed.

NHS Alliance is calling for PBR to be seen as a maximum price rather than an absolute price in order to deliver savings to the taxpayer during the downturn. PBR was introduced in 2003 and is a rules-based approach for paying for hospital services in the NHS. A national rate, or tariff, is set annually for each type of service and commissioners are then required to pay for the healthcare provided to their patients at this tariff.

Dr Michael Dixon, chairman of the NHS Alliance, said PBR had encouraged acute trusts to become “profit centres”.

He also questioned the accuracy of PBR data. Recent Audit Commission results have suggested that errors in estimating PBR costs may vary by up to 10%.

“We are talking about quite a large margin, which means that the level of error, up to 10%, may well be the equivalent of total savings required at a time of deficit,” he said.

Although the NHS Alliance welcomes the move from ‘average cost’ to ‘best value cost’ when pricing PBR, the organisation said this is not enough.

The NHS Alliance believes that if PBR represented a maximum cost many trusts would be able to offer services at considerably less than the tariff and thus benefit patients and the taxpayer.

Commissioners would, however, have to guard against being duped by market tactics such as loss leading or skimming. Dixon said: “These risks must be faced if the NHS is to keep within budget. If last year the focus was on quality, then the focus for the future must equally be on cost. Cost has now become the business of every clinician and manager seeking to provide the best value in health and care for patients.”

Understanding NHS finance, budgets and commissioning

By Mike Broad - 23rd July 2009 3:24 pm

Political expectations are growing that hospital doctors will get to grips with NHS finances and get more involved in budget management and commissioning.

With the NHS facing a funding shortfall of up to £10bn for the three years after 2011, there’s increasing political pressure on doctors to help identify areas where savings can be made.

Lord Darzi also called for hospital doctors to be more involved in commissioning and budget management to help drive the quality agenda. In High Quality Care For All: Our Journey So Far, which charts the progress of the Darzi Review (July 2009), he calls for the extension of practice-based commissioning from GPs to hospital doctors and nurses.

To this end, the Academy of Medical Royal Colleges has teamed up with the Audit Commission to produce a guide on NHS finance for doctors. The guide says: “This is not about turning doctors into accountants; it is about enabling doctors properly to engage with finance colleagues so as to make the best use of NHS resources for patients.”

Commissioning - the background

Commissioning is the process of determining the health needs of the population, the resources available and how to organise service provision. Commissioning currently occurs mainly at PCT level and they’re responsible for buying services from local providers. This can be from NHS trusts, foundation trusts, themselves (or other PCTs) or from the independent sector.

The first step in this process is a Joint Strategic Needs Assessment. This is a process conducted in partnership by local government, PCTs and the local community to identify areas of priority for action to improve local health and wellbeing. It informs the Local Area Agreements, helping commissioners to specify outcomes that will help providers design local services and it’s been a statutory requirement since 1 April 2008.

Practice-based commissioning

Commissioning at PCT level can be seen as relatively remote from patients and clinicians. So, GPs have been given more say in how they deliver services to their patients because they’re closer to them. Theoretically, under practice-based commissioning, services better represent patients’ preferences.

PBC has also been developed with the aim of making the NHS more patient-centred by extending choice in elective care.

GPs can take on the commissioning and financial responsibility for large parts of PCT budgets and change the patterns of service provision. Practices can group together but the PCT retains legal responsibility. Practices can use 70% of the savings made for reinvestment for new services or more equipment.

While benefits have been seen in primary care, there’s little evidence so far that any form commissioning has greatly affected hospital services in the past 20 years.

Despite PBC being introduced in 2004, most GPs are really only now developing formal commissioning relationships with PCTs.

World Class Commissioning

World Class Commissioning is a government programme to improve commissioning and thus the quality of care. It strives to secure maximum improvement in locally prioritised health and wellbeing outcomes from existing resources.

There are 11 competencies for a PCT to become a World Class Commissioner. They include locally leading the NHS, working with community partners, collaborating with clinicians, engaging with public and patients, prioritising investment and promoting innovation. Commissioners will be assessed against them by an annual commissioning assurance process.

Understanding Payment by Results

If hospital doctors are to get more involved in finance, they need to understand Payment by Results. PBR was introduced in 2003 and is a rules-based approach for paying for hospital services in the NHS. It is a key part of the current reform programme in the NHS and was designed to directly link the payments that healthcare providers receive to the activity they undertake. PBR underpins patient choice by enabling the money to follow the patient.

A national rate, or tariff, is set annually for each type of service, with services classified by health resource groups. Commissioners are then required to pay for healthcare provided to their patients at this tariff.

PBR has significant implications for NHS organisations. Both hospital providers, and particularly PCT commissioners, face greater financial risk and reduced financial control.

With the price set nationally, contract negotiations focus on the volume of activity to be provided. Without the protection of fixed value block contracts, providers need to maintain a certain level of activity and ensure that costs do not exceed the national tariff in order to remain financially viable.

Budget management

Once an organisation has set its overall strategy and its service and financial plans, these need to be translated into a budget. Setting a budget in this way will ensure that resources are allocated in line with the organisation’s aims and objectives.

Good budget management is achieved where budget holders are held to account for managing their budgets; reports monitoring performance against budgets are accurate and provided regularly to budget holders; monitoring reports do not just contain financial data but are linked to information about performance and service improvements; and, variations against budget are identified and investigated, and corrective action is taken.

Financial management is about explaining and accounting for what has happened in the past and forecasting income and expenditure in the future. Using budget statements, budget holders should be able to identify the areas where they have spent less and spent more than their budget.

Service-line reporting provides a framework that enables NHS bodies to understand the combined view of resources, costs and income, and hence profit and loss, by service-line or specialty rather than at trust level. Managing at this level allows managers and clinicians to make more effective decisions about, for example, growing or reducing services on the basis of efficiency and profitability, where cross-subsidisation is occurring, or where services might be better provided in the community. PBR has encouraged more trusts to adopt a more comprehensive approach.

There is also a growing impetus for trusts to introduce patient-level information and costing systems. It involves a bottom-up approach to costing, using information about individual patients’ resource consumption. The costs of individual patients are aggregated to generate costs for differing groupings, for example by HRG, by procedure or by consultant.

This provides a much better understanding of what drives costs and how to make efficiencies.

Making changes and efficiencies in NHS services

Efficiency savings can either be cash releasing or non-cash releasing. Cash-releasing efficiency savings result in the cost of the service provided being reduced. Non-cash releasing efficiency savings occur when more activity is provided but the cost of delivering the service remains the same. An example of this could be a reduction in average lengths of stay, which resulted in more patients being treated.

Improvements in quality and efficiencies are expected to be secured through better procurement, commissioning, organisation and management, with any additional savings being reinvested in new or better local services.

There are a variety of reasons why changes to service delivery might be made; for example, to improve the patient experience, the need to meet efficiency targets or to move services from secondary to primary care.

The financial consequences of such changes should have been determined and set out in a business case.

Developing a business case

A business case is a document developed to support decision making for new investments or to change or develop a new service. It sets out the case for undertaking a project, weighing up the objectives and benefits against the estimated costs and risks. Business cases should include: measurable objectives; an appraisal of all the options available (including the ‘do nothing’ approach, an indication of the preferred option and an explanation setting out why it is favoured); demonstrate the affordability and value for money; provide a timetable reflecting the life of the project; and define the roles and responsibilities of those involved.

It should make a compelling case to the audience that is going to judge its merits and should be subject to a robust appraisal process which evaluates its relative costs and benefits, both financial and non-financial.

Financial training for doctors

The report, A Guide to Finance for Hospital Doctors, by AMRC and the Audit Commission also suggests that clinicians should receive financial training to help them understand budgets, commissioning and their monitoring.

Related stories

PBR needs overhaul

Doctors must get more “financially savvy”

BBC Health - 21st July 2009 10:18 am

Hospital doctors have been told they must learn more about finance if the NHS is going to cope in the recession.

The Audit Commission and Academy of Medical Royal Colleges have issued a guide to help medics become more savvy about how the £100bn budget is spent.

They said by understanding more about money they could help redesign services to make them more efficient.

Unions said doctors were willing to get involved in finances, but were wary of crude cuts to spending.

Read more at BBC Health.

Charges needed to avoid cuts, says report

By Mike Broad - 20th July 2009 1:46 pm

The NHS has to change dramatically to survive the impact of the economic downturn, a report claims.

The report From feast to famine: reforming the NHS for an age of austerity says the NHS has to become much more efficient, and change its approach to what is fair, if services are not to be compromised by the crisis in public finances.

The report by the Social Market Foundation argues that while it’s unlikely further funding will be raised, there is potential for the NHS to manage demand and get better value from existing money.

The NHS must recognise that fair does not necessarily mean free, the report says. Charging patients for access to healthcare, as they do in many European countries, offers the NHS the best chance of making people think about how to ration their own use of health resources.

Charging does not undermine the principle of fairness in securing equal access for equal need. The report suggests that the NHS charging system should be reformed to reflect income, not categories such as pregnancy or retirement; anyone receiving tax credits should be totally exempt from NHS prescription charges; a charge of £20 for GP appointments should be introduced to encourage healthier, wealthier people to avoid using the NHS unless absolutely necessary, with an exemption for those receiving tax credits; and, NHS charges for GP appointments and prescriptions should be capped at around £100 per year.

Co-author David Furness said: “Free care for all will end up making the NHS less fair. The alternative to getting people to ration themselves is a return to rationing by stealth - waiting lists, crumbling hospitals and poor quality services - which hits hardest the poor and sick.”

Other recommendations to promote efficiency in services include: Local contracts for GPs and consultants; a new Royal College of Commissioners to give commissioning higher status; and, new powers and responsibilities for commissioners to improve the quality of healthcare providers.

Co-author of the report Barney Gough said: “Central government will not be able to drive the efficiency savings the NHS needs to survive. Instead responsibility must be given to autonomous local commissioners to work with local people to design a range of services appropriate to their needs.”

The BMA’s Chaand Nagpaul said charging for GP services would undermine the doctor-patient relationship and deter patients who needed care.

Read the full report.