17 July 2006
New Reform publication: Investment in the NHS – facing up to the reform agenda
Reform has today published its latest report on NHS policy. Investment in the NHS – facing up to the reform agenda, by Nick Bosanquet, Professor of Health Policy at Imperial College London et al, argues that a new investment approach, based on public private partnership, is urgently needed to unlock improvements in care. The report is available at www.reform.co.uk.
§ NHS capital investment is now vital to act as a catalyst for service redesign, which is urgently needed to meet the mounting pressures of faster access and greater efficiency. But spending in recent years has concentrated on over-expensive buildings that may not be sustainable in the new environment of choice and payment by results; and now the service appears to be imposing a freeze on investment just when the benefits of new projects are most needed. The report argues that local managers need to identify a new wave of manageable schemes will be affordable and justified by local demand.
§ The report argues that the NHS reform agenda – payment by results, patient choice and practice based commissioning – means that large hospital building schemes will only be appropriate in certain situations. Much more common will be smaller and simpler units which do not have to be owned by the NHS but could be leased to NHS providers. Given the tight financial environment, new investment projects will only take place through public private partnerships.
§ The report’s key points are:
– There is a strong requirement for the NHS to invest if it is to achieve a more flexible pattern of services closer to patients. New investment can lead to greater efficiency by acting as a catalyst for service redesign, in particular by developing care in the primary care sector.
– Despite the urgent need and potential benefits for new investment, the current attitude of NHS managers appears to be based on caution and reluctance. There was a significant NHS capital underspend in 2005-06 of £1.2 billion, double the level of £0.6 billion in 2004-05. The underspend is likely to be repeated in 2006-07.
– The actual causes of the unwillingness to invest are deficits, partly due to an over-expansion of capital projects since 1999-00; a lack of financial information and knowledge of costs; and crude attempts by the Department to retrench on spending.
– Some areas of the country plan for considerably more investment in PFI schemes than others. The West Midlands and London Strategic Health Authorities plan to spend four times as much per head of population than the South East Coast SHA. Trusts which have much less contracted expenditure – current as well as capital – are going to be much better placed in the near future to cope with the rigours of the reform agenda as they will find it easier to adjust to variations in revenue.
– Public private partnerships, such as the Private Finance Initiative, have been a major step forward on traditional public sector procurement. It would be unfair and wrong for the failings of some “white elephant” schemes to be laid at the door of such partnerships.
– To achieve a sustainable basis for new investment, some key policy themes should be established:
– Greater awareness of costs. Payment by results introduces a clear standard of obsolescence: capital is obsolete if it cannot earn a return under the tariff.
– Local decision-making. In effect the NHS needs to invest in a new range of dispersed centres which can make more effective use of its investment in human capital.
– Patient choice. Not only will money follow the patient but also funding and investment too.
– Public private partnership. With the tight outlook for public spending it is highly unlikely that there will be new funding from the public sector.
– Large hospital building schemes are only appropriate in certain situations. For different schemes the model needs to change so as to allow increased local freedom and flexibility. Key principles of new investment projects will include, for example, setting depreciation periods in relation to the earning life of the assets in the local environment rather than in relation to a fixed rule from the centre. This will often be much less than 30 years.
– In effect the NHS should move to a modular system which could fund investment of various sizes from £5-30 million. One option would be for property companies to own buildings and rent them to an operating company, whether NHS, for-profit or charitable. It is unnecessary and inefficient for the NHS to own so much capital.
§ Both The Times and BBC News Online reported on the report this morning. The report in The Times noted that Reform is “the market-oriented think tank that was the first to predict the NHS funding crisis and the need to cut jobs". Coverage is available at www.reform.co.uk.
§ The new report follows on from the earlier Reform NHS reports Staffing and human resources in the NHS – facing up to the reform agenda (April 2006) and The NHS in 2010: reform or bust (December 2005).
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Comment: REFORM, in my view, has omitted a very crucial word – competence – from their categorised assessment. This Govt is incompetent. the evidence is too stark for all to see and suffer in silence accepting more health inequalities.
"It is basically wrong to make money out of patients and their families."
Comment: The uncommon common sense tells us that but does the Govt listen? It must now be made to listen.