With the NHS at last balancing its books, the challenge facing Gordon Brown, as chancellor and as prime minister-in-waiting, is how to increase efficiency to fund new drugs and meet the needs of an ageing population.
The greatest potential for efficiency improvement is to be found in core medical processes, rather than eliminating waste and bureaucracy by cutting management costs, as Adair Turner's 2001-2002 study found. Recent NHS research confirms this analysis, and shows that as much as £2.2bn could be saved.
In hospitals, the biggest savings would come from cutting the time patients spend in hospital before and after operations, while in general practice efficiency could be improved through the greater use of generic drugs and by GPs managing demand for specialist care more effectively.
Research over 30 years has highlighted a wide variation in performance across the NHS, and successive governments have latched on to these variations as areas to improve efficiency. Performance has improved, but variations in core processes remain. So will the levers and incentives being put in place under the current health reforms have a bigger impact than previous policies?
When it comes to hospitals, paying a fixed price for delivering care will drive efficiency improvements in the case of treatments where patients can choose, but that is doubtful in cases where patients have little or no choice. Most hospital beds are in fact occupied by patients admitted as emergencies, often as the result of an acute exacerbation of conditions such as diabetes. Many of these patients can be helped to remain at home if GPs and community nurses anticipate their needs and work closely with hospital specialists.
The government's reforms offer GPs incentives to avoid hospital admission. But so far most GPs have been slow to take up these opportunities. It is unrealistic to expect this initiative to be a major driver of improved performance.
Equally questionable is whether the reforms will support the development of integrated care to reduce the use of hospital services. The continued separation between GPs and hospitals, and increasing diversity of provision to support patient choice, has brought further fragmentation, not closer integration.
With healthcare organisations competing for a bigger share of the NHS budget, there is little incentive for them to collaborate to provide care in the community. Of greater concern still is the ability of the organisations that control NHS resources to negotiate on equal terms with NHS and private-sector providers. Primary care trusts are expected to bring about improvements in performance by becoming smart purchasers of care for their populations.
The government has strengthened the provision of care by introducing NHS foundation trusts and independent sector treatment centres. But it has given scant attention to the development of primary care trusts. This has created a fundamental weakness in the design of the reforms, with the purchasers of care lacking the necessary expertise and resources to make the healthcare market work efficiently. The levers and incentives do not exist to reduce variations in productivity and performance on the scale needed to fund future medical advances.
This is the challenge that the next prime minister will have to address as a matter of urgency. With the NHS budget expected to increase by only half the current rate from April 2008, the reforms themselves must be reformed to achieve a sustainable universal service.
· Chris Ham is professor of health policy at the University of Birmingham and adviser to the Nuffield Trust
C.J.Ham@bham.ac.uk
