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Navigating the NHS
core issues for clinicians

Edited by

PETER LEES
Senior Lecturer in Neurosurgery
Director of Research and Development
Southampton University Hospitals NHS Trust

Foreword by

Sir Kenneth Caiman

Chief Medical Officer
Department of Health

MJM
THE BRITISH ASSOCIATION
OF MEDICAL MANAGERS

CRC Press
Taylor & Francis Group
Boca Raton London New York

CRC Press is an imprint of the

Taylor & Francis Group, an informa business
First published 1996 by Radcliffe Publishing
Published 2016 by CRC Press
Taylor & Francis Group
6000 Broken Sound Parkway NW, Suite 300
Boca Raton, FL 33487-2742
© 1996 Peter Lees
CRC Press is an imprint of Taylor & Francis Group, an Informa business
No claim to original U.S. Government works
ISBN 13: 978-1-85775-106-2 (pbk)
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British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library.

Library of Congress Cataloging-in-Publication Data

Navigating the NHS: core issues for clinicians/edited by Peter Lees;

foreword by Kenneth Caiman.
p. cm.
Includes bibliographical references and index.
ISBN 1-85775-106-X
1. National Health Service (Great Britain). 2. Health care reform — Great Britain
I. Lees, Peter.
[DNLM: 1. National Health Service (Great Britain). 2. State Medicine — organization &C
administration — Great Britain. 3. Health Care Reform - history — Great Britain.
W 225 FA1 N3 1996]
RA395.G6N376 1996
362.1'0941-dc20
DNLM/DLC
for Library of Congress 96-13731
CIP
Typeset by Marksbury Multimedia Ltd, Midsomer Norton, Avon.
Contents

List of contributors v

Foreword vii

Preface viii

Acknowledgements ix

1 Introduction 1
Peter Grime

2 Where are we now? The NHS in the mid-1990s 7

Tim Scott

3 An introduction to priority setting in the NHS 17

Richards and Tony Lockett

4 What is NHS purchasing, and where is it going? 27

Tony Shaw and Murray Cochrane

5 Marketing in the NHS 39

Andrew Boon

6 Casemix, coding and contracting: a beginner's guide 51

Peter Lees and Paul Stafford

7 Shared care or integrated care? Managing clinical services for

chronic disease across the interfaces 63
Bob Young

8 Managing quality through outcome measurement and audit 73

Sue Lydeard and Steve George

9 Towards evidence-based practice: the role of research and

development, training and education 87
Stephen Holgate
 CONTENTS

10 Continuing medical education: a fundamental balancing act 101

Jenny Simpson

11 Management arrangements in NHS Trusts 109

Peter Beck

12 The medical director: corporate player, not representative role 119

Tim Scott

13 The clinical director: poacher turned gamekeeper? 129

Celia Cramp

14 The future 137

Tim Scott

Index 147
List of contributors

PETER BECK, Medical Director, Kotherham District General Hospital,

Moorgate Road, Oakwood, Kotherham, South Yorkshire S60 2UD
ANDREW BOON, Consultant Pathologist, Department of Cytopathology, St
James' University Hospital, Leeds LS9 7TF
MURRAY COCHRANE, Director of Developments, Cornwall and the Isles of
Scilly Health Authority, John Keay House, St Austell, Cornwall PL25
4NQ
CELIA CRAMP, Clinical Director, St Helens and Knowsley Hospitals, Whiston
Hospital, Warrington Road, Prescot, Merseyside L35 SDR
STEVE GEORGE, Lecturer in Public Health Medicine, Southampton University
Hospitals NHS Trust, Tremona Road, Southampton, Hants SO16 6 YD
PETER GRIME, Senior Registrar in Oral and Maxillo-facial Surgery, South-
ampton University Hospitals NHS Trust, Tremona Road, Southampton,
Hants SO16 6 YD
STEPHEN HOLGATE, MRC Clinical Professor of Immunopharmacology,
Southampton University Hospitals NHS Trust, Tremona Road, South-
ampton, Hants SO16 6YD
PETER LEES, Senior Lecturer, Honorary Consultant Neurosurgeon and
Director of Research and Development, Wessex Neurological Centre,
Southampton University Hospitals NHS Trust, Tremona Road, South-
ampton, Hants SO16 6YD
TONY LOCKETT, Associate Director, Corning Besselaar Ltd, 7 Roxborough
Way, Maidenhead, Berks SL6 3UD
SUE LYDEARD, Quality Development Manager, Southampton University
Hospitals NHS Trust, Tremona Road, Southampton, Hants SO16 6YD
JOHN RICHARDS, Head of Performance and Development, Southampton and
South West Hampshire Health Authority, Oakley Road, Southampton,
Hants SO9 4WQ
TIM SCOTT, Senior Fellow, BAMM, Barnes Hospital, Kingsway, Cheadle,
Cheshire SK8 2NY
 LIST OF CONTRIBUTORS

TONY SHAW, Chief Executive, Southampton and South West Hampshire

Health Authority, Oakley Road, Southampton, Hants SO16 4GX
JENNY SIMPSON, Chief Executive, BAMM, Barnes Hospital, Kingsway,
Cheadle, Cheshire SK8 2NY
PAUL STAFFORD, Director, Secta Management Consulting, Shelley Farm,
Shelley Lane, Ower, Hants SO51 6AS
BOB YOUNG, Consultant Physician, Department of Endocrinology, Salford
Royal Hospitals NHS Trust, Hope Hospital, Stott Lane, Salford M6 8HD
Foreword

The title of this book intrigued me. It conjured up nautical images of charts,
maps, shoals, rocks, wind, rain and storms. It suggested instruments to deter-
mine course and direction, compass and sextant. And of course it is a good
metaphor. Understanding the NHS is about knowing where you are going and
how to get there. The image of the course of a large tanker being changed by
many tugs also came to mind. The NHS does need to change, but it will only do
so if there are a number of willing and powerful forces at work.
But the image also begs several questions. The first and most obvious, is what
is the destination? This is a key question, and the answer to it sets the tone for the
chapters in the book. Is it about financial issues? Is it about career progression for
staff? Is it about managing the workforce? For me the answer relates to the
primary purpose of the NHS which is to meet the needs of patients and the
population, and to put them first. It means involving patients and the public
more in determining what is required and how best it can be achieved. It is first
and foremost about values. This is of course simplistic and such an objective has
within it a series of contraindications and conflicts. But at least it gives a sense of
purpose and direction to the organization.
But what do we need to get there? Again to stretch the nautical example, there
is a need for good management, teamwork and leadership. Without these the
ship will not function effectively and mutiny may even occur! Working together
in partnership is crucial, as is the recognition of the skills and expertise of all
members of the crew. In particular the captain needs to earn respect and ensure
that all members of the team are pulling in the same direction.
Then, there is the issue of instruments available to chart the course, monitor
performance, measure the distance travelled and identify problems ahead. The
radar function is important (intelligence) as is the need to continually improve
the methods available to control the direction (research). In addition the
members of the crew need to be regularly updated on these matters (education)
and be helped to do so.
This book sets out to chart some of these issues. It provides practical solutions
to problems, and gives examples for others to take up or reject.
Finally, it is perhaps important to stress that navigation and nautical
manoeuvres are not always easy. In doing so, particularly when the environment
is changing rapidly, the quality of life of the crew also needs to be considered.
The staff are our most important asset, we need to think of them too. This book
also gives some insights into how that might be done.
Sir Kenneth Caiman
March 1996
Preface

In just over a decade the NHS has undergone the most widespread changes
since its inception. Such has been the pace of change that unless you were at
the heart of the 'reforms' in the early 1980s you would be forgiven for
wondering where we came from and probably why. If proof of that
confusion were needed it can be found regularly among my senior registrar
colleagues when applying for consultant posts. Those clinicians perceived to
have a leaning towards 'medical management' seldom enjoy much interest
until that fateful time and will be very familiar with the oft-posed request,
'tell me something about management, I have an interview tomorrow'.
The stimulus for this book was to help medical trainees understand the
huge health care management 'industry' which has developed so rapidly and
which nowadays impacts upon us all, but such is the calibre of my co-
authors' contributions that this book has relevance to anyone trying to
negotiate their way around 'today's NHS'.
Using the history of the reforms as a backdrop, we have chosen discrete
topics (presented in broadly logical order) representing the major new
initiatives, with a bias towards the secondary care sector. The authors were
asked to make their chapters stand-alone, accessible for the uninitiated and
to imagine they were on the train en route to 'the interview' and had the
sudden urge to 'mug-up' on a pertinent topic quickly.
I conclude with an invitation. With the current pace of change, further
editions of this book are anticipated and ideas for inclusion next time would
be warmly welcomed.
Peter Lees
March 1996
Acknowledgements

This was not a solo effort and I am grateful for help and encouragement
from a number of people. All the authors are busy professionals but still kept
perfectly to deadlines. Sir Kenneth Caiman, the Chief Medical Officer, has
kindly written the Foreword and Dr Jenny Simpson and Tim Scott (of the
British Association of Medical Managers (BAMM)) have not only
contributed directly but have also given inestimable advice on the subject
areas and whom to approach as contributors. Peter Grime and Tim Lees,
trainees at the time, gave invaluable comment upon whether the objectives of
the book were being met. Gillian Nineham and her colleagues at Radcliffe
Medical Press have taught me a lot and with great patience. The speed that
Radcliffe turn such a tome into the printed book has impressed me
enormously. Those of you who, like me, are fortunate enough to work with
an outstanding secretary will appreciate the huge contribution of my
personal assistant, Clair Wilkinson.
To Doris and our daughter, Hannah, who was born during the final
preparation of the book
1 Introduction
Peter Grime

On the road to Damascus

Several years ago I made a decision to pursue a career in hospital medicine,

not as a physician (affectionately referred to in our unit as the 'clever
doctors') but as a simple surgeon. I made a list, as is my custom when I have
a decision to make: 'the advantages and disadvantages of achieving
consultant status'. I did not, indeed could not, at that time list any
disadvantages, but my list of advantages was long and positive: a consultant
post was for life, I would be my own boss, run my own department and be
free to run things as I decided. The financial rewards would be excellent:
good salary, good fringe benefits and good private practice potential.
Although it was going to take some considerable time with a lot of hard
work to get where I wanted to go, I have never been afraid of hard work and
knew that I had the talent to succeed. I could expect that, when I achieved
consultant status, my work intensity would decrease and the hours of 'hands
-on' work would diminish. There would be enough junior staff to do the
necessary routine work and that would free me to concentrate on 'higher
things'. The amount of 'boring' clinical work would go down, and I would
be free to choose the service that I provided. I viewed management in simple
terms. Hospital administrators (managers) would be there to facilitate the
success of my department and minimize any inconvenience to both myself
and my staff. I would make the decisions (manage) but have little to do with
the day-to-day implementation (administration).
A classical hospital medical or surgical training reinforces the belief that
you are correct, that you know best. This 'apprenticeship' is long and hard
and produces like-minded survivors: egotistical, arrogant, single minded,
determined, to name but a few of the 'surgical' personality traits that one
requires to succeed. One had, and still has, to be careful of the 'old boy'
network, which has great power to ensure either a smooth progression
through the 'ranks' of the 'King's Own Scalpels' or a rapid demobilization!
The ability to perform surgery and manage patients should be an advantage,
 NAVIGATING THE NHS

but one's main duty is to toe the party line, kiss the occasional frog, never get
romantically entangled with a consultant's daughter or wife and never, ever
do anything to interfere with the smooth running of the boss's private
practice! Taking all things into consideration, I could smell the sweetness of
success.
Unfortunately things did not go quite the way I wanted them to. I
managed to fall foul of 'the system'. For some inexplicable reason I began to
think independently or to be more honest. I began to speak and act more
independently and committed a heinous crime. I suffered 'opinions',
probably borne out of a frustrated development, and deviated from the
accepted path of behaviour. When the time came to move from registrar to
senior registrar, interviews came and went, and subsequently dried up! I was
facing a crisis in my personal and professional life. As a consequence I did
what I always do when difficult decisions have to be made; I reverted to self-
analysis and made my lists again. Analyse, conclude, act! What is wrong with
me? Why does nobody want me? I am good at my job, enthusiastic, hard
working, innovative; my curriculum vitae is excellent. How could anybody
not want me? The list contained personal good points, perceived bad points,
points for going on, points for career change. Do I really want to be a
consultant now? I revised my list of the advantages and disadvantages of
achieving consultant status in the health service. On this occasion I could not
list any advantages, yet the list of disadvantages was long and of consider-
able concern.
By this time the White Paper had arrived and the 'new-style' National
Health Service (NHS) management was born: proactive rather than reactive
(to the medical profession) management; passive administration; rolling
contracts with poor job security and a decreasing salary in real terms
(perhaps under the guise of performance-related pay); an increasing work
intensity because of an emphasis on work-load targets; the decreasing
number of junior staff with their limited hours 'on call' and fewer
consultants (probably redesignated more simply as 'specialists') than would
be needed to fill 'the gaps'; less clinical freedom and more market-oriented
practice; income generation; internal markets; management growth with an
unwelcome 'interference' in clinical matters; audit and information
technology (number crunching par excellence}-, the Patient's Charter; low
staff morale; attacks on private practice and associated media hype implying
poor consultant performance; a decrease in status, with consultants
perceived as 'just another employee - easily replaced!'
I began to view management in a different light, something that had been
taken away from, and turned against, the profession. The worm had turned!
The oppressed administrator, sick to death of arrogant, self-opinionated
 INTRODUCTION

doctors, grasped the opportunity to strike back under the guise of 'NHS
reform'.
It appeared that my potential job, if indeed there was to be one, was not
worth bothering about, an understandable attitude given rationalization of
thought for self-preservation.
Unfortunately I had reached the stage at which a career change was
impractical: not at my age and with a young family to support. I had to go on
and make the best of it! After a number of interviews, when I really felt that
the end was nigh and I was about to sink without trace, I finally convinced an
appointments committee to give me a chance and (gratefully) got on with it.
Once in the lifeboat I did not want to reach the point of applying for
consultant posts before revising my attitude, giving serious thought to future
practice and the role of a consultant in the 'new NHS'; after all I still needed
to reach dry land.
Looking back I could see two superficially different, yet deeply similar,
unproductive approaches to the consultant role (in both clinical practice and
management). My first deliberations were positive and rather self-focused. I
suspect, but cannot be sure, that I assumed an intention to play my part in
the NHS to the best of my ability. Surgical practice in the NHS would be
clinically and financially rewarding to me. I saw myself in a dominant, quasi-
managerial role, in control, making decisions for implementation by
someone else. My revised, later, list was extremely negative, although still
self-focused, and my attitude to the perceived loss of management control
was reactive, a somewhat paranoid view ('It is not fair, they are out to get
me. Resist all change, do not co-operate'), a view devoid of rational thought
for a supposedly intelligent, well-educated professional. 'What do they know
about health care and managing patients? I know best, and I should be
making the decisions'.
The NHS had changed for the worse because I was not going to get an
awful lot out of it! To be frank I am now appalled, as I hope you the reader
are appalled, at this negative behaviour. I have never considered myself to be
a negative person. I had not even recognized, until it was pointed out to me,
that both lists were devoid of one important sentiment. Not once had I ever
mentioned the 'patient' (the customer). I appeared to see everything in terms
of me and what I wanted and never in terms of what the patient needed or
wanted. What was I going to get out of it? I could see myself as part of the
problem rather than the solution.
Clinical education and training teaches us to listen, observe, examine,
investigate, conclude, act, review and change opinion if necessary. If we are
honest, the provision of health care in this country has been haphazard and
sometimes illogical, too often based on personal opinion rather than proven
 NAVIGATING THE NHS

value. The management of acute and emergency problems has generally been
first class, unlike the care in chronic disease, the management of which is all
too often less than desirable. Changes in management have to be both
clinical and administrative if we are to get the best value from available
resources.
I needed, indeed wanted, to review my attitude to health care and my role
in the provision of services. What would I do if I were managing (running)
my own business? How would I go about providing health care? I sat down
and produced the following list of questions: What do my patients
(customers) want? What do they need? Do I want to increase the range of
services I provide? Am I in a position to change and respond quickly, as
required? Can I provide the goods now? Do I have the appropriate skills? Do
I have the ability to develop skills, and even if I do, do I actually want or
need to develop them? Do I need to buy in skills? What facilities do I need?
What facilities do I have at the moment, and do I want or need to develop
those facilities accordingly? Can I afford to do that, and if I go ahead, will I
be able to meet the needs and the demands that those extra facilities will
generate? Can I increase my income without incurring extra costs (in other
words can I reduce unit cost and liberate income?) Could I generate income
from loans, get enough business to repay them and still provide myself with
enough personal income? Would I actually get more customers if I made
these changes, and where would they come from? What is the competition
doing that I am not? What could I provide that the competition is not?
Whether or not they need it, would my customers actually want it? What
would I charge? Would it be enough to cover my expenses, or would I price
myself out of the market? Do we have adequate representatives in the 'field',
and are we reaching all our potential customers?
Encouraged by my efforts I made another list of questions, assuming I
would be running the business for someone else: What do our customers
want and need now? What will our customers want and need in the future? Is
our organization geared up to providing those wants and needs at a
competitive price and acceptable quality? If it is not, what do we need to do
to correct the situation? Do we need more staff? Can we get better facilities?
Become more efficient? What can we do to help the business to succeed?
In order to make decisions (manage), I would need information. I could
not make decisions, nor answer the inevitable questions posed by customers,
without the relevant facts and figures. The customers would be expected to
enquire about 'results' and I would expect to produce evidence of my ability
to provide a 'quality' service. (Customers expect a reasonable service at a
competitive cost.) I would need to provide my customers with the goods they
wanted and to deal with them in a quiet and efficient manner, responding to
 INTRODUCTION

their comments and criticisms. The business would operate to a set of

reasonable standards, of which my customers would be made aware. That,
after all, is the business way.
What became very evident to me was that this 'business approach' differs
from the archetypal 'medical management' typified by the character of Sir
Lancelot Spratt in the 'Doctor' series by Richard Gordon and by my own
early aspirations. The traditional medical approach is almost exclusively self-
focused: 'I know best, you get what I provide and like it! I am the most
important person and deserve the biggest income'. The business way is
predominantly customer-focused, given that the questions asked should lead
to the provision of a service that the customer needs or wants rather than
that which the doctor wishes to provide. Salaries paid to all employees reflect
availability and maintenance of the work-force: employers will only pay
what is needed to keep staff and get the job done (without dropping to
unacceptable standards).
Looking at the questions posed I recognized an all too familiar scenario -
aspects of the NHS reforms - not in 'management' jargon but in 'plain
speak'. I recognised audit (what are we doing, how are we doing?); research
and development (what should we be doing, how do we improve on the
present?); marketing (what does the customer want?) or customer focusing
(providing for the needs of the customer); information technology
(computer-oriented gathering of vital facts and figures); quality control
(service to a satisfactory standard); resource management (getting the best
out of staff, equipment and facilities and keeping the costs down) or value
from resources; efficiency gains (reducing unit costs to release capital);
contracting (guarantees of work and control, therefore of income and, to
some extent, expenditure); The Patient's Charter (working to a set of
reasonable, published standards of business practice and a declaration of
intent to provide a satisfactory service).
Ask yourself the question, how would you run a business with an annual
turnover exceeding £70 million (the annual budget of an 'average' NHS
Trust)? It makes good business sense to budget for income and expenditure,
to cut the cloth according to the purse. Devolving budgets to individual
units, departments or directorates encourages self-reliance and promotes
inventiveness, providing that the degree of central control remains
unobtrusive. Changes in practice can lead to efficiency gains and liberation
of finances to spend on better, or more extensive, services. Without the
ability to generate true income, however (the 'pot' is a fixed size), there must
be a limit to what can be achieved. With 'winners' there will always be
'losers'; one directorate may grow as another contracts, one area may benefit
as another suffers. To that end not all the NHS reforms are desirable, and I
 NAVIGATING THE NHS

do not suggest that the medical profession embraces any philosophy without
question. We are one of the key guardians of patient welfare and must
remain so. It is our responsibility, however, to ensure the provision of the
best service possible from given resources and that can only be achieved by
working within the system, by placing ourselves in a position to influence
policy in the widest sense. It is difficult for a reasonable person not to
respond to a well-reasoned argument. The medical profession has been
handed a golden opportunity, through the reforms, to influence health care
in a manner not previously possible. The reforms will not go away and
neither should we assume that further reform will not take place.
Perhaps the medical profession has already failed the NHS, just as
consultants of the past have failed those of the future by burying their heads
in the sand and hoping it will all go away, by bleating about change that any
sensible profession should have instituted long ago under proper self-
regulation, and by failing to grasp the initiative, relinquishing a managerial
role to non-medical personnel.
I am thankful that my early misfortune to be cursed with a 'bad attitude'
has opened my eyes and my ears and closed my mouth to ill-conceived
words. I wish that my change in attitude had come about through maturity
and wisdom rather than the threat of unemployment, yet I believe with a
passion felt only by the converted. The health service has the potential to be
better than it has ever been. The foundations are being laid for the future
with the birth of evidence-based medical practice.
Change inevitably has its price, and perhaps it should not be unexpected
that those who lived with the old system cannot live with the new. For those
prepared to be involved, to co-operate (doctors can and will make good
managers) a fulfilling career will be realized. I implore you, the reader, to
pursue a similar exercise to my own, to read and digest the contents of this
book. We, as a profession, need good managers and all of us should have a
working knowledge of how to manage. Join us!

Reference

1 Department of Health (1989) Working for Patients (Cmnd 555). HMSO, London.
 Where are we now?
The NHS in the mid-1990s
Tim Scott

Trying to describe the current NHS is not a leisurely activity to be

undertaken on a Sunday afternoon. This is no quiet country meadow, where
one can set up easel, mix paints and depict a harmonious, tranquil setting.
People working in the NHS feel their situation to be much more akin to
white water rafting the Colorado river. Any thought of describing a
particular bend in the river, with its treacherous swirls and eddies, is lost in
the need to try to spot the shoals under the water ahead and keep the raft
from hitting the side walls of the canyon.
To talk about a high degree of change in the NHS is to dilute the reality
with management jargon; there are few givens, the language changes as fast
as the structural framework, and no-one, least of all government, has a clear
understanding of where it will all take us.
Even to attempt to discuss the so-called NHS reforms introduced by the
White Paper Working for Patients (1989)1 is to suggest that there was
somehow a steady-state NHS before the reforms and a modified NHS some
time afterwards. The reforms were in fact a further major and radical
reshaping of an NHS already subject to a variety of change factors.

NHS management from 1983

Where then should we start the story? In 1974 with the area health
authorities? In 1982 with the abolition of those area health authorities? Each
intervention has added its own momentum and created its own language.
One starting point might be the famous Griffiths NHS management enquiry.
On 6 October 1983, the late Sir Roy Griffiths reported in a letter to the
Secretary of State on the review of NHS management that he had been asked
to undertake in February of that year. He pointed out that 'surprisingly,
given the welter of the reports on almost every aspect of the NHS over the
past thirty years, there has been no major review of the internal management
of the hospitals since the Bradber report of 1954'. He then proceeded with a
 NAVIGATING THE NHS

series of recommendations on how the whole thing should be actively

managed rather than passively administered. In this report, which was seized
on and implemented by government, we see many of the seeds of the
subsequent reforms.2 In particular the introduction of general management
was the most visible aspect of Griffiths' desire to see a more business-like
environment permeating the NHS.
One of Griffiths' recommendations was the creation of the NHS Advisory
Board (subsequently reshaped as the NHS Policy Board). This structure,
drawing on an industrial model, provided a range of advice to the Secretary
of State, drawn not only from the civil service, as was customary, but also
from a variety of major industrialists. One of the significant advantages has
been that Sir Roy himself, and a number of others, provided a continuity
across the inevitable Cabinet reshuffles over the past decade.
During the 1980s the developing implications of the Griffiths' prescription
were unfolding in the NHS. For example, Griffiths had wished to see the
rapid introduction of much more sophisticated budgeting and control
systems. Initial experiments, under the title of 'management budgeting', ran
aground as in a number of places they exposed the cultural and value system
differences between doctors and administrative staff, principally finance
professionals. In 1986 a modified set of initiatives known as resource
management, constructed in conjunction with the clinical professionals,
sought to develop more appropriate organizational management structures
and management information systems, with a particular commitment to the
involvement of clinical professionals in such structures.
Another major symptom of the developing business culture of the NHS
was the emphasis on contracting out services. The market-based Con-
servative government, in power since 1979, saw many opportunities in the
public sector for competitive tendering for services, and a 1983 programme
from the Department of Health (DoH) required health authorities to put
forward programmes for domestic cleaning, catering and laundry. Significant
financial gains were achieved, and, perhaps more importantly, discussion
was opened up on what really needed to be done 'in house' and what could
be contracted out. By 1987 the process had begun to spread to other non-
clinical services, such as portering, transport and computing, and later it
reached support clinical services, including diagnostic and pathology
services.
One particular aspect of NHS accounting that came under increasing
pressure was a lack of any true accounting for capital or valuing of capital
assets, including the estates and land. The need to ensure a 'level playing
field' with external organizations in the tendering process, as well as to force
more rational decision making in areas including hospital building and
 WHERE ARE WE NOW?

equipment purchasing, led to a series of technical financial modifications,

which can again be seen as precursors to the 1989 White Paper.

White Paper (1989) reforms

Much anecdotal evidence exists to suggest that the one year review of the
NHS to which Mrs Thatcher committed herself in 1988 came as a surprise,
not only to the civil service but even to her cabinet colleagues. The late 1980s
had seen a succession of funding-based crisis issues, particularly during the
winter of 1987/88. The working group took evidence privately and did not
consult in any meaningful way. One of the individuals with access to this
inner circle of thinking was Professor Enthoven, an American economist who
had in 1985 set out a model of how a market might operate in the NHS.
Although the working group was ostensibly set up as a reaction to public
concern over the overall financing of the NHS, it became clear that this was not
in fact a topic for debate, but that government, and Mrs Thatcher in particular,
believed that far greater value could be obtained from existing investment.
The reforms, when finally set out, surprised many. This was because there
was little detail, either in the main document or the subsidiary working
papers. Many of the radical ideas being put forward seemed to be only
partially thought through and indeed potentially at odds with one another.
In broad measure they could be set out as:

• the creation of a split between those responsible for purchasing health

care and those responsible for providing it
• a set of contracts to be negotiated and agreed, specifying health care to be
provided at a price and within other contractual terms
• a requirement for all doctors to undertake medical audit
• the creation of self-governing NHS Trusts
• the creation of fundholding general practices.

Purchaser-provider split

The fundamental element of the reforms was the decision to split the NHS
into two constituent elements; those whose responsibility was to consider the
 10 NAVIGATING THE NHS

needs of particular defined populations and determine what services should

be provided for that population, and those, in provider organizations, who
would undertake the contracts for health care offered by such purchasers.
Whilst the White Paper made explicit the mechanism by which purchasers
were to be separated from providers and set out the organizational structure
(much comment focused on these practicalities), the underlying concept was
in itself a very powerful clarification of the sometimes conflicting and
ambiguous roles that had in the past been undertaken by the statutory
organizations. Many district health authorities (DHAs) had struggled to find
ways to invest more in community-based services, whilst their hospitals
represented the single largest employer in the locality.
Hospitals themselves had been caught in the 'efficiency trap'. Treating
ever-increasing numbers of patients, even at significantly reduced costs,
meant that individual hospitals required additional funding. Under the
complex funding arrangements, which differed from region to region, such
increases in 'cross-boundary flows' might only affect monies received at best
some two years later. Hospitals that attempted to tackle growing waiting
lists by increasing their efficiency suffered from this funding gap. One of the
avowed intentions of the reforms was that 'money should follow patients',
i.e. if patient flows to individual organizations increased, so should their
funding. The logical consequence in a cash-limited health service, which was
not made explicit, is that any hospital managing to attract more funds
because it attracted more patients can do so only at the expense of other
hospitals seen to be 'losing' patients.
The extent to which this free market might be allowed to develop was a
key question during the early stages of the reforms. The potentially dramatic
impact on London in the end necessitated a major market intervention, the
establishment of the London Implementation Group (LIG), and the pace at
which hospitals and localities outside the M25 have been able to increase the
numbers of patients they treat, and stem the flows into London, has been
considerably constrained.
At the outset, it seemed as if many of those involved in management
within the NHS, who came originally from a hospital or community
background, moved swiftly into organizational positions within the new
provider units. To balance this, efforts of the DoH were to some extent
concentrated on developing a strong purchasing function, since little explicit
purchasing of health care had previously been undertaken. Throughout the
country health authorities merged with each other to become commissioning
agents (note the subtle shift in terminology) with responsibility for significant
populations. These commissioning agencies have not stabilized; there are at
least two factors still shifting their configuration and indeed internal
 WHERE ARE WE NOW? 11

organizations. In the first place the major review, which looked at the
functions and structures of the NHS at higher levels, has seen the rethinking
on the number and role of regions. Additionally, the need for close working
between family health services authorities (FHSAs) and DHAs, reflected in
many places by the creation of joint purchasing discussion fora and indeed
agencies, will lead to the creation of single organizations responsible for all
these functions.

Trusts

Health-providing organizations, hospitals, community units and so on were

to be set up as self-governing Trusts. Any particular configuration could put
forward a Trust proposal, and, if the Secretary of State considered that they
had a reliable future and business plan, would be made a Trust, with a
chairman appointed by Secretary of State and a board of trustees. In effect
such a Trust would have buildings and equipment on loan from the
government and would in return be required to pay interest on the debt.
However, apart from providing a return on investment, Trusts were not
intended to make profits, and any surplus was to be reinvested. Trusts were
set up with potential for a considerable number of 'freedoms', including the
ability to negotiate and agree pay and conditions with staff outside the
national Whitley council rates. There were undoubtedly inducements to the
more well-managed and active units to put themselves forward for Trust
status, and the 57 first wave applicants received considerable developmental
support from the DoH. The next two years saw increasing pressure on the
balance of the units, described as 'directly managed', to shift to Trust status.
The re-election of the Conservative government removed any lingering
doubts or hopes that the reforms might be reversed, and the inevitability of
Trust status became the cultural norm.
More interesting perhaps than the routine numbers of Trusts announced
year on year has been the reconfiguration of some. Most spectacularly
perhaps, the Guy's Hospital Trust, often described as the flagship of the
reforms, has been forced into a shotgun marriage with St Thomas', reflecting
the influence that the Tomlinson report3 and the LIG have had on the capital.
Another major constraint on configurations has been the shift away from
'whole district Trusts'. There was a tendency in the early Trust proposals,
particularly in some geographical areas such as Manchester and Lancashire,
for proposals for hospitals and linked community services to be regarded as a
12 NAVIGATING THE NHS

single Trust unit. Whilst a number of these were accepted, there was some
reconsideration of the principles, and the DoH began strongly to advise
against such proposals unless there were exceptional circumstances. Whilst
merger configurations are being considered where there is the possibility of
rationalizing sites, the general approach is for single discrete units of
management of between £50m and £l50m turnover.

Clinical directorates

In accord with its stated intentions of devolution, the NHS Executive

(NHSE) has not put forward prescriptive requirements for the internal
management structure of Trusts. There are clearly a number of givens: the
chairman of the Trust is appointed by the Secretary of State, and the
membership of the Trust board is fixed, with an equal number of non-
executive and executive directors. These latter include the chief executive,
the medical director, the director of finance, the director of nursing and one
other as seems locally appropriate. What is left to the Trust's own
judgement, however, is how they manage internally. Within hospital Trusts
in particular, the preferred model is often referred to as the clinical
directorate structure. The detailed features of such structures, which
essentially create strong devolved units of management headed up by clinical
staff, have been researched and reviewed by a group made up of British
Association of Medical Managers (BAMM), British Medical Association
(BMA), Institute of Health Service Management (IHSM) and Royal College
of Nursing (RCN). They jointly issued a research-based booklet entitled
Managing Clinical Services - a consensus statement of principles for effective
clinical management,4 based on detailed study of this kind of arrangement in
a variety of units. The clinical directorate structures and hospitals in which
they have emerged provide links back to the resource management
programme. It was the resource management programme and its pilot
hospitals that first raised the topic of internal structures, and those hospitals,
notably Guy's, publicly discussed and debated the merits of formally
involving clinical staff in management. The medical consultants, who in large
measure took on the clinical directorate role, often did so at personal
expense to both income and career and in unstable and difficult situations.
Nevertheless the emerging consensus demonstrates the importance of this
particular step.
 WHERE ARE WE NOW? 13

GP fundholders

The most unexpected element of the 1989 White Paper was the proposal to
establish fundholding GP practices. Subsequently described as the chilli
powder in the stew of the reforms, fundholding practices were to some
extent drawn from and modelled on the health maintenance organizations
(HMOs) established in the USA in the 1970s. Practices of a reasonable size,
originally 11000 but subsequently reduced.to 9000, were to be allowed to
manage funds to pay for a variety of treatments, including elective surgery at
local hospitals. The practices, which tended inevitably to be multihanded,
had to demonstrate that they had the management and business capacity to
take on the responsibility and were then to be given a budget, calculated
around their current referral patterns, to cover non-emergency inpatient
work in a variety of elective surgical areas, outpatient visits, diagnostic
testing and an 'indicative' budget for drugs.
These budgets, which were of the order of £l million - £2 million for the
larger practices, would give the practice the opportunity to use the money for
alternative purposes, such as investment in practice premises or employment
of additional practice staff, in the event that savings could be made. The
intention was clearly to provide an incentive to reduce pressures on hospital
services and to provide a clinical quality control on elective surgery. There
were, and still are, a number of concerns about the whole principle of
fundholding practices, to which the Labour party has declared its opposition.
The most significant criticism, is the accusation that they create a two-tier
service, i.e. that their contract leverage means that their patients will be
treated differently, better or more swiftly by hospitals. The level of concern
was such that the DoH was forced in 1990 to issue a circular clearly
reiterating the principle that only clinical priority should determine priority
for admission for hospital treatment.
Nevertheless the success story of fundholding practices has been that they
have negotiated a better quality of service for their clients and in many cases
raised standards and expectations, both with the general public and with
other GPs. As the criteria have been relaxed to enable more practices to
become fundholding, the percentage of the population covered by
fundholding practices increased so that, by 1993/94, 25% of the population
of England were in fundholding practices. This figure contains quite
substantial variation, some regions having a third of their population
covered by fundholding practices. Yet, because only certain elements of
hospital budgets for non-emergency specified elective operations are
included, still only a small percentage of the total hospital and community
14 NAVIGATING THE NHS

health budget is being passed through fundholding practices. Even so they

constitute a very significant element, and research conducted by the London
School of Economics, funded by the King's Fund Institute, has revealed the
range of innovation and change that they have stimulated. Quite simply they
have changed the nature of the relationship between the hospital consultant
and the GP. For many fundholding practices the fundamentals under
discussion during contract negotiation were not particularly to do with price
or even clinical quality, but about quite simple matters such as the
availability of hospital consultants to discuss patients and the daily pick-up
and delivery of test results. A number of large hospitals, too busy to discuss
what seemed to be relatively trifling matters, were horrified to find that
practices had happily switched their allegiance, not merely for pathology
tests but also even for particular aspects of surgery. Although the sums
involved as a percentage of the hospitals' overall budget were relatively
trivial, it is these kinds of marginal change that hospitals find difficult to
accommodate, especially in the short-term.
The full potential of fundholding practices, and the extent to which the
budget for health services might be managed by the fundholding practices, is
still not agreed. Experiments are being undertaken on passing the totality of
budget for a local population to a number of practices (total fundholding),
but major questions arise both about the role of the health authority as
purchaser and about the ability of Secretary of State to influence patterns of
health care through independent contractors.

Medical audit

The requirement set out in the White Paper that medical staff be involved in
routine and regular audit has had a mixed course. Politically it was seen as a
necessary check to counter claims that overall quality would reduce in a
market for health, since buyers would go for the cheapest product. The
intention was that doctors, through self-regulating mechanisms, would
ensure that the quality of clinical work in hospitals was maintained and
improved rather than allowed to deteriorate in any way. Considerable sums
of money were provided by the DoH, albeit taken from the overall health
care budget, to stimulate and develop audit in hospitals. Responses have
been very mixed. Whilst some specialties in some hospitals do undertake
rigorous audits on a structured and planned basis, they probably comprise a
relatively small percentage. In many hospitals the monies have been either
used to support research or diluted in other ways. Typically, in many
 WHERE ARE WE NOW? 15

specialties, a monthly meeting reviews a number of cases in a somewhat

unstructured way.
The position has been further complicated by subsequent moves by the
DoH to promote clinical audit, intended to involve the whole multi-
disciplinary team who participate in patient care. This currently sits uneasily
in many hospitals alongside medical audit, which is not yet sufficiently
mature to involve other disciplines. The other major problem is the lack of
linkage between medical or clinical audit and the routine management
processes of the hospital. Many hospitals have developed some form of
quality control, quality assurance or quality improvement, with a few
attempting total quality management (TQM). Audit has in only a few cases
been integrated into these broader management initiatives. In the remaining
hospitals the result is that management issues often uncovered by audit
remain unaddressed and the worlds of organizational management and
clinical management are perceived as in some way different from each other.

Contracts

The 1989 White Paper was seen by many to be theoretical and not based on
any detailed development work. The government chose to characterize all
calls for experimentation and development as attempts to block the process
of change, and determined that the principles would be implemented
nationwide on 1 April 1991. The management response, from both the
NHSE and the regions, was 'steady state' and 'smooth take-off'. In other
words the implementation of contracts was not to be seen as an opportunity
to reshape health care in any major way at that time, but that contracts
should basically reflect current realities. Some regions, for example North
Western, took this even further and insisted that contracts should preserve
the status quo for three years. Most initial contracts were block contracts,
i.e. they agreed an overall sum of money for hospital services to be provided
to the same level as previously. Subsequent pressure from the DoH, as well as
natural development of the market, has meant a shift towards cost and
volume contracts. By this is meant contracts that specify a price per, for
example, hospital episode and volume (number of episodes) for the contract
as a whole, with quite often contractual specification of acceptable tolerance
and thresholds that will trigger changes in payment.
Costing systems, initially primitive and useful only at the level of clinical
specialty are being developed, with experimental work looking for a move
16 NAVIGATING THE NHS

towards comparing costs from one contract to another for specific groups of
patients (health care resource groups (HRGs)). There is an inevitable tension
between the centre's desire, on the one hand, to allow a variety of
approaches to contracting, with local circumstances dictating the type and
nature of the contract, and on the other, to be able to compare contracts
from one part of the country with those of another. The argument will
always be that what is being purchased in one place is apples and what is
being purchased in another is oranges, and the development of a national
standard set of groups (HRGs) for patients is an attempt to achieve and agree
on acceptable standardization.

Evaluation to date

The government rejected any attempts to set up formal research and

evaluation; this was to be the way forward. A publication by the King's Fund
Institute, summarizing independently commissioned research, was cautiously
optimistic, suggesting that 'there is potential for real gains arising from the
reforms'.5 What no-one would disagree with is that the NHS has been
fundamentally reshaped, and whatever organizational structures might be
adopted in the future, there is a far clearer understanding of the distinct and
different roles of commissioning health care and providing it.

References

1 Department of Health (1989) Working for Patients (Cmnd 555). HMSO, London.
2 DHSS (1983) NHS Management Enquiry (The Griffiths Report) DA (83)38. DHSS,
London.
3 Department of Health (1994) NHS Services in London (The Tomlinson Enquiry). DoH,
London.
4 IHSM (1993) Managing Clinical Services. BAMM (with BMA, IHSM and RCN),
London.
5 King's Fund (1984) Quality Assessment in Health. Maxwell, London.
3 An introduction to priority setting in
the NHS
John Richards and Tony Lockett

This chapter provides a brief overview of the key issues involved in priority
setting in the 'new NHS'. As priority setting has become increasingly topical
at all levels of debate, political, professional and popular, it has spawned a
huge body of literature and a proliferation of 'experts'. The subject is heavily
laden with political and philosophical overtones and is thus both complex
and emotive.
Priority setting, in its widest sense, is the process and rationale by which
decisions are made on how to allocate resources in the face of many
competing demands. The need to make these choices requires that there is a
mechanism for determining which options have the greatest priority. This
definition of priority setting rests on the assumption, familiar to economists,
that demand is infinite and must be matched in some way to resources that
are finite. The importance of this phenomenon to the NHS, and the widening
gap between demand and the ability of resources to keep pace, was clearly
expressed by Sir Brian Thwaites in 1987.l

Background

Recent interest in priority setting is set against a background of rising health

care expenditure, both in the UK and world wide. Indeed the origins of the
NHS reforms, embodied in the 1990 NHS and Community Care Act, may be
traced to the financial crisis in the NHS that came to a head during 1988.
Newspaper reports, such as one about a 'hole in the heart' baby who had
died whilst waiting for an urgent operation in Birmingham, added fuel to the
fire. Commentators put such problems down to a chronic shortage of
resources, which had given rise to lengthy waiting lists and cancellations of
theatre sessions due to a lack of skilled nursing staff. These events, amongst
others, gave rise to the unprecedented step of a prime ministerial review in
1988 and culminated in the publication of the White Paper, Working for
Patients in early 1989.2 Rather than concluding that the solution was
increased funding, as many had hoped, the review team opted for
18 NAVIGATING THE NHS

fundamental change in the management of the health service and sought to

introduce an internal market to stimulate greater efficiency through the
mechanism of competition. These market style reforms were inspired to a
large degree by the work of an American academic, Alain Enthoven3 (who
had visited the UK in 1985) and by similar reforms in the education sector.
Critics of the government reforms suggested that the introduction of an
internal market represented privatization of the NHS 'by the back door'.
Nevertheless the White Paper and subsequent ministerial pronouncements
expressed a clear commitment to the founding principles of the NHS: a
system of health care funded mainly from general taxation and free at the
point of delivery, and a comprehensive service providing equal access accord-
ing to equal need. Whilst this appears clear, much of the subsequent complex
debate ultimately comes down to these three key issues.

• What is the real meaning of a comprehensive service; does it mean

everything that could be provided?
• What is meant by equal access according to equal need, and who defines
what constitutes need as opposed to want?
• Can greater efficiency reconcile demand with available resources without
compromising the fundamental principles of the NHS?

The international context

There is a truly international context to priority setting, which helps to put

the UK experience in perspective. All health care systems, whether state
funded or not, have been experiencing increasing pressure on resources, and
many different approaches have been tried.4 One of the most well known,
but misquoted, examples is the Oregon Health Plan. The plan started by
trying to rank over 700 categories of treatment according to cost utility
criteria. This proved to be unworkable, and a second ranking method was
devised based on 17 broad groupings of care from life-saving to cosmetic, but
the approach was finally only approved when the problematical 'quality of
life' criteria were ruled out. The plan has been through many changes and
has been subject to considerable criticism, especially in the UK, where it has
been seen by some as a bureaucratic and inequitable attempt to ration health
care. However, the Oregon experiment5 must be seen in the context of a
health care system in which some 15% of the population had been excluded
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