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The Maynard Doctrine: Is the world mad or sad? The return of the global budget must await.

Professor Alan Maynard considers whether system reform needs a psychiatrist or a grief counsellor - oh, and why global budgets must come back.

Any commentary on the current state of NHS policy must, as in so many domains of public policy, address the question of whether the world is mad or sad.

In the context of the NHS, I will address two areas of contention: the role of Monitor, and the recent draft document “Setting levels of ambition for the NHS Commissioning Board (latterly known as the national coal board)


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Clearly, Mr Lansley and his brood of civil servants were having a bad day when they gave Monitor the role of determining hospital tariffs (PbR).

In Economics 101, we explain that public and private markets have a demand side (NHS commissioners who purchase / demand services of high quality at least cost) and a supply side (NHS and private supplier who tender for commissioner’s funds on the basis of cost and patient outcome).

Confusing these two roles is a sin guaranteed to cause distress in markets. This is exemplified by the oil cartel, which controls supply and thereby is able to manipulate prices, distort demand and use its profits to support dictators (e.g. Venezuela) and fritter away their society’s scarce resources on football teams and tower blocks in the desert.

Allowing providers to manipulate the demand for their goods and services through price / tariff manipulation guarantees mischief whatever the protestations to the contrary and the assurances of humility and good intent.

Sadly in a bout of Whitehall confusion, a powerful supply agency (Monitor, the regulator of Foundation Trusts (FTs): a powerful supply-side agency) has been given the power to manipulate demand by being put in charge of fixing PbR tariffs.

What silly-billies we have ruling us!

Of course, Monitor assure us that there will be walls between these activities and they can independently manage the role of keeping FTs in the style to which they are accustomed by the manipulation of NHS tariffs which affect FTs prosperity. “The road to hell is paved with good intentions”, don’t you know?

PbR tariff-setting should lie with the commissioning agency i.e. the NHS Commissioning Board.

However the failure to separate demand and supply side functions is not the only problem with Monitor. Recently they commissioned a consultancy report entitled “An evaluation of the reimbursement system for NHS funded care”. This month, they published a report of stakeholders’ responses to this:

A sexy chart at page 4 of the stakeholder evaluation (figure 1) has a section on “compliance / flexibility” which goes like this:

“Block contracts are not conductive to efficiency or transparency. Need for clear set of rules of engagement for negotiations between providers and commissioners. Difficulties balancing at both commissioner and provider levels”.

Cor! What beautiful rocket science!

The latter two sentences are pure “motherhood and apple pie”. But let’s consider the first sentence. This appears to assert that PbR does improve efficiency and transparency. This is a nice assertion, which is disproved in the same chart.

Under the section “pricing methodology”, the authors note that there are “difficulties incentivising quality through tariffs” and this “suggests a need to consider tools like CQUIN”. To me, that reads that PbR alone does not improve quality and - just like global budgets - it requires supplementary policy to implement greater efficiency.

But does PbR improve cost data? Figure 1 offers a conclusion: “reference cost data does not facilitate an understanding of true costs” says Monitor. Furthermore, they conclude that “very large cost variations within some individual HRGs are inexplicable”.

PbR is implicitly seen by Monitor as a failure, as it does not facilitate cost or quality control. Furthermore, like all other fee-for-service incentive mechanisms, it indices activity inflation which undermines PCT / CCG expenditure controls.

The logic of Monitor’s report is that it may be timely to ditch PbR.

PbR was introduced to increase activity (i.e. reduce waiting lists) in a time of high NHS funding growth. Activity and cost inflation is no longer tolerable. We now have overly oppressive “austerity”. So is it now time to move away from PbR and return to global budgets - i.e. funding hospitals with a fixed budget and leaving hospital managers to control activity within that constraint?

Monitor dislikes global budgets because (to reiterate their conclusion) “it is not conducive to efficiency and transparency”. But we have seen that PbR has the self-same problems. Both systems need to be accompanied by costing systems (e.g. PLICs) and quality instruments like CQUIN.

The potential advantage of global budgets in times of severe spending control is that it enables commissioners to better control NHS expenditure.

NHS Commissioning Board mandate
Here we have two documents (DH gateway references 17799 and 17770) to delight and titillate to you to sleep!

The draft mandate has 5 core sections
i) Improving health and health care. This indicates interest in “improving healthcare outcomes and reducing inequalities” whilst “upholding” waiting times standards. It also expresses a desire to “strengthen the priority” given to prevention. As ever, everything appears to be a “priority” and there is an absence of ranking in relation to proven cost-effectiveness.
ii) Putting patients first: here are good intentions about empower patients and families and integrating services around “the needs of patients. Nice intent - but how to do it efficiently?
iii) Helping to achieve “broader social and economic objectives. Here, there is mention of children with special educational needs and disability, helping to reduce reoffending and enhancing R&D to facilitate economic growth. Curious selection of issues and where is evidence of value for money (vfm)?
iv) “Effective commissioning”. Effective commissioning is a necessary but not a sufficient condition for VFM. We need cost effective commissioning. If you mean this, why not say it! Are you cowards or confused in DH?

The outcomes framework has 5 domains
i) Preventing people from dying prematurely - that word “effective” again. Please - we are interested in efficiency, not mere effectiveness!
ii) Enhancing quality of life for people with long term conditions. Regardless of cost and again with focus on effectiveness? No! Using resources cost-effectively!
iii) Helping people to recover from episodes of ill health or following injury. Regardless of cost? No rationing? Not merely effectively but cost-effectively!
iv) Ensuring patients have a positive experience of care. Measured how and cost-effectively?
v) Treating and caring for people in a safe environment and protecting them from avoidable harm. Protection from harm regardless of cost may be inefficient e.g. driving down MRSA and C. Diff levels when in single figures may not be cost-effective. Probably, there is an efficient positive level of patient lack of safety as it may be resource wasteful to drive out all risks.

So what is needed? Radical revision of this often vague set of disparate and good intentions, with a much greater focus on target “measurability” and performance in relation to evidence of cost effectiveness

Document gateway 17770 offers you the chance of counting the number of times the words “domain” and “matrix” are used! There is recognition of the paucity of outcome data and the inevitability of using process data.

Unlike with the GP-QOF, the hope must be that any process data / guidelines are evidence based. This document emphasises the need to appraise performance with timely agreed data on an on-going basis. It is a document for “nerds” and may challenge some NHS operatives.

If you have stuck with this so far, well done!

It is remarkable that the issues raised here have received relatively little attention from the media or ‘think tanks’. They can make you both sad at their lack of clarity and mad at their continuing ability to confuse even the simplest of notions.

Let me end with two contentions for debate:
i) CCGs need to replace PbR with global budgets if they are to survive
ii) The Commissioning Board remit needs significant re-tuning, with especial focus on deletion of the word “effective” and its replacement with “cost effective” so that ever thought , word and deed is focused on value for money and not merely whether some often inappropriate activity works!

P.S. While we are at it, let’s re-name NICE as the National Institute of Cost-Effectiveness, a title that the Blair government was too scared to use in 1999 for fear of frightening the docs, bless ’em!