Health economist Professor Alan Maynard points to the parlous pricing function, cost and value
The admirable Steamship NHS Titanic is being driven into the iceberg territory of fragmentation and privatisation by Admiral The Hunt. After five years of parsimonious annual funding growth of 0.8 per cent, good ship NHS is in dire straits, with rivets pinging from previously robust component parts.
Its stoker-managers are threatened with dismissal by the Admiral and his fellow nitwits, who are merely intent on issuing more instructions of increasing irrelevance: the mushroom principle of keeping folk in the dark and showering them with horse manure rules the waves. Pax Britannicus.
The capacity of Admiral The Hunt and his crew to maintain the seaworthiness of the NHS Titanic is being depleted by the sacking of over 600 Department of Stealth sailorfolk who (nominally) are concerned with keeping the Titanic afloat.
Moreover, there is a matching lack of understanding in the Admiral’s head office in Downing Street, where arrogant and ignorant bosses have neither the empirical grasp nor the political sense to ensure the safety of passengers and crew.
The crew remain anxious to ensure that the Titanic avoids the icebergs associated with a liking for a shrunken public sector and redistribution to the rich.
The efforts of these good folk in the Stealth Department who seek to bring evidence and sanity to Admiral The Hunt is complemented by an auxiliary guidance system of the NHS Titanic, called NHS England.
When Admiral The Hunt screams “Left hand down about a bit! Let’s have seven-day working!”, his first mate, Sir Galahad Stevens quietly tries to lessen the likelihood that the Titanic will accelerate towards the icebergs.
The push-me-pull-you of delicate, covert and competing orders being used to lessen the damage caused by Admiral The Hunt makes the NHS Titanic creak and groan ominously, further endangering its vulnerable passengers-patients.
All the nice girls love a sailor
With the management of the NHS Titanic subject to continuous Maoist revolutionary fervour, some exceedingly daft notions are corrupting the good ship’s guidance systems.
We are familiar with funding issues, foolhardy manifesto commitments to seven-day working, chaotic workforce planning neglect, ephemeral pledges for more mental health funding and drunken expenditure on the Cancer Drug Fund.
Two other fundamental issues are being neglected in the referendum debate and the Chancer of the Exchequer’s bumblings with the economy. They are the measurement and management of the costs and benefits of health care. These are both essential for the efficient running of the good ship NHS Titanic.
The costs of healthcare
Decades ago, I encountered ‘accountancy’: a curious profession which I soon abandoned, as its practitioners did not seem to understand the notion of ‘cost’ (the value of what is given up when scarce resources are consumed).
Accountants in the NHS spend their onerous lives checking flows of expenditure, with their job tenure dependent on breaking even at worst, and making a small surplus if possible.
In 1960, the NHS introduced a costing system because it was thought that comparative analysis of expenditure for items and procedures might facilitate better expenditure control.
Five years later, an eminent American economist Martin Feldstein completed his Oxford D.Phil. thesis, and concluded that cost variations had been unaffected by the new NHS costing system. Feldstein abandoned health economics and went on to advise US Presidents on economic policy.
One can but sympathise with him, as fifty years later NHS costing systems are largely a joke. For instance, the cost of a hip replacement between hospitals varies many times, with the cheapest providers clearly in dreamland and/or lying!
NHS costs continue to be largely guestimates of poorly-allocated expenditures.
These often-garbage cost estimates are the basis of current NHS tariffs: what is called payment by results, and in reality is payment for activity. These tariffs were originally based on average costs of procedures across NHS hospitals.
Subsequently, the tariffs have been top-sliced and buggered about in the pursuit of ‘efficiency’; better known as expenditure control.
This ensures creative accountancy by managers, which facilitates short-term opportunism rather than efficiency
Where is the evidence that these costs represent the opportunity cost of the procedures?
To answer this question, all NHS providers should have graduated to the use of specialty costing. Only 42 per cent of trusts have specialty costing. The rest prefer to pretend they know their cost structures and have useful data to determine which activities are profit-making and which are loss-leaders.
Isn’t it sensible for managers to confront issues e.g. if ENT is losing money, who does/should cross subsidise it? If all are losing on ENT tariffs, isn’t the national structure daft?
Wanted: accurate cost data
Maintenance of the good ship NHS Titanic requires the collection and application of accurate cost data. Comparative analysis of this information could then be used by managers to identify real low-cost producers and learn lessons for the national management system.
Identification of high-cost producers could similarly incentivise change.
Currently, it seems that many hospitals collect garbage cost data and use it to further mangle their efforts to be efficient and provide patients with good care.
With payment by results and more efficient use of cost data, we should expect that cost variations would decline and more accurate cost information would emerge.
Sadly, with the majority of hospitals still not having specialty costs, management remains inadequate.
The benefits of healthcare
Low-cost producers may be providing poor-quality care and slaughtering their patients. Consequently, it is essential also to have good outcome data to use alongside cost data.
Oh I do like to stroll along the PROMs PROMs, PROMs when the brass band plays, tiddle-i-om-pom-pom
American health literature is full of advocacy of “value-based” provision of healthcare. There are considerable investments in what we Brits call patient-reported outcome measures (PROMs).
Such measures involve patients valuing their physical and psychological functioning before and after care.
The Swedes are also exploiting the potential of PROMs. They have begun to use to establish value-outcome norms and link them to reimbursement. Thus if the norm for a hip replacement or cardiac surgery is met, the full tariff is paid. If the performance norm is not met, then tariffs are reduced.
Such creative and innovative work is most welcome. But what is the NHS doing?
The English PROMs system is expensive. Furthermore, dozy policymakers and managers have tended to ignore the potential of the system. Response rates continue to vary, and evidence of clinical take up is incomplete. How many NHS trusts routinely report their PROMs data?
As a consequence of the lack of use of PROMs data since 2009, there is talk of removing central funding of PROMs and leaving investment in it to cash-strapped trusts.
This is clearly an attempt to abolish PROMs, when the rhetoric of NHS “innovation” clearly requires development of the system to ensure national standard-setting and accountability, as seen to be emerging in the USA and Sweden. It would be typical of the British to invent something of value, and then abandon it, leaving others to harness its benefits.
Some trusts deep in the mire of deficits will no doubt not miss PROMs. Others who use the system to protect the welfare of patients and the efficient use of resources will find it difficult to fund local PROMs; and of course the stock of comparative data will be diminished.
It seems that Admiral The Hunt and his lackeys are naïve at best and criminally insane at worst. Their behaviour seems consistent with a desire to hit the icebergs in their path and destroy the NHS.
Sir Galahad continues to be optimistic and hopes that sanity will prevail. Meanwhile we all wear out our prayermats, fearing the worst
The Department of Stealth is manically pumping out the leaks in the Titanic’s financial structure in an attempt to demonstrate solvency at the financial year’s end. However it and those involved in the day-to-day management of the good ship remain largely ignorant of the costs and outcomes of their efforts.
These processes of neglect ensure avoidable waste and damage to passenger-patients. For decades, those charged with NHS Titanic’s welfare have fiddled with re-disorganisations and ignored the fundamentals of the comparative analysis of the costs and benefits of care activities.
With “efficiency” efforts continually focused on expenditure salami-slicing, the chances of improved policy and management of NHS resources remain remote. Policymakers prefer the traditional storm of irrelevant horse manure with endless plans and innovations, rather than the use of fundamental building-blocks of cost and outcome data in their steering of NHS Titanic.