Professor Alan Maynard suggests that Health Secretary Andrew Lansley is not so bad, and that the current financial crisis means pay and pharma prices need much closer attention.

Is the current Secretary of State For Health so bad?

Reviewing the history of the NHS over the last 15 years, you can identify Secretaries of State who actively sought to improve the NHS. Three figures stand out, although you may not particularly like them and the policies they pursued: Alan Milburn, Patricia Hewitt and Andrew Lansley.

Yes! The current Secretary of State is at least trying to do something to reform the restrictive practices and variations in clinical activity that have been monitored for years.

Compare Lansley with Frank Dobson and Dr John Reid: the incumbent Health Secretary may have created a storm of dissent and a political riot; but at least he has tried to improve the NHS.

Agreed he is a poor communicator of his policies and some of the proposals lack credence, but better to “stir the pot” rather than fiddle while Rome burns!

Integrated care and care homes’ woes
And Rome, in the shape of the NHS, is burning. For instance the disciples of “integrated care” wish to merge budgets and integrate service delivery for chronically ill patients across primary, secondary, tertiary and social care. Good on ‘em!

As ever, the task is complex and perverse incentives bar progress.

But pay attention citizens of Rome, to the condition of the social care sector! The Fat Controller of local authorities, Comrade Pickles, has hacked budgets and is pushing through legislation that will enhance “local autonomy” in such a way that national services can be cut by local fiat.

The unsurprising consequence of public expenditure cuts is that private nursing homes are being made insolvent. Last year, the number of elderly people receiving state funded care fell by 5 per cent to 1.7 million despite an ageing population (CQC data quoted by Simon Mundy, Financial Times, May 26th, p. 20).

Fat Controller Pickles is adding to the consequent problems with severe funding cuts to local authorities in 2011-12. Such cuts lead to financial woes for providers. The classic example is Southern Cross where discussion of its severe problems has, apart from Sally Gainsbury’s piece in last week’s HSJ, been largely ignored by non-financial journalists.

The previous owners of Southern Cross, Blackstone (a US private equity group) sold the equity in many of its homes, and as a consequence the new owners pay rent on 752 homes which house 31,000 publically and privately funded clients.

They are currently reporting a loss of £310 million in the half year ended March 31st. Consequently, they are now asking their landlords to cut the rents they levy on Southern Cross homes by 30% for four months so that they can stay in business. The value of Southern Cross shares have fallen from a peak of 600p in 2007 to 10p today.

In part, this fall reflects concern about the uneven quality of care provided in their facilities. The FT’s Mundy reports “Regulators placed more than 100 under an embargo last year, temporarily preventing them from taking new residents, contributing to an annual fall in occupancy” (FT, May 26th, page 20).

Clearly this is a nice “triumph” of privatisation and the Fat Controller’s austerity policies. Put alongside the expense and inefficiency of rail privatisation revealed by the McNulty report earlier this month and you have well documented examples of how difficult it is for the State to regulate efficiently these paragons of capitalism.

Proceeding to integrating the NHS and social care is obviously a nice problem given the woes of private care homes sector.

Cutting public sector pay and pensions
Managers will exploit regulations as much as they can, whether they are public or private “bureaucrats”. Thus the need for transparency in their performance and the design of incentives to reward excellence and punish weakness is clear.

In the rail industry, McNulty emphasises that over-manning and the ability of the unions to pick off rail companies and inflate wages has resulted in costs over 30% higher than in mainland Europe.

Inevitably there will be a McNulty approach in the NHS. Is there over-manning here?

On inpatient wards and GP surgeries there is usually a furious flow of patients and harassed worker bees of all sorts.

Is there scope to improve patient flow and the division of tasks between skill groups?

Is there overstaffing in outpatients?

And is the skill mix the most efficient? May replacing nurses with nurse assistants and GPs by nurses may be efficient?

Agenda for Change (A4C) and the pay settlements for GPs and consultants led to some “interesting” pay inflation. Some grades are still poorly paid e.g. porters.

But A4C was supposed to have performance-related restrictions to progress up grade scales. In too many cases, progression has been automatic and inflationary thanks to poor human resources management.

Expect downward pressure on pay and pensions as inflation increases due to commodity price rises - i.e. reductions in standards of living of five to ten per cent are the lot of most public sector workers.

Cutting the pharmaceutical budget?
As everyone struggles to maintain their budgets, focus on the pharmaceutical industry. What share of “The Nicholson Challenge” of saving £20bn will be reflected in reduced sales and profits for this industry?

The industry optimistically hopes that companies will increase their revenues as part of “value-based pricing” (VBP).

At worst, VBP could drive a coach and horses through existing regulation. It is essential that NICE maintains its role in accessing “value” in the most scientific way possible. To allow industry to pressure government to sideline NICE would ensure damage to patients and taxpayers.

Industry must demonstrate cost and benefits for its products. It should accept that at present, its productivity in producing new and valuable products is poor.

It will have to increase its investment in good basic science. Sadly for us, such investment may be most efficiently done in China and India.

There is emerging evidence that the NICE cut off is too generous e.g. analysis of NHS decision choices shows a PCTs cut off of half and less of the current NICE level of £30,000 per QALY.

More research is needed to produce an evidence base for the NICE cut-off. But a preliminary estimate is that £15,000 per QALY might be about right. That should choke off the flow of marginally cost-effective new drugs and ensure the industry shares a proportionate burden of the cuts in the period of austerity that we face.

Wanted: change and improved efficiency in the NHS

'Without change of a radical and unpopular nature, the NHS may be doomed - whatever Dave’s promises to the electorate.'

Lansley and his successor have to choose wisely in these difficult policy areas.

A “dormant and dozy” Secretary of State intent on choice fudging (a confection that is ever-popular with politicians wishing to harvest votes) will undermine the NHS.

Without change of a radical and unpopular nature, the NHS may be doomed - whatever Dave’s promises to the electorate. No more Reids as SOS, please; more Lansley types with better evidence-based policy proposals and improved “sales“ ability!

Onwards, Comrades, to the management revolution in the NHS!