In the latest of the NHS Confederation’s policy salon series, speakers from the Institute for Government and KPMG led a discussion on opportunities from putting together funding streams across the public sector and for more integrated working.

The Institute for Government is a new independent, non-aligned organisation seeking to promote more effective government (and opposition) and civil and public service.

The speaker argued that facing the magnitude of the UK’s fiscal crisis and economic recession, the public sector tendency is to eschew collaboration across organisational boundaries and innovation, but rather to seek tighter control over one’s own organisation and its core business and budgets. the focus is thus on more efficient delivery and greater productivity, prioritising the allocation of scarce resources. In short, an inter-organisational focus.

In the current situation, several problems arise with this.

The UK’s level of deficit is very big, and though we start from a high public spending base now (compared to in 1997), it is unlikely that the savings required for many years to come can be delivered by efficiency, productivity and resource control. It is simply hard to maintain efficiency and productivity focus over several years without cutting services to, and perhaps through, the bone.

This is not just a fiscal crisis. Government is facing up to very complex cross-cutting challenges, like the growth in long-term conditions; an ageing population; and climate and environmental problems. These are complex, crossing traditional bureaucratic boundaries and are not all amenable to the traditional work of the public sector – they require population lifestyle change.

Although operational efficiency programmes could offer significant and worthwhile savings (back office, IT, asset sales), the public sector will need to keep doing those. Financial markets, which hold the government’s debt, are likely to require cuts in all public spending to maintain its confidence to lend.

Failure to work effectively across public sector boundaries is incredibly wasteful, with high overhead and transaction costs. Research on disadvantaged families in the most deprived wards in Sheffield found that they received similar services from 5-6 different agencies, which were not talking to each other. The families were confused which agencies workers were coming from; workers were not aware of the duplication with other services. The Prime Minister’s Strategy Unit projected that £250,000 a year is invested in some such families.

Public services do not necessarily lack money, therefore. The case is more of ineffective delivery across boundaries, which the Total Place initiative seeks to encourage.

Another need is a climate fit for innovation and creativity. The pubic sector remains quite risk-averse; and collaboration and innovation require major cultural shifts.

Though we have a uniquely decentralised central government system, where individual departments have huge power, the UK has the most centralised governance in the hands of central government. This paradox is reinforced by both a relatively weak centre, and silo-based scrutiny systems. Structural change is required.

It is also important to develop the right kind of leaders, not only of teams, buildings and organisations, but people who play a public and understood part in their communities to help resolve joined-up problems. The target landscape increased incentives to lead inside organisations, rather than to work across boundaries.

Public services need a relentless focus on clients. They often appear obsessed with institutions and bureaucracies, rather than finding out their clients’ needs and why they are not seeing better outcomes. This involves creating shared targets between agencies, and a need to align incentives across local economies.

The public sector often fails to judge its employees’ and organisations’ success in building partnerships to buy outcomes. Staff are not judged by their skills to create successful collaborative relationships.

Capability reviews have been poor at assessing partnership working until very recently. If we are serious about this, it will be a case of promoting those who emphasise collaboration and joint working.

Staff involvement is vital in practical issues of service change (like asking cleaning staff about design of hospital furniture).

While public sector organisations always throw up good examples of engaging front line staff, it is always one or two; but very rarely ‘the way we do things here’ - a culture really valuing knowledge and skills available.

There are fantastic innovations in government and in health, and very innovative people. But the system remains too risk-averse, considering the challenges it is facing. A climate where people can innovate is required.

One reason people don’t innovate is that we don’t manage risk and failure well in public service. Why would you try doing something new if you’re not sure your senior managers know how to minimise risk or will react proportionately if a sensible innovation goes wrong?

How many leaders lead by example, saying yes more than no, or even exploring and discussing a new idea even if it will not be sanctioned?

How good are managers at increasing energy levels? To face the oncoming challenges, people will need motivation. Needless reports and meetings, and micro-management without added value lower staff energy levels Innovation requires energy.

Building partnerships is key – collaboration sparks innovation, especially now the game is better services for less money.

Total Place is an attempt to get people to work more effectively together to solve problems facing a community.

The second speaker opened his comments quoting NHS Confederation policy director Nigel Edwards’ axiom, “why do some hares outrun foxes? For the hare, it’s a question of life and death; for the fox, it’s a question of lunch”. He referred to the structural weaknesses facing the British economy, and tangentially suggested that a fruitful topic for another debate might be whether the formal apparatus of state is in fact a nineteenth century concept.

The operational efficiency programme facing the public sector is
unrelenting (Gershon aims for £26 billion savings; CSR 2007 vintage £30 billion - plus £5 billion 2010-11). Areas for focus include:
back office and IT - more standardisation
purchasing – greater scale and personalisation
purchasing - scale and professionalism
asset and property sales

The 10 regional SHA commercial support units spun out of the DH commercial directorate created chatter in the NHS, with people (understandably) not want to lose their fiefdoms, and feeling that their own purchasing power as commissioners was greater than others’ (without very clear data sources to prove this).

The effeiciency and productivity savings proposed in the NHS of around £15-20 billion by 2015 may not be not big enough

Next comes a focus on the estimated prize of NHS efficiency savings: is it ambitious enough? Consider the areas of:
back office £18 bn spend £4 bn saving / prize
IT £16 bn spend £3.2 bn saving / prize
purchasing £89 bn spend £6.1 bn saving / prize

The NHS tends to discuss and do inventions, which are innovation. What it does not tend to do is adoption and diffusion.

On the subject of property, it was suggested that the NHS is not radical enough in joint ventures with the private sector to transform estate and release value.

Total Place is one approach, which involves a programme of mapping total public spending in a local area, and identifying efficiencies through collaboration and accelerating jont working under local area agreements (LAA) and local strategic partnerships (LSP).

He suggested that there is considerable potential to use continuous improvement techniques to cut across barriers, asking rhetorically how many NHS staff nationally are being trained in the Toyota ‘lean’ method?

Why should it not be mandatory to adopt best practice? With quality accounts (which have to be received and endorsed by commissioners, though they have no legal force), why can’t these link into quality, efficiency and productivity and spread through every NHS employee’s contact of employment, with no automatic pay rise if no demonstrable gain in quality, productivity and efficiency?

The answer is a lack of grip, contest and competing forces.

An initiative in use over 14 police forces was cited as having increased capacity, improved satisfaction and created tangible eficency savings. Its suggested return on investment was of 5:1 in between 1-2 years.

Three principles should apply to reform:
get people who know how to use anlytical tools to work with people who know how to do the job and stick with this arrangement over several years, which is sheer had work. If systems can get a 5:1 ROI and 20% efficiency and productivity gains, why not try and have a go? The NHS might not achieve 20%, but undoubtedly could do 10%.

Technology can be key, as in the Whole System Demonstrator pilots (in Kent, Newham and Cornwall), which deploy adaptive technology on a risk-stratified basis to look after the frail elderly at home. Its potential appears enormous from interim findings (it is due to report in a year), but the risk is the NHS will not change staffing mix, or the agencies entering the older people’s homes will continue as heretofore and as a result the technology won’t be used fully and properly. Industrial scale should be used where an innovation demonstrably works.

‘The Wolf At The Door’ is a recent KPMG document based on global studies of public sector leaders. It found that:
84% report shrinking budgets
63% are yet to significantly change their business model
less than 20% are planning radical change to their business model

The speaker concluded that they were not convinced the NHS has the right strategies to the NHS must train, develop, support and hold to account its staff in different ways. This will need more radical public-private synergy.

Discussion
Delegates reflected on whether the level of change can be delivered by incumbent providers – since efforts to exhort change in efficiency and reductions in duplication and variation have not been notably successful.

The book ‘The Innovator’s Prescription’ was cited, for its argument that healthcare’s major problem may not be technical innovation but the business model. For some areas, it may be time to start again rather than get incumbents to change.

Can the NHS create enough tension to get incumbents to behave like innovative new entrants?

One example was given of Peter Homa’s process redesign work at Leicester Royal Infirmary. A senior surgeon wanted more day case working. This was investigated with a team of staff, and it hit logistical barriers until a porter suggested that these logistical barriers could be overcome if the day’s work began at 7 am. Homa (not present at this event) asked the surgeon when he’d first put the idea forward, and learned that it had been 20 years previously.

Others suggested the NHS is always full of examples of wonderful work, but the sense is that this happens despite external pressures, making it hard for innovation to happen. How to design external governance so that the things we would like to see happen become rewarding financially and career-wise?

Shared working with local authorities (joint chief executive appointments and closer working) is made problematic by legal barriers and the approach of the Audit Commission. These technical and legal abarriers are surmountable, but it is hard.

Another delegate observed that as commissioners, organisations wanting this kinnd of joint working who are told that providers locally can’t or won’t integrate better can simply write a new service specification.

One chief executive noted he would get sacked for failing at world-class commissioning long before failing in his comprehensive area agreement.

Another asked (rhetorically, again) how to increase incentives for commissioners in CQUIN with a fixed tariff, when productivity gains (or higher profit margins if employment is reduced) accrue to providers? Commissioners get bigger bills for higher volumes. Is real innovation compatible with a fixed tariff?

One delegate mentioned a region’s attempts to create a new type of integrated care delivery organisation (which is currently primarily NHS, but would, should and will in its fullestform incude local government and voluntary sector). They reported “struggling like hell with payment; we have to take it out of tariff or we will be mercilessly drained”. They suggested that the current system is unable to fund a holistic health maintenance organisation. (One part of the proposed entity remains an acute hospital).

Quip of the session went to NHS Confederation policy drector Nigel Edwards, who suggested that the discussion indicated that in an evolutionary metaphor, health policy “needs an evolutionary approach rather than any more attempts at intelligent design”.

Financial arrangements need to incetivise sensible inter-agency behaviour. The system in general provides few or no incentives for prevention., especially when the benefits will not accrue to the providing organisation.

Another delegate proposed that the characteristics of high-performing healthcare organisations are:
aligned incentives
shared governance with physicians
good leadership
integrated information systems
suitable external mechanisms for challenge
These characteristics need to be part of the organisation’s culture, and in such organisations as the Mayo Clinic, Geisinger and Kaiser Permanente (interestingly, all US exemplars), have all taken about 25 years to develop. These things cannot be transplanted quickly. Unfortunately, the NHS does not have 25 years. It can happen in the NHS: Grant Kane, chief surgeon of Sunderland Hospitals NHS FT saved £1 million in a year by going to all his surgeons individually and asking them if certain items or procedures could be medically justified.

Another suggested that workforce discussions linking productivity and performance to pay would be best linked to teams rather than individuals.

The second speaker responded that no-one in the NHS has done enough on HR management in the last 60 years, and this will have to get very local, aligning incentives and applying them with private sector intensity. He suggested that NHS managers need to use the employment contracts they’ve got; need to hold people to account for doing things; and keep this at speciality or ward level. The pay progression policy needs thinking through.

He added that linking service line reporting reporting to management expectation produces results in most systems. Private sector skills should be used to address the big stanadisation areas the NHS still has. Consultancies are simply professional service firm like hospitals, but know about the need for different incentives. The NHS has only had 5 years of negative funding growth in 60 years, and is in for a period of restraint - if not contraction.

A chief executive observed that innovation and collaboration need capacity, time and skill. Doing these things practically on the ground is incredibly time-consuming. all time worrying about WCC assurance leaves managers feeling distracted from being creative and innovative.

It was observed that a recent meeting of acute CEs felt strongly that HR is the weak link in their organisations, and that the quality of HR leaders is not fit for purpose, and candidates lack strategic understanding.

The second speaker suggested that this is a question of the quality of leaders in general in the NHS, and we can’t marginalise HR.

A delegate from the acute sector debunked comments about how acute trusts are ‘dragging people in off the street to treat them’. Capacity has been created to meet 18 weeks. He observed that Wales and Scotland have dispensed with the primary-secondary split, and asked if it is time for the NHS in England to follow suit.

I cited Professor Aidan Halligan’s infamous words (written for me in those good old British Journal of Healthcare Management days) that “any suggestion of real reform has been a deceit – working patterns, practices and customs are at the heart of many capacity issues, and have never been challenged” as DH career-ending candour for Aidan as deputy CMO in 2006, but now a mainstream view. How can progress be made considering the cited and evident CE instability of tenure?

In summary
The second speaker suggested in summary that the key question now facing the NHS is one of will to change. This involves three steps:

1. The need to engage 1.34 million NHS staff in change and not to attack them, so link innovation and collaboration to quality in appraisals, supporting change but praising progress
2. Financial instability is a national structural problem, so it is not possible for the NHS (or ay area of public service) to attempt Ponzi scheme camouflage; it is time to attack quickly and differently.
3. Leaders across the system must collaborate – PCTs with providers - on the coming lack of money and what to do about it. There is a need to embrace the private sector, and to be much more radical in how we modernise property and think about different employment models

The first speaker concluded that information was of crucial importance for public protection, and as “fuel for co-operation and collaboration” noting the problematic growing public mistrust with the handling of data by the public sector. Leadership is needed politically and among managers on this issue. Furthermore, commissioning is critical: the public sector has real problems with commissioning capacity and skill levels. The challenge for leaders is about creating an environment for innovation and co-operation to thrive.