In the first of Health Policy Insight’s series of interviews in the run-up to the publication of the revised 2010-11 NHS Operating Framework and the NHS Confederation annual conference, editor Andy Cowper talks to Nigel Edwards, acting chief executive of the NHS Confederation.

HPI: You describe the Coalition government’s NHS reform proposals as “radical” in your recent HSJ article. What are the characteristics of radical policies that succeed?

NE: “If it succeeds, it will be radical in four main aspects. It’s fair to say most reforms of the last 15 years changed names, structures and numbers of organisations, rather than granting power from centre – as this reform proposes.

“The second bit of radicalism comes around provider freedoms. There’s been a lot of talk about provider freedoms, and the coming reforms intend to take providers virtually off state balance sheets, making them more independent and leaving very little distinction between independent sector, charity or FT type providers.

“The third bit is a really radical move from a quasi-market to a near-full market with a competition regulator and clearly governed by competition law.

“And the fourth bit is a radical level of transparency, in the proposals to publish much more data, more regularly. We’ll all be at home doing our regression analysis spreadsheets, to work out where’s the best commissioner or provider!”

“Separating commissioning from providing is a key principle of these proposals. The big question is, does this work at GP practice level?

“The end-point Andrew Lansley wants is to have GPs as commissioners rather than providers– partly because of the conflict of interest of combining these roles. I think that conflict of interest is unavoidable and can be used constructively to these groups much more innovative. I think that GPs will be most effective as providers that have a capitation budget rather than mini-PCTs.

HPI: What are the characteristics of radical policy reforms that fail?

NE: "There are several things that lead to failure. One obvious one is the lack of a clear story about how the reforms fit together. A second is too much detail about how to do things rather than describing what the aims are.

“One big difference between this reform and Labour’s is that we are getting this mapped out all in one go; not one bit (or sector) at a time. These reforms are likely to have much less detail, so there is more scope to fill in the gaps and adapt policy to local circumstances.

“So overall, we can see how this might work. An interesting question arises because although politicians and civil servants do policy design well, they do implementation and transition management less well.

“The big risk about these reforms is that of transition, and how we get there from here..

“Inevitably, situations will arise which will basically be about how in a difficult financial environment, commissioners and providers get ‘there’, to the new system.

“If the ‘wheels come off’ (meaning things like a return of trolley waits or financial overspends) in the next few years, there will be temptation for the public and politicians to blame the policy, even if the problems that arise are nothing to do with these policies. People could say ‘this programme’s not working’.”

HPI: What do you think is a reasonable timescale for success?

NE: “The reference timescale for major healthcare reform programmes elsewhere in the world suggests that we have to think in terms of 10-15 years. Much of the machinery for the new system will take 18 months to put in place and longer to start working. We might have a problem with our ‘instant gratification’ culture, expecting unreasonably fast results.

“If you look at Dutch healthcare reform, it’s been successful, but after over 10 years it is still some way from full implementation. We tend to expect reform to start working in six months. Which isn’t realistic”.

HPI: Your work on the ‘austerity-cold’ NHS listed five ways to achieve savings: operational improvements; removing waste by redesigning clinical processes; redesigning the care pathway between organisations, especially for treating long-term conditions; reconfiguring the estate and fixed costs (if the first three can be achieved); and disinvestment decisions. How does this fit with the new policy agenda?

NE: “We’ve got to do all of those now, alongside implementing the reforms. These five are all still the right things to do.

“A possible problem is to do with the type of redesign: whether it will allow changes at the scale required to remove fixed costs. We’re moving to a system of micro-commissioning which tends to be best at micro-improvement and redesign: A question may arise about the acceptability of big-system solutions which remove fixed costs.

“This leads to a potential problem: how to get more out of standard operational improvements now, and then how to handle Years Three, Four and Five of austerity (and this is Year One).

“If we’re putting the big environmental changes of disinvestment and closure in the bag until 2014-16, that will leave us making big changes in a political and electoral environment which might not delight policymakers”.

HPI: Is there evidence that GPs have the skills or desire to lead commissioning?

NE: “I don’t think we know, but it’s a crucial question. You meet some GPs who’ve done amazing things with commissioning. How many of those are there? If the answer is ‘not enough’ or not well distributed, we’ve got a problem.

“Another question is whether the incentives offered will be strong enough to make those who have been holding back participate? We have to hope so”.

HPI: What should we do about the consistent 27-8% of GPs whose responses to the DH PBC survey show that they oppose the policy of commissioning?

NE: “Given GPs’ attitudes to lot of other policies, you might say that 73% reasonably in favour is about as positive an endorsement as you’re likely to get. It might be that commissioning can do without the refusenik 27%, who could delegate their commissioning to others. Fewer may refuse when they see it become a reality.

“This is why I keep returning to the need to align the GMS and commissioning contracts. They can’t be separate. We’ve got to use peer pressure of the leading GPs to improve primary care provision and to improve commissioning. Both areas need levers. It’s ultimately up to GPs to bring their colleagues with them, and they can”.

HPI: Genuine commissioning involves accepting variation in what commissioners can provide with comparably population-weighted budgets – the ‘postcode lottery’, doesn’t it?

NE: “It’s clear that the new policies accept that there is going to be variation in how well commissioners plan and purchase care. There’s variation now, but the reforms, if they work, will make it much more visible.

HPI: Should the new commissioning organisations be able to keep surpluses, and what about it if they make losses?

NE: “On the subject of surplus and deficits, you remember RAB - Resource Accounting and Budgeting?

HPI: Yes.

NE: “RAB still applies to the Departmental Expenditure Limit – DEL! This means the NHS budget still has to virtually balance, so the money going to GP commissioning groups must sum close to zero. That means if some keep surpluses and others overspend, there’s a one-way bet and the whole will be likely to overspend.

“If people can’t keep surpluses, what’s their incentive to innovate and bring in new good and efficient practice?

“Another issue is managing the risks of much more independent providers, we could see a multiplication of risk reserves all over the system. That would suck money out and make financial chaos more likely. Perhaps the DH have found a way around the international accounting rules on this.

“There is a major challenge around how to manage surplus, deficit and failure.

“Failure needs some strong actions. We can’t go on having trusts where the chief executive job is a revolving door: the CEs come and go, but none of the staff who may be causing the problems feel any consequences.

“We need a rigorous failure regime, even if just to encourage. Obviously, we will hope not to use it. This will apply to commissioning groups too.

HPI: Should GP commissioners and PCT commissioners be allowed to vary from the guidelines of the independent NHS commissioning board?

NE: “The problem that can arise with guidelines, if they’re gold-standard and evidence-based, is what commissioners and providers can do if there simply is not enough money to meet all 19 at once?

“There’s a fine line between issuing helpful, evidence-based standards and hemming people in so as not to allow them initiative and autonomy”.

HPI: How independent will this independent board be if the Secretary of State can sack its CE / chair?

NE: “I think this will require clear rules of engagement and a memorandum of understanding”.

HPI: Should people be able to choose and change their commissioner, as they are in Holland?

NE: “I think that is the policy: patients will choose their commissioner by their choice of GP, and they’re initially more likely to choose a GP for their GP’s quality rather than their commissioning ability.

“There’s an important difference with Holland: choice there means paying a money premium. We need to achieve much more transparency about what the GP commissioner buys, or people will only be able to base their choice on GP quality”.

HPI: What is your view on the proposals being floated to hand over public assets to foundation trusts and get them off the government balance sheet?

NE: ”I’m not sure yet how far off-balance-sheet they’d be. We could be talking Royal Mail-type off-balance-sheet; not universities-type. There are some very rigorous tests set by ONS and Eurostat. The biggest test is also a technical question: who stands behind such an organisation if they go bankrupt or can’t meet payroll?

“The political reality in the UK is that we have geographical monopolies, which are too big to fail”.

HPI: Just as in banking, so in healthcare - the government remains the lender of last resort?

NE: “Yes. That may be the crucial test: how much detailed say government has in how FTs run their businesses would determine whether FTs can be off-balance sheet or not. It’s a nice theory that removing safeguards may improve performance, but it’s like a tightrope walker without a safety net – it might improve concentration and performance but if it does not, it’s going to hurt”.