The key policy levers enabling this to happen are:
1. The purchaser provider split, with GP commissioning consortia taking the leading role on the purchaser side of the divide.
2. Patient Choice.
3. Competition between a plurality of ‘any willing providers’.
4. Payment by Results with price competition.
5. Patient held budgets.
6. Foundation trusts becoming social enterprises and the abolition of the cap on their private income.
These policies are mutually reinforcing and this is how they will work:
GPs will be formed into GP consortia and will control 80% (£80bn) of the NHS budget to buy in services for their patients from a variety of providers (including FTs, private hospitals and third sector organisations) competing against each other in competitive healthcare market. Market competition will be enforced by applying EU competition law and overseen by the economic regulator, Monitor, as well as the new National Commissioning Board. Money will follow the patients via the Payment by Results (PbR) system. This has traditionally been a fixed pricing system, but the tariffs will now be opened up to price competition (I’ll come back to this).
GP consortia will take over most of the roles of PCTs and SHAs, which are being abolished. Since the process of purchasing healthcare, designing care pathways and interpreting healthcare outcome data is a complex process, they will need to buy in management expertise. Although some consortia will employ ex-PCT staff, many will take on private companies through the Framework for Procuring External Support for Commissioning (FESC). These companies include US HMOs like United Health and Aetna, as well as UK companies like BUPA. These companies will therefore be involved in both purchasing and providing healthcare. Consortia will have strict financial responsibilities and will therefore be encouraged to ration care or opt for cheaper services.
Meanwhile, all hospitals are going to become FT, which will subsequently become social enterprises, i.e. owned and run by their staff and essentially not-for-profit private hospitals. They must be able to make a small surplus to re-invest and will not be able to be bailed out if they fail financially. If they do fail, they will be merged or taken over by the private sector. Hospitals will need to make money through Payment by Results. However, the marketplace will be competitive and PbR tariffs will no longer be fixed. This will lead to a ‘race to the bottom’ as consortia look to save money by referring to hospitals with the cheapest tariffs. As tariffs fall, Hospitals will need to generate more income by cutting costs or treating more private patients. In addition, increasing numbers of people will take out additional healthcare insurance as consortia ration more and more services and waiting lists increase because of the abolition of waiting list targets.
Over time, we will see an increasing role for the medical insurance industry and a two-tiered mixed funding healthcare system, ending one of the founding principles of the NHS. There will also be a new health insurance market for patients with patient held budgets, who will want the option to ‘top up’ their care to avoid the risk of running out of money.
It is clear that many hospitals in poorer areas will be able to attract less private patients and will be seriously disadvantaged by this system. Meanwhile, hospitals in wealthier areas may be able to continue to reduce their tariffs, supported by greater private income, putting even more pressure on struggling hospitals.
As tariffs fall, all hospitals will be pressured to drive down costs. This is most easily achieved by cutting staff and changing skill-mix. In addition, national T+Cs will no longer apply to hospitals that are social enterprises because they are private organisations. Thus, they will be able to set their own local T+Cs. Existing NHS staff will be protected by TUPE legislation, but new members of staff will not and they will potentially no longer be entitled to NHS pensions. If medical students and future students think it’s bad now, then they should think again. It’s only going to get worse.
In addition, since some hospitals will fail, many staff will be transferred to the private sector and have to accept worse T+Cs, especially is unemployment levels are high. This whole process will set in train wage deflation and the destruction of the NHS pension system, which is paid for by current employees.
The white paper is therefore designed to fulfil a longstanding Tory dream – to dismantle the NHS and replace it with the private sector, which will receive its profits from the UK taxpayer.
This NHS will not fall overnight because the market’s invisible hand will destroy it in a piecemeal fashion, leaving the unprofitable areas of healthcare firmly in public sector hands. It is also political suicide to dismantle the NHS, so it is being performed using the political rhetoric of patient empowerment through the patient choice agenda, and clinician empowerment by giving GPs a budget of £80bn.
Amazingly, Lansley is getting away with it because there is far too little understanding and resistance from the medical profession, which is realistically the only group of people that can prevent this assault on the NHS.
It’s time for the medical profession to heed Aneurin Bevan’s words: “It will last as long as there are folk left with the faith to fight for it.”
Clive Peedell is consultant clinical oncologist at James Cook University Hospital, and co-chair of Britain’s NHSCA. He writes frequently on the issues facing doctors in the UK and is a regular contributor for hospitaldr.co.uk, where this post first appeared.