Sunday, 22 November 2015

NHS capital to revenue transfers make things look better but reinforce the underlying problems

The NHS has found a way to make the ongoing deficits in trusts seem less awful. But looking less bad isn’t the same as fixing the problem and what is happening now reinforces the worst failures of the NHS. Here is why.

Deficits in NHS hospitals this year have already reached £1.6 billion which is the worst they have been for a very long time. This is clearly worrying.

The leadership has decided to take decisive action. The HSJ reports a comment from Paul Briddock of the Healthcare Finance Management Association:

“It seems that both Monitor and the TDA are trying to work locally with FTs and trusts to make capital to revenue transfers. They are asking trusts to consider scaling back their capital expenditure plans, releasing the cash that was previously going to be spent here to support the cash shortfalls being driven by their income and expenditure deficits.”

In other words the decisive response from DH, the TDA and Monitor is to fiddle the accounts to make things look better and damn the effect on making the long term much worse.

This is a major worry as the “fix” reinforces one of the worst habits the NHS exhibits when spending money. The system is far too focussed on the short term and neglects the allocation of money to the things that would lead to long term, sustained improvement in operational productivity and quality. Here is an analogy:

You run a factory that makes widgets. Your factory has a dodgy leaky gas supply and old electrical wiring which sparks a lot. Fires are common, cause lots of damage and cost a lot to put out. And, obviously, fires cause factory closures and get in the way of your ability to make more widgets. You can’t currently make enough widgets to meet the demand, which is insatiable.

Your budget is under pressure. Perhaps the source of the problem is that, although widget making looks profitable, this assumes the factory doesn’t break down or incurr extra costs like paying firefighters.

The board of your firm decides that the response is to cancel the capital programme of fixing the gas leaks and rewiring the building. So you can have enough cash this year to pay the firefighters when they come to fix the increasing number of fires. And you can still show a surplus even when the factory keeps breaking down.

Exactly when do you realize this is perpetual madness? But it is (however imperfect the analogy) exactly what the NHS is doing. And has done in the past even when there was plenty of money sloshing around the system.

The NHS could be improved in big increments by careful spending on the right things. Buildings could be better designed to support staff and current treatment processes (there are still many pre-NHS facilities). Better equipment could deliver cheaper, more reliable diagnoses and treatments. Most importantly (and most neglected) better information systems could provide the information required for the multiple staff who interact with patients to deliver coordinated care (the organisation-focussed idea of integrated care is faintly ludicrous as most single NHS organisations can’t coordinate the care inside their own walls because their systems for managing patient information are so poor). Most hospitals don’t have reliable information to tell them whether alternative ways of organising their care yields better efficiency or quality.

Many of those improvements depend on capital spending, which has been neglected in the past and is being postponed now to make a superficial choice between making things look good rather than actually making them good. The NHS can't improve unless it spends on the long term things that enable that improvement. That's what capital spending should be about.

This problem is greatly exacerbated by the NHS’s general suspicion of management. Managers are often thought of as either useless bureaucrats or actively harmful parasites. And the desire of politicians to seek attractive headlines rather than effective action reinforces the problem (as I’ve argued here). The reality is that the NHS is so undermanaged that, some commentators put it (quoted on the flipchartfairytales blog), if it were a charity:

Our own position is that we wouldn’t want to support an organisation spending less than 5% of its total expenditure on good management. Without this we would lack confidence that the objectives of the organisation would be achieved.”

The NHS spends something like 30% of that metric.

It doesn’t fill me full of confidence that the latest plans of the leadership of the NHS are focussing on making the superficial accounts look better rather than making a case for the capital spending on long term improvement and the management capacity to identify the key requirements and ensure the spending delivers the improvements.

I’d rather see the NHS facing a major short term crisis than see it reinforce the worst habits that have led to its current position.

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