Will East graduated from St John’s College, Oxford in 2005, and is training to become a barrister. He runs a political blog, John Wilkes, which focuses on civil liberties issues.
> Policy summary
Open the NHS up to new providers, competing on price
This would involve:
- Allowing private and voluntary sector providers to petition the NHS to let them provide better services
- Giving a statutory duty to primary care trusts, who commission NHS services, to consider each petition
- Changing the payment by results system, so that clinical providers can compete on price as well as quality.
> Policy explanation
Huge amounts of money have been pumped into the NHS over the last years - but there hasn't been an equivalent improvement in the service that patients receive. The health service is the third biggest employer in the world - after the Chinese state army and the Indian railways. But still it's nowhere near the best health service in the world. If we avoid reforming the NHS, then it will face a crisis: an increasingly elderly population and the higher costs of drugs and technology mean that the health service budget will be stretched more than ever before.
At the moment, we're failing to make use of the expertise that's out there among private and voluntary sector organisations, who have experience of providing healthcare efficiently and to a high standard. And, worst of all, there's often little or no stimulus for the hospitals, treatment centres and primary care clinics that make up the NHS to get any better. The government has done something about this, by introducing new providers into the health service - such as the privately run treatment centres that provide routine operations like cataract ops. But, it's nowhere near enough. Given recent form, and with the huge spending splurges of recent years drying out, the NHS will be facing a real financial crisis by the next election - and a Conservative government would need to do something about it.
The government's current reforms are building inefficiency into the system. The system of "payment by results" (by which hospitals are paid) is essentially a fixed price system, which makes hospitals compete on patients, but not on price. This means that there is no incentive for inefficient ways of working to be eradicated, and for costs to be driven down.
I propose that:
- Private and voluntary sector providers should be allowed to petition to run NHS services which are currently inefficient or poor in quality.
These organisations would petition primary care trusts, saying that they could run a service better than the present provider. Well performing NHS organisations, such as foundation trusts, would also be allowed to petition. If successful, they would then be able to take over that service. This principle could be applied to all NHS services, from back office work, such as payroll, to operations and general practice.
- Giving a statutory duty to primary care trusts, who commission NHS services, to consider each petition
There would need to be a statutory duty for primary care trusts, as commissioners of 75% of NHS services, to consider each petition they receive, examine the provider's proposals to see if they would provide better value for money and quality, and consult patients for their views. The PCTs would be required, at the same time, to announce that an offer has been made to take over the service in question, allowing other providers to also petition and try and beat the original offer.
At the end of this, the primary care trust would be required to make an objective assessment of the merits of the offers, and whether they would provide a better service than the existing provider. If so, the provider with the best offer would take over the service. Staff under employment with the incumbent provider would be transferred to the new provider initially if it so wishes. The new provider would have complete managerial power to reorganise the way the service is provided.
After a service has been taken over by a new provider, there would then be a moratorium on subsequent petitions for a period of 5 years. This would give more of an incentive for organisations to petition in the first place (as they would be guaranteed an income stream for 5 years if they won) and prevent constant petitioning from occurring.
- Changing payment by results, so that clinical providers can compete on price as well as quality.
At the moment, organisations which supply clinical services to the NHS (be they from the private, voluntary or public sector) are paid a fixed price known as the NHS tariff. The price paid for each type of operation is decided under the system and paid whenever the hospital provides that operation to a patient. This builds inefficiency into the system (see above). It would also prevent the idea of new providers petitioning to run services more efficiently, as these providers would only be able to compete on the basis of better quality services, not price.
I therefore propose that the fixed price system be abolished, in favour of a "benchmark" price that represents the average price of a particular operation across the NHS. New providers could offer to take over services, at prices that are lower than the benchmark price. Gradually, as these providers took over services, the "benchmark" price would come down, forcing incumbent providers like NHS hospital trusts to become more efficient. This would not be to the detriment of quality services for patients - as commissioners, when receiving petitions, would have to consider the effect of a new provider taking over on quality of service, as well as price.
> Political risks and opportunities
Opportunities:
- This would be a really radical solution to reforming the NHS, increasing efficiency for taxpayers and quality for patients
- It would be a solution which Labour would not be willing to adopt - making it a distinctive Conservative policy
- It would help pave the way for future tax cuts and the reduction of the £90bn plus health service budget
Risks:
- It would face a hail of protest from Labour and the unions, with accusations of "privatisation" and of the Conservative party returning to its "extremist" roots
- It would be a difficult policy to explain to voters, as Labour's policies on choice have been
> Questions for Conservativehome readers:
- Should patients be allowed to petition for new services to be provided, too?
- If so, what should be the mechanism for this?
- Should the moratorium period for subsequent petitions be longer than 5 years?
- What about services which are provided or commissioned on a national basis (eg the NHS IT programme)?
> Costs
Start-up costs
There would need to be extra employees within primary care trusts to consider the petitions in detail. As a policy affecting the whole of the healthcare system, the project would also require considerable resources to be devoted to it within the Department of Health and local NHS organisations. Having said that, there are already expert teams operating the payment by results system at national and local levels.
Running costs
The system would actually reduce the cost of the health service budget significantly, whilst improving quality for patients.
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