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Chris Skidmore MP: We’re rewarding failure in the NHS. We need to reward good, efficient care

Chris SkidmoreChris Skidmore is Member of Parliament for Kingswood and a member of the Education Select Committee. Follow Chris on Twitter.

Figures released this week revealed the huge scale of six figure salaries amongst NHS managers and consultants. More than 7,800 were paid more than £100,000, with a third of them on salaries larger than the Prime Minister’s.

In a time of public sector pay restraint these figures highlight the need for reform of pay on the NHS, particularly as they have increased at nearly half of the trusts which were surveyed. This contrasts sharply with the broader outlook on pay, which has changed more positively over the last year. From 2010/11 to 2011/12 total staff costs have fallen by £1.5 billion, with the cost per head reduced by an average of £215. 

Staff costs account for a huge proportion of NHS budgets. According to the King’s Fund, NHS spending on staff, at £42.8 billion, accounted for 64 per cent of the operating costs of Primary Care Trusts, NHS and foundation trusts. As we face up to an ageing population and fiscal reality this is clearly an area that should be targeted for savings, and it can’t be right that managers at the top are protected.

While no managers should be immune from the pay restraint being shown by the rest of the public sector, this is particularly true of those who have been part of failing trusts. Shockingly, the number of staff being paid more than £100,000 at Mid Staffordshire rose from 79 to 85 last year, in spite of the huge concern and scandal surrounding the trust which has now been put into administration by Monitor.

This reward for failure cannot be allowed to continue. We need a system where there are strong incentives to make sure that treatment is delivered in a way which is cost-effective and doesn’t come with a thick layer of expensive management.

One of the most worrying changes over the last year has been the fact that spending on care in hospitals is rising much faster than spending on primary care. From 2010/11 to 2011/12 there was a real terms increase in spending on hospital care of 1.2 per cent compared to a 1.2 per cent real terms decrease in spending on care in the primary setting. This is exactly the opposite of what needs to happen; where it is more efficient care should be shifted away from hospitals and delivered locally.

Payment by results, used to incentivise doctors to carry out care at a local level, could go a significant way towards making care more cost-effective and stripping out management. An example of how this has been used to deliver high quality care can be found in the US, where HealthCare Partners is paid a fixed fee by the Government Medicare programme to accept the risk of the care costs of an elderly patient. In order to avoid the high cost of hospitalising patients HealthCare Partners provides high-quality local care and preventative medicine which would be unaffordable if it were being paid on a per-procedure basis. The longer term benefit of high-quality local care is internalised by the system, and experienced by both patients and taxpayers.

The benefits have not gone completely ignored in the UK. Closer to home, the Torbay Care Trust – often associated with innovative practice – offered GP practices bonuses if they achieved targets which included reducing hospital referral rates.

They have, however, not been recognised in the same scale. The key to the effectiveness of the Medicare provision by HealthCare Partners is that all the financial risk is borne by the primary care provider. Within the British commissioning structure, larger rewards would need to be offered for reducing referrals in order to drive a similar improvement in primary-level provision.

Such a radical approach would tackle the root cause of high management spending: too much is being spent in the wrong care settings. With the right incentives we can deal with the unreasonably large sums being paid to managers, but more importantly we could also improve the quality and cost-effectiveness of care.


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