A glazier or a window breaker?

Secretaries of State are either ‘glaziers or window breakers’. Such was one of the more printable conclusions by one of 10 former Secretaries of State for Health interviewed in a rollicking read by Nick Timmins out next week. Looking at the election result plus the choice of Jeremy Hunt to remain as Secretary of State for Health, and you might be forgiven for thinking that the next two years will mean ‘glazier’. That may not be the case.

While the full audited figures won’t be released until July, we know NHS providers ended 14/15 in deficit – probably around £823m. For 15/16 the acute sector has set a deficit budget.

What isn’t new, as a former senior Department of Health official remarked recently, is that ‘when hospitals phone up to say they are running out of cash and can’t pay their staff, there is little option but to hand out more cash’. What is new is the scale – for example 75% of acute hospitals ended the year in the red. Unlike businesses, NHS providers have less scope to reduce their margins and intentionally downsize when in trouble.

The need to get NHS finances under control must be on top of Jeremy Hunt’s in tray. But unlike the case in 2006/7 when finances were obviously adrift, the sheer scale this time points to widespread and systemic issues, not one or two sites or regions with poor financial management.

The root cause, of course, is twin. First, the settlement of on average 0.9% real terms (adjusted for inflation) per annum in the life of the last parliament relative to the long run 3.7% (lest we forget, the 0.9% is lower than most other EU countries, save those having IMF intervention). Second, the lack of investment in primary care, social care and other parts of the public sector, which results in downstream ill health and thus cost for hospitals (read our blog this month by Izzi Seccombe of the LGA on this).

Be not too comforted by the election pledge by the Conservatives of £8bn per year by 2020/21 for the NHS in England. The fine print qualifier was ‘as economic growth allows’. And there were no promises on the amount of real terms growth in the years before 2020/21, nor on a protected ringfence around any future increases.

We might of course be saved by economic growth – current predictions to 2020 are at best 2.1% per annum (IMF) or 2.3%-2.5% per annum (OBR). On this basis, even after deficit reduction, it seems unlikely that 3-4% real terms growth per annum for the NHS will be the norm. More pertinently, labour productivity within the wider economy is limp – about 16% below pre-2008 trends with the Bank of England’s analysts able to explain at most half of this gap.

For the NHS, measures of productivity are notoriously unsophisticated, as well as volatile. But recent trends show NHS trusts as having less than half of the target of 2-3% productivity gains needed by 2020/21. In part this was due to trusts busting budgets over the last two years by hiring clinical staff (mainly nurses) so as not to lapse on quality.

Look closer at trusts for the past two years and a) there is a lot of variation between them in productivity rates and b) few bucked their own trend rate. Why? There is probably no single reason. I am reminded of the work of Bloom, Van Reenan and colleagues on quality and productivity in hospitals internationally – management matters.

So while finances dip, the temptation for Jeremy Hunt might be to be a window-breaker early in the new parliament. Surely some bold support of smart decisions on tariff, pay, some service reconfigurations, procurement, incentives for 7-day working, as well as securing extra cash, will be crucial? But most fundamentally, glazier-like activity is needed to move the NHS towards the Five year forward view – and to support an intelligent and explicit strategy to boost elusive productivity growth.

What might be some elements of this strategy? The limits of stage 1 – cutting obvious fat – have been reached, although as Lord Carter is showing there is still a way to go before procurement achieves best value.

Stage 2 might be making existing (expensive) services more productive using quality improvement processes, flow, reengineering and so on, and a priority must be the emergency care pathway. The NHS Trust Development Authority has recognised this and is letting five trusts over five years implement the principles of Toyota Production System under a contract for £9m. We at the Health Foundation have form here, having funded several ‘flow’ initiatives over the last five years.

Progress requires hard, detailed and data-informed work on clinical pathways by clinicians, and testing change. And there is no easy ‘cut and paste’ to spread. But evidence on impact is promising, and collective effort – such as through collaboratives or twinning – may help speed progress, as is being tried across Scotland and Wales. Other ingredients to success in stage 2 must include unblocking the data pipeline, and a serious search for opportunities for automation that reduces the need for staff.

Stage 3 is developing new models of care, acknowledging that many solutions to challenges in the acute sector lie in primary, community and social care and wider. Here the question is not what models to encourage but how to speed up change. Cool, detailed implementation and information-driven change are key, but more than anything leadership, trust and teamwork involving patients – context plays a crucial role in making progress. The NHS can be prodded in this direction through incentives, but speed will require more direct support of those wanting to make change. Why might more devolution eg to Manchester help? Not just the opportunity to pool health and social care and other budgets in new ways, but because the extent of tacit local knowledge can allow bolder decisions to be made.

Stage 4 is to reorient the NHS towards prevention. And there have been some well-intentioned steps made in this area to improve public health, such as the 2010 white paper Healthy Lives, Healthy People. But clearly a lot more thinking is needed here, not least weaning commissioners off the usual straight return on investment calculation that, for health, discourages investment for the future.

So, a glazier or a window breaker – which do we need? A bit of both. A careful glazier is needed who draws in a wide range of voices and supports such a strategy, and avoids politically tempting but unhelpful distractions. But with some elements of the window breaker, as I mentioned earlier, to help with the financial and productivity challenges. Some of our grant holders have given us some starters for ten – but what do you think?

Jennifer is Chief Executive at the Health Foundation.