Hospital pledges raise capital concerns

Following the announcement this week of extra funding for NHS hospitals, Nigel Edwards takes a closer look at the accompanying Health Infrastructure Plan, and argues it leaves a number of important areas unresolved.

Blog post

Published: 02/10/2019

At the Conservative party conference this week, the Prime Minister announced extra capital funding for NHS hospitals, with six trusts to benefit from £2.7 billion of new spending. But the accompanying Infrastructure Plan, which provided the hook for the announcement, has received less attention.

Although the Plan talks about other types of investment, it has a focus on hospitals. It seems misaligned with the NHS Long Term Plan that is premised on the development of integrated systems of care – key parts of which are community and primary care, which do not feature in this latest pledge. This is in spite of over 40% of practices being in buildings that are not suitable for their current purpose, let alone the delivery of high-quality multidisciplinary population health. 

The document does provide some good analysis of some of the problems of the current capital regime. They include:

  • the high and rapidly growing level of backlog maintenance – valued at over £6 billion
  • the very bureaucratic and tortuous approvals processes
  • the lack of budgetary certainty, which makes it difficult to plan
  • the need to align with integrated care system plans in allocating capital.

It is striking that quite a lot of the analysis appears to be about how to make the Department of Health and Social Care’s job of controlling capital and living within the CDEL (capital departmental expenditure limits) easier. This seems to be consistent with a proposal from NHSE/I for powers to remove the power of foundation trust boards to spend capital. 

However, the paper offers no solution to the backlog maintenance problem, only partially addresses the issues it identifies and leaves a number of important areas unresolved, some of which are explored here. 

System planning and capital

The observation that the NHS increasingly expects plans to be developed on a system basis is correct, but the implications are not followed through. Capital spending will still be assessed on an organisational basis – presumably still based on current rules about the ratio of capital expenditure to turnover of the organisation, when the affordability and benefit to the local system might be the correct answer.

While a mechanism is needed to avoid the problems and poor decisions that were common when capital was regarded as a free good, the current system based on these market-type disciplines does not seem to work, and causes capital rationing that can get in the way of some of the bolder ideas that local systems could develop. This can have particular implications for the functionality of what is built.

Experience with PFI shows that squeezing the specification of new buildings to make them affordable often resulted in the removal of features that allowed future flexibility, and detracted from the experience of users of the building. One solution to this was to reduce bed numbers. In a number of cases, this was based on rather optimistic – and erroneous – assumptions about admission rates and lengths of stay, which may have contributed to the UK’s very high occupancy rates by OECD (Organisation for Economic Co-operation and Development) standards.   

General practice’s ability to pay off capital costs

Servicing the revenue costs of improved buildings has been a particular problem for primary care investment, and one of the reasons why investment has been relatively low. However, here too there are risks in allowing lots of individual decisions that are not informed by a more strategic vision. The logic of primary care networks and integrated care requires a different type of building and distribution of services than that generally provided by the developers of GP surgeries. The mechanisms to plan, design and build these will need rethinking, as decisions will need to be made collectively. 

This is not an argument for taking control of all these decisions away from individual organisations, but it is an argument for a much better approach to system planning based on good evidence.

Capital and service planning need major improvement

Much of the expertise in both service and capital planning has been eroded over the last 20 years. The long-term reliance on market mechanisms and the constant disruption of intermediate organisations has been a major driver here. The frequent outsourcing of planning and strategy to consultancies who do not have the time or the budget to transfer skills to their clients, and no opportunity for them to learn from mistakes, will also not have helped and has often meant that plans are not properly owned.

There are similar shortages of people who know about the development of really good modern buildings – the building notes that inform development are so out of date that they contain specifications for a ward smoking room.

The NHS has spent a small fortune on leadership development over the last decades – there now needs to be an investment in the disciplines for planning. In parallel, the approval, allocation and decision-making processes in this area need some serious attention – but from the point of view of improving local decision-making for patients rather than meeting the needs of the Department of Health and Social Care or party conferences. 

Suggested citation

Edwards N (2019) “Hospital pledges raise capital concerns”, Nuffield Trust comment.