Lesson 5: Don’t overrate structural reorganisation

Time and again, structural change has been favoured by politicians and leaders hoping to change English health systems for the better. Mark Dayan takes a look at recent high-profile reorganisations and argues that they often have a more limited effect than their architects might hope.

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Published: 16/10/2018

If staffing and financing have sometimes been changed less than might be expected to support NHS reforms, structural reorganisation – in the sense of changing the existence, duties or powers of NHS bodies – has been the lever policymakers pull again and again. Depending on exactly how big a change has to be to count as a reorganisation, the last twenty years have seen at least ten.

It has been used to try to achieve a wide range of policy goals including introducing more market forces, getting rid of them again, making hospitals more accountable, and making the health service work better with social care.

The Health and Social Care Act (2012)
During his time in opposition, Conservative health spokesman Andrew Lansley hoped to build on New Labour’s market-based reforms by putting GPs in charge of buying care and taking the Department of Health out of decisions to create a competitive, ‘self-improving’ system.

As the Tories formed a coalition with the Liberal Democrats in 2010 with Lansley as Health Secretary, these plans were amended to create an even more radical Bill that abolished the main NHS regional and local bodies – strategic health authorities and primary care trusts.

Following great controversy, the legislation was ‘paused’ in 2011 while a ‘Future Forum’ of eminent figures looked over the proposals. They made changes including limiting how free GPs were to decide how they purchased care and stopping the regulator Monitor from having a duty to promote competition. The result was an Act that, despite very wide-ranging changes, created something far from the purist free market envisioned by its creator.

A recent example is the major overhaul brought about by the 2012 Health and Social Care Act. The introduction of Sustainability and Transformation Partnerships (STPs) last year to bring together health and social care bodies at a regional level was also a form of reorganisation, although it had no legislative footing. Proposals for more are frequently discussed. The official legal duties and structures of the Act are now quite divorced from the co-operative way in which local NHS bodies are now expected to behave (Lamb, 2016). The Labour Party is committed to a repeal of the Health and Social Care Act and a reorganisation back to what existed before (Farley, 2018; Stewart, 2016).

Remember structural reorganisation carries costs

Compared to increasing funding or staffing, one possible attraction of structural reorganisation is that it is a lever for change that does not simply involve paying for more from the Treasury pocketbook. There is often a hope that it will cut the costs of ‘bureaucracy’. But history tells us that it too has real costs which should not be underestimated. As the most recent major legislative reorganisation in England, the Health and Social Care Act of 2012 provides a series of examples.

The direct financial cost was estimated at £1.5 billion, primarily made up of paying for redundancies, office space and IT. However, a National Audit Office (2013) review found this was based on self-reported data which looked impossible in some cases. It also failed to take into account the costs of staff time and several other sources of extra spending, meaning the real figure was probably higher.

The Department of Health believed this £1.5 billion would be counterbalanced by savings of £1 billion a year in lower administration costs. However, the National Audit Office (2013) suggested this had been inflated due to an assumption that administrative costs would have otherwise risen – despite the fact that they had actually been falling.

Data since the Act throw further doubt on these savings. The number of NHS managers fell around the reforms, from around 39,000 in 2010 to 34,000 in 2013. However, this drop started well before the Act was passed (Walshe, 2014). In fact, after the reforms were fully implemented in 2013 the number of managers began to rebound: today there are once again around 39,000 in NHS trusts, regulators and commissioners (NHS Digital, 2018). Meanwhile, the years of the reforms saw spending on management consultants spike to nearly £600 million a year, having earlier been cut to below £200 million (Department of Health, 2011; 2013).

Perhaps even more important was the opportunity cost: the loss of leadership and staff time to focus on other problems. Looking back, The King’s Fund concluded: “it seems likely that the massive organisational changes that resulted from the reforms contributed to widespread financial distress and failure to hit key targets for patient care” (Ham and others, 2015).

A study of an ambitious NHS transformation programme in the North East of England, which imported new management ideas to try to improve safety and efficiency across all NHS bodies, became a chronicle of the local impact. The authors reported that the unexpected reforms “seriously disrupted” progress, which was slowed or halted at 10 of the 14 trusts they looked at (Hunter and others, 2014).

The experience of the Health and Social Care Act is a lesson to weigh any similarly sized reorganisations against a cost likely to be measured in hundreds of millions of pounds, and substantially slower progress against important health service aims.

Moreover, the mechanisms which cause this do not appear only to be relevant to root-and-branch legislative overhauls. Nearly all the main sources of costs – distraction, the call on staff time, the cost of hiring and firing, consultants and IT – seem likely to be repeated on different scales in smaller changes without legislation.

Don’t overestimate the difference changing NHS structures actually makes

Before the 2012 Health and Social Care Act, two earlier waves of reorganisation aimed to bring market forces and local purchasing power to bear on providers of NHS care. Both were controversial and played a dominant role in national debate around the NHS at the time. Yet studies and reviews have tended to conclude that they had less impact on the delivery of care than expected.

The reforms of the 1990 NHS and Community Care Act first brought an ‘internal market’ into the English NHS. On one side of the market, services like hospitals and mental health support were put under the control of newly created ‘NHS trusts’ which were to operate somewhat independently and compete to provide care. On the other side, local health authorities and individual ‘fundholding’ GP practices were given the power and duty to buy care from these trusts and others on behalf of patients. The reforms were meant to deliver efficiency, quality of care, consistently shorter waiting times and a “patient-friendly and patient-led service” (Clarke, 1989).

However, a wide-ranging review of evidence by Le Grand and others (1998) found that “despite some changes in culture, measurable changes were small and perhaps not as great as was predicted (or feared)”. The authors suggest that this might partly have been because other forces outweighed the market incentives the reorganisation created. The NHS retained its tradition of centralised, hierarchical rule, which limited the scale of decisions that were really left to the market. For example, health authorities as purchasers were instructed to bail out hospitals in financial difficulty. Boom and bust in funding appeared to drive waiting times and satisfaction more than the relatively subtle effects of changing the organisational make-up (Le Grand and others, 1998).

Fundamental forces can drown out your clever redesign

The New Labour government initially dialled back the internal market, but from 2000 they started their own reorganisations to reintroduce it. Primary care trusts took over the role of local purchasing, now rebadged ‘commissioning’, and NHS trusts were encouraged to move to a new and even more autonomous ‘foundation trust’ model. These structural changes formed part of a much wider set of changes which aimed to strengthen market forces and reduce waiting times (Mays and others, 2011).

Reviews at the end of this period suggested the impact of these structural changes was subtle at best. On the purchasing side, The King’s Fund noted “a consistent finding that NHS commissioning has had a limited impact in shifting services out of hospital, reducing avoidable use of hospitals, and developing new forms of care” (Smith and Curry, 2011).

Likewise, a Nuffield Trust study found that commissioners had struggled to bring about new or reshaped services. Reasons for this included a wariness of destabilising hospitals, a lack of data (or lack of awareness of data), and lack of funding. Towards the end of this period, the reorganisation of the 2012 Health and Social Care Act added to the difficulties of getting local areas to move towards a strategic vision (Smith and others, 2013).

This period did indeed see dramatic falls in waiting times, and rising public satisfaction. But academic and think tank studies have tended to highlight centrally enforced targets, financial incentives and sharp rises in spending and staff as the most important factors, rather than structural change (Ham, 2010; Mays and Dixon, 2011).

On the other side of New Labour’s reforms, foundation trusts were created with the aim of making hospitals and other local services radically more independent and accountable to local people. They had new powers to accumulate and spend capital and to vary workforce pay and conditions; they were governed by an arm’s-length regulator instead of the Department of Health; and boards of governors from local communities were appointed to oversee them locally (Allen and Jones, 2011).

But these rights have been undermined by national decisions and policies which reassert central control and treat foundation trusts in exactly the same way as other trusts. Secretaries of State continued to intervene in key decisions (Timmins, 2018) and the recent introduction of control totals meant central bodies signing off on financial plans. Encoding this change into NHS structures, the independent regulator of foundation trusts, Monitor, was merged with the regulator of other trusts to form NHS Improvement in 2016 (Clover, 2015).

Meanwhile, foundation trusts had never made much use of their notional power to vary pay and conditions, perhaps because of the NHS’s strong tradition of national pay bargaining and the political implications of challenging this (Allen and Jones, 2011). Studies found that governors from local communities often felt they struggled to use their skills and experience to hold trusts to account (Allen and others, 2012).

In hindsight, the introduction of the structures of the internal market seems to have led to only fairly limited actual changes at the front line. So those in favour of reversing these changes should think realistically about the impact this is likely to make in turn.

More broadly, changing the shape, duties and powers of organisations has often turned out to be a policy lever of limited strength compared to funding and financial incentives; targets and diktats from the centre; culture and behaviours; and staffing. Where structural changes clash with these they have often been on the losing side. This suggests there should be a premium on making sure structural reorganisation, where it is necessary, pulls in line with more fundamental forces.

References

Allen P and Jones L (2011) ‘Diversity of health care providers’ in Understanding New Labour’s market reforms of the English NHS. The King’s Fund. https://www.kingsfund.org.uk/sites/default/files/chapter-2-diversity-health-care-providers-new-labours-market-reforms-sept11.pdf

Allen P, Keen J, Wright J, Dempster P, Townsend J, Hutchings A, Street A and Verzulli (2012), ‘Investigating the governance of autonomous public hospitals in England: multi-site case study of NHS foundation trusts’, Journal of Health Services Research & Policy 17 (2), 94-100

Clarke K (1989) ‘Working for patients’. House of Commons Hansard excerpt. https://hansard.parliament.uk/Commons/1989-05-11/debates/2dddfa50-0123-4cd9-bfe0-da2f297076f5/WorkingForPatients

Clover B (2015) ‘Monitor/TDA merged body to be called NHS Improvement’, HSJ, 16 July. www.hsj.co.uk/home/monitor/tda-merged-body-to-be-called-nhsimprovement/5087954.article

Department of Health (2008) High quality care for all. NHS Next Stage Review Final Report.

Department of Health (2011) Annual report and accounts 2010-11. TSO. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/215448/dh_130154.pdf

Department of Health (2013) Annual report and accounts 2012-13. TSO. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/229996/Annual_Report.pdf

Farley H (2018) ‘Labour to overhaul Tories' NHS structural reforms, says Jon Ashworth’, Politics Home, 2 June.
https://www.politicshome.com/news/uk/news/95639/labour-overhaul-tories-nhs-structural-reforms-says-jon-ashworth  

Ham C (2010) ‘Improving performance in the English National Health Service’, Eurohealth 16(3). www.euro.who.int/__data/assets/pdf_file/0007/129436/Eurohealth16_3.pdf

Ham C, Baird B, Gregory S, Jabbal J and Alderwick H (2015) The NHS under the coalition government. Part one: NHS reform. The King’s Fund. https://www.kingsfund.org.uk/sites/default/files/field/field_publication_file/the-nhs-under-the-coalition-government-part-one-nhs-reform.pdf

Hunter DJ, Erskine J, Hicks C, McGovern T, Small S, Lugsden E, Whitty P, Steen IN and Eccles M (2014) ‘A mixed-methods evaluation of transformational change in NHS North East’, Health Services and Delivery Research, No. 2.47. www.ncbi.nlm.nih.gov/books/NBK263705/

Lamb, S (2016) Does the NHS need a new law? Nuffield Trust www.nuffieldtrust.org.uk/news-item/does-the-nhs-need-a-new-law   

Le Grand J, Mays N and Mulligan J (1998) Learning from the NHS internal market. The King’s Fund.

Mays N and Dixon A (2011) ‘Assessing and explaining the impact of New Labour’s market reforms’, in Understanding New Labour’s market reforms of the English NHS. The King’s Fund. www.nhshistory.net/New_Labour's_Market_Reforms.pdf

Mays N, Dixon A and Jones L (2011) ‘Return to the market: objectives and evolution of New Labour’s market reforms’, in Understanding New Labour’s market reforms of the English NHS. The King’s Fund. https://www.kingsfund.org.uk/sites/default/files/chapter-1-Return-to-the-market-objectives-evolution-new-labours-market-reforms-sept11.pdf

National Audit Office (2013) Managing the transition to the reformed health system. Report by the Comptroller and Auditor General. https://www.nao.org.uk/wp-content/uploads/2013/07/10175-001-Managing-the-transition-to-the-reformed-health-system.pdf

NHS Digital (2018) NHS Workforce Statistics - March 2018. Official statistics. https://digital.nhs.uk/data-and-information/publications/statistical/nhs-workforce-statistics/nhs-workforce-statistics---march-2018-provisional-statistics  

Smith J and Curry N (2011) ‘Commissioning’, in Understanding New Labour’s market reforms of the English NHS. The King’s Fund.

Smith J, Porter A, Shaw S, Rosen R, Blunt I and Mays N (2013) Commissioning high-quality care for people with long-term conditions. Summary, Nuffield Trust. https://www.nuffieldtrust.org.uk/files/2017-01/commissioning-high-quality-care-for-long-term-conditions-web-final.pdf

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