2 A new start

what counts is what works Key themes the third way keeping what works discarding what has failed The third way 2.1 In paving the way for the new NHS the Government is committed to building on what has worked, but discarding what has failed. There will be no return to the old centralised command and control systems of the 1970s. That approach stifled innovation and put the needs of institutions ahead of the needs of patients. But nor will there be a continuation of the divisive internal market system of the 1990s. That approach which was intended to make the NHS more efficient ended up fragmenting decision-making and distorting incentives to such an extent that unfairness and bureaucracy became its defining features. 2.2 Instead there will be a 'third way' of running the NHS - a system based on partnership and driven by performance. It will go with the grain of recent efforts by NHS staff to overcome the obstacles of the internal market. Increasingly those working in primary care, NHS Trusts and Health Authorities have tried to move away from outright competition towards a more collaborative approach. Inevitably, however, these efforts have been only partially successful and their benefits have not as yet been extended to patients in all parts of the country. 2.3 This White Paper will put that right. It builds on the extensive discussions we have held with a wide range of NHS staff and organisations. It will develop this more collaborative approach into a new system for the whole NHS. It will neither be the model from the late 1970s nor the model from the early 1990s. It will be a new model for a new century. Six key priciples 2.4 Six important principles underlie the changes we are now proposing: first, to renew the NHS as a genuinely national service. Patients will get fair access to consistently high quality, prompt and accessible services right across the country but second, to make the delivery of healthcare against these new national standards a matter of local responsibility. Local doctors and nurses who are in the best position to know what patients need will be in the driving seat in shaping services third, to get the NHS to work in partnership. By breaking down organisational barriers and forging stronger links with Local Authorities, the needs of the patient will be put at the centre of the care process but fourth, to drive efficiency through a more rigorous approach to performance and by cutting bureaucracy, so that every pound in the NHS is spent to maximise the care for patients fifth, to shift the focus onto quality of care so that excellence is guaranteed to all patients, and quality becomes the driving force for decision-making at every level of the service and sixth, to rebuild public confidence in the NHS as a public service, accountable to patients, open to the public and shaped by their views. Keeping what works 2.5 There are some sound foundations on which the new NHS can be built. Not everything about the old system was bad. This Government believes that what counts is what works. If something is working effectively then it should not be discarded purely for the sake of it. The new system will go with the grain of the best of these developments. 2.6 The Government will retain the separation between the planning of hospital care and its provision. This is the best way to put into practice the new emphasis on improving health and on meeting the healthcare needs of the whole community. By empowering local doctors, nurses and Health Authorities to plan services we will ensure that the local NHS is built around the needs of patients. Hospitals and other agencies providing services will have a hand in shaping those plans but their primary duty will be to meet patients' requirements for high quality and easily accessible services. The needs of patients not the needs of institutions will be at the heart of the new NHS. 2.7 The Government will also build on the increasingly important role of primary care in the NHS. Most of the contact that patients have with the NHS is through a primary care professional such as a community nurse or a family doctor. They are best placed to understand their patients' needs as a whole and to identify ways of making local services more responsive. Family doctors who havebeen involved in commissioning services (either as fundholders, or through multifunds, locality commissioning or the total purchasing model) have welcomed the chance to influence the use of resources to improve patient care. The Government wishes to build on these approaches, ensuring that all patients, rather than just some, are able to benefit. Primary and Community Services Most people look first to their family doctor or local pharmacist for advice on health matters. Dentists, optometrists and ophthalmic medical practitioners also provide essential care to meet everyday needs. Community health service staff offer a range of services for people wherever they are, in their homes, schools, clinics and even in the streets. These services include health visiting, school nursing, chiropody, occupational, speech and language therapy. Services such as district nursing, community psychiatric nursing and physiotherapy can enable people with short or long term disability to be cared for in their own homes. Other specialist staff such as midwives provide care across hospital and community settings. 2.8 Finally, the Government recognises the intrinsic strength of decentralising responsibility for operational management. By giving NHS Trusts control over key decisions they can improve local services for patients. The Government will build on this principle and let NHS Trusts help shape the locally agreed framework which will determine how NHS services develop. In the future the approach will be interdependence rather than independence. Discarding what has failed 2.9 The internal market was a misconceived attempt to tackle the pressures facing the NHS. It has been an obstacle to the necessary modernisation of the health service. It created more problems than it solved. That is why the Government is abolishing it. Ending fragmentation 2.10 The internal market split responsibility for planning, funding and delivering healthcare between 100 Health Authorities, around 3,500 GP fundholders (representing half of GP practices) and over 400 NHS Trusts. There was little strategic coordination. A fragmented NHS has been poorly placed to tackle the crucial issue of better integration across health and social care. People with multiple needs have found themselves passed from pillar to post inside a system in which individual organisations were forced to work to their own agendas rather than the needs of individual patients. 2.11 To overcome this fragmentation, in the new NHS all those charged with planning and providing health and social care services for patients will work to a jointly agreed local Health Improvement Programme. This will govern the actions of all the parts of the local NHS to ensure consistency and coordination. It will also make clear the responsibilities of the NHS and local authorities for working together to improve health.

Health Improvement Programme An action programme led by the Health Authority to improve health and healthcare locally will involve NHS Trusts, Primary Care Groups and other primary care professionals, working in partnership with the local authority and other local interests. See chapter 4. Ending unfairness 2.12 The internal market created competition for patients. In the process it created unfairness for patients. Some family doctors were able to get a better deal for their patients, for financial rather than clinical reasons. Staff morale has been eroded by an emphasis on competitive values, at odds with the ethos of fairness that is intrinsic to the NHS and its professions. Hospital clinicians have felt disempowered as they have been deliberately pitted against each other and against primary care. The family doctor community has been divided in two, almost equally split between GP fundholders and non-fundholders. 2.13 In the new NHS patients will be treated according to need and need alone. Cooperation will replace competition. GPs and community nurses will work together in Primary Care Groups. Hospital clinicians will have a say in developing local Health Improvement Programmes. Ending distortion 2.14 The market forced NHS organisations to compete against each other even when it would have made better sense to cooperate. Some were unwilling to share best practice that might benefit a wider range of patients in case they forfeited competitive advantage. Quality has been at best variable. 2.15 In the new NHS, there will be new mechanisms to share best practice so that it becomes available to patients wherever they live. A new national performance framework for ensuring high performance and quality will, over time, tackle variable standards of service. Ending inefficiency 2.16 Under the internal market, the Purchaser Efficiency Index was the only real measure of performance. But it distorted priorities and - to the universal frustration of NHS staff - institutionalised perverse incentives which got in the way of providing efficient, effective, high quality services. In addition, budgets for emergency care, waiting list surgery and drug treatments were artificially divided, reducing flexibility. 2.17 In the new NHS, the Purchaser Efficiency Index will be replaced by better measures of real efficiency as part of a broader set of performance measures. They will assess the NHS against the things which count most for patients, including the costs and results of treatment and care. National reference costs will allow NHS Trusts to benchmark their performance. And partitioned budgets will be unified so that total resources can be matched locally against the needs of patients, ensuring more efficient and appropriate care. Internal market bureaucracy Evidence shows that: one fundholder with a contract worth £150,000 received 1,000 pieces of paper per year a Health Authority in the south processed 60,000 invoices per year representing 8% of its healthcare budget an inner city Trust contracted with over 900 funds and sent out 40,000 invoices per year Ending bureaucracy 2.18 The internal market sent administrative costs soaring to unsustainable levels. In recent years effort and resources have been diverted from improving patient services. With so many players on the field, transaction costs in the NHS inevitably spiralled. 2.19 This White Paper will cap management costs and cut the number of commissioning bodies from around 3,600 to as few as 500. The Government has already taken steps to reduce transaction costs and along with the changes in this White Paper £1 billion in administration will be saved over the lifetime of this Parliament for investment in patient services. Ending instability 2.20 The internal market forced NHS Trusts to compete for contracts that at best lasted a year and at worst were agreed on a day-to-day basis. Such short-term instability placed a constant focus on shoring up the status quo rather than creating the space to plan and implement major improvement. 2.21 This White Paper will scrap annual contracts. Instead, the new NHS will work on the basis of longer-term three and in some cases five year funding agreements that will allow clinicians and managers to focus on ways of improving care. Unacceptable variations At its best, the NHS leads the world. But the degree of local variation means that individual patients cannot be sure of receiving that best: the death rate from coronary heart disease in people younger than 65 is almost three times higher in Manchester than in West Surrey emergency readmissions to hospital are 70% higher in one area than in another the proportion of women aged 25-64 screened for cervical cancer varies from 67% to 93% in different areas the number of hip replacements in over 65s varies from 10 to 51 per 10,000 of the population the number of outpatients seen within 13 weeks of written GP referral varies from 71% to 98% the number of outpatients admitted for elective treatment who have waited less than 3 months since a decision to admit varies from 56% to 82% the percentage of drugs prescribed generically varies from below 50% to almost 70% the percentage of consultant episodes carried out as day cases varies from below 50% to almost 70%. Ending secrecy 2.22 Under the internal market hospitals became 'self-governing trusts' run as businesses, focused on finance, and required to compete with each other for short-term contracts. Increasingly NHS Trust Boards meeting in secret made it hard for local people to find out what their local hospital was planning and how it was performing. GP fundholders could make significant purchasing decisions without reference to the local community. 2.23 In the new NHS, all NHS Trusts will be required to open up their board meetings to the public. They will have new statutory duties on quality and on working in partnership with others. Comparative information on NHS Trust performance will be published. Openness and public involvement will be key features of all parts of the new NHS. 2.24 These developments will place the traditional values of the NHS into a modern setting. They will be backed by the Government's commitment to extra investment in the NHS, year on year. But that extra money has to produce major gains in quality and efficiency. Otherwise the health service will simply not keep pace with the needs of the public it is there to serve. The NHS has to make better use of its resources to ensure that it delivers better, more responsive services for patients everywhere. It has to share best practice and eliminate poor performance so that patients have a guarantee of excellence. The next chapter describes how quality and efficiency will be instilled in all parts of the NHS. How are we replacing the Internal Market with Intergrated Care Internal Market Fragmented responsibility between 4,000 NHS bodies. Little strategic planning. Patients passed from pillar to post Competition between hospitals. Some GPs get better service for their patients at the expense of others. Hospital clinicians disempowered Competition prevented sharing of best practice, to protect 'competitive advantage'. Variable quality Perverse incentives of Efficiency Index, distorting priorities, and getting in the way of real efficiency, effectiveness and quality. Artificially partitioned budgets Soaring administrative costs, diverting effort from improving patient services. High numbers of invoices and high transaction costs Short term contracts, focusing on cost and volume. Incentive on each NHS Trust to lever up volume to meet financial targets rather than work across organisational boundaries NHS Trusts run as secretive commercial businesses. Unrepresentative boards. Principal legal duty on finance Integrated Care Health Improvement Programmes jointly agreed by all who are charged with planning or providing health and social care Patients treated according to need, not who their GP is, or where they live. Co-operation will replace competition. Hospital clinicians involved New mechanisms to share best practice. New performance framework to tackle variable standards of quality Efficiency Index replaced by new reference costs. Broader set of performance measures. Budgets unified for maximum flexibility and efficiency Management costs capped. Number of commissioning bodies cut from 3,600 to 500. Transaction costs cut Longer term service agreements linked to quality improvements. NHS Trusts share responsibility for appropriate service usage NHS Trusts with representative boards and end to secrecy. New legal duties on quality and partnership

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Prepared 8 December 1997