7th Report – Public expenditure on health and social care

The need for the NHS to achieve 4% year-on-year efficiency gains has been the dominant issue for the Committee throughout the Parliament as it has looked at expenditure issues. In this inquiry, evidence has indicated that the straightforward savings have been achieved and that little progress has been made on transformative change. The conclusions that we draw from this evidence are that:

•     the NHS has provided savings during the first two years of the programme, but that there is a question mark about how sustainable they are
•     the straightforward savings which are possible have now been made, and
•     the transformation of care that will be required to make the NHS sustainable in the future and able to deal with increasing demand has yet to take place.

On this final point, the key question, raised in evidence, is not ‘what has been saved?’ but rather ‘what has the money “saved” been spent on?’. That is currently not transparent, and more needs to be done to demonstrate what new activity has been possible because of the gains of the efficiency process.

Pay restraint

In our report last year the Committee said that “although pay restraint is undoubtedly key in the short term, it is neither prudent nor just to plan for sustainable efficiency on the basis that NHS pay continues to fall relative to pay elsewhere in the economy”. Pay restraint has contributed substantially to the efficiency programme but, as the Secretary of State told us, “we cannot constantly rely on the kind of pay restraint that we have had to date”. The Committee welcomes the Government’s recognition that the future of the health and care system cannot be built on an open-ended pay freeze. If the health and care system is to be a good employer (which it needs to be if it is to deliver high quality care) it needs to undertake transformative change in order to ensure that its committed staff are better able to meet the needs of users of its services.

Allocation of resources

The allocation of funds and the formulae used to do it will always be contentious. The Committee acknowledges that NHS England has set out its plans both transparently and in good faith. In a system in which there is a limited increase in funding, however, it becomes even more difficult to make changes to allocations than in times of plenty. The concept of target funding is as old as the NHS itself. Although the formula will continue to change, with the result that the day when all CCGs receive their target funding will never arrive, the Committee endorses the general approach while recognising that there will always be debate about how quickly actual funding should close the gap with target funding. It is clearly more difficult to make meaningful progress when the overall budget is largely stable in real terms.

Trusts and Foundation Trusts

This is the fourth report which the Committee has issued during this Parliament on the implications the Government’s spending plans for health and care services. In each report we have drawn attention to the urgency of transformative change of the care model if the needs of patients are to be met. The fact that the number of NHS Trusts and NHS Foundation Trusts reporting underlying deficits continues to grow represents evidence that the pace of change has not been sufficient to meet the challenge.

Integration of health and social care

The problem at the heart of the desire for greater integration between health and social care is that the NHS, although coping with a static budget for the first time in its history, is better funded than social care. Social care authorities are facing reduced budgets and rising demand. Improved integration in these circumstances therefore requires a switch in funding from health services, particularly those in the acute sector, towards community-based services and social care. The challenge is to achieve this without destabilising existing services so that they can no longer function effectively before new arrangements are in place, leading to gaps in care for patients.

The Committee welcomes the emphasis which the Government is now putting on service integration, both within healthcare services and between healthcare and social care. The Committee also recognises the logic of creating the Better Care Fund to provide and incentive for health and social care authorities to cooperate in new ways and facilitate the transfer of resources into community services with is a necessary part of the change process.

The Committee remains concerned, however, that the pressures on available resources across the whole system, but particularly in social care, are now much greater than they were a few years ago, with the result that successful integration of high-quality health and care services represents a substantial and growing challenge. We continue to believe that fragmented commissioning structures significantly inhibit the growth of truly integrated services. We have recommended in previous reports that Health and Wellbeing Boards (HWBs) should be encouraged to develop their role to provide an integrated commissioners’ view of the transformative change which is necessary in the health and care system. We repeat that recommendation in this report and further recommend that NHS England and the Local Government Association should commission a review to establish the best practice method of consolidating the commissioning process through HWBs with minimum disruption of ongoing activity.

The Committee also repeats the recommendation it made last year that the current level of real terms funding for social care should be ring-fenced. As we said in our report last year, this would “ensure that resources were no longer seen as ‘belonging’ to a particular part of the system but to the local health and care system as a whole”. We believe that in the absence of stronger commissioners and a commitment to ring-fenced real terms funding for health and social care, there is a serious risk to both the quality and availability of care services to vulnerable people in the years ahead.

Reconfiguration

Integration will also require reconfiguration of services. Advocating service integration without recognising that the consequence of integration is reconfiguration of acute services is simply dishonest. The case for acute service reconfiguration is often presented as an economic necessity, but that is only half the story. It is certainly true that economic pressures mean that changes in acute services are necessary if the health and care system is to meet the demands placed upon it. The argument for reconfiguration, leading to reduced emphasis on acute services, is however supported by considerations of clinical quality as well as economic pressure. Our system currently places insufficient emphasis on identifying early symptoms and supporting normal life, with the result that it has provide reactive acute care to patients whose condition should never have been allowed to become acute. The challenge facing NHS policy makers, at both national and local level, is to explain this underlying policy requirement to a sceptical public.

Changes which lead to the closure of hospitals or remove services from hospitals are notoriously controversial with local communities. Too often this is because the first a community hears about proposed changes is when the acute facility is proposed for closure. If these proposals are notoriously controversial, it is too often because the case for change is notoriously badly made.

Part of the benefit of involving Health and Wellbeing Boards in the commissioning decisions about health and care, with a single overview for a given community, should be to engage the local professional and lay communities in a greater understanding of the care quality issues which underlie the case for service reconfiguration, as well as the economic issues involved.

System leadership

It is unclear who will take the lead on system change on a local or regional level. The Committee was told that with more organisations in the system, none of which are big enough or influential enough to shape the system, strategic change will have to be brought about through collaboration “which, history suggests, tends to be less effective”. There is a real danger that, without a body which can take charge of decisions about reconfiguration and integration of services, change which needs to be made to maintain and improve services will not happen. The evidence we heard in this inquiry confirms to us that, in the present system, this is the most viable approach to ensure continuity of and improvement in services.

Health and Wellbeing Boards were established by Parliament to enable commissioners to take a view across the whole of a local health and care economy. In the light of the urgent need to increase the pace and scale of service reconfiguration in the health and care system, the Committee repeats the recommendation it has made in earlier reports that the role of HWBs needs to develop to allow them to become effective commissioners of joined-up health and care services.

Competition

There was a consensus amongst witnesses that the most significant issue in relation to competition was the potential extended delays to mergers designed to improve quality of service for patients. Witnesses from Monitor, the Local Government Association and the NHS Confederation all agreed that in competition matters the essential requirement was that decisions on mergers and other competition issues should be taken without undue delay. We were told that “whatever process we have in place needs to both assure competition and act speedily in the interests of the system”.

For reasons of both financial viability and quality of service, the OFT and Competition Commission need to ensure that their decisions on mergers are reached as quickly as possible. They should also have regard to the principle legislated for in the Act in respect of Monitor that it must allow ‘provision of services in an integrated way’ where this improves quality of provision or reduces inequalities in relation to access to services or to outcomes.

In September 2013, Sir David Nicholson was quoted as saying that competition was not working to improve quality from patients and that a change in the law might be needed to ensure the intent of policy was implemented. It is clearly significant that less than six months after the Act came into force, the Chief Executive of NHS England has said in terms that this key aspect of the Act is not working as had been intended and that competition rules are impeding changes that would provide a better service to patients. We have also heard that some commissioners are concerned by uncertainty about those provisions, which is inhibiting the way in which they commission services. This is clearly an unsatisfactory situation.

The Secretary of State told us that he did not consider that there was a case as yet for seeking to change competition law. The Committee is concerned, however, that in the case of Bournemouth and Poole the competition authorities intervened to obstruct a proposed service reconfiguration on competition grounds without being able to substitute another proposal to deliver service change. The Committee has stated its view many times that there needs to be an increase in the pace and scale of service change. The Committee recommends that the Government should examine the background to the Bournemouth and Poole proposal in order to ensure that unnecessary impediments to necessary change are removed.

“Cherry-picking”

Another issue that we discussed in evidence was the suggestion that some providers select patients whose treatment is straightforward, leaving others with more complex needs to be treated by the default NHS provider on the same tariff. The concern is twofold:

·  Firstly, that the rigidity of the tariff system leads some providers to overpaid, and others to be underpaid, with potentially serious consequences for the both the availability and quality of patient care; and

·  Secondly, that the transfer of care of some patients to other treatment centres may undermine the viability of the original unit.

It is important that payments to providers reflect the costs of treatment, and that the payments system is able to distinguish accurately between different types of case. It should be a priority for NHS England and Monitor to work to develop a payments system which reflects this requirement.