The health crunch: can the NHS flourish in leaner times?

pharmafile | March 22, 2010 | Feature | |  NHS, NHS funding, qof 

The economic downturn which hit the UK in 2009 coincided with a pre-planned slowing down in the investment in the National Health Service, stirring up debate about how the country can continue to improve its health services and find cost efficiencies.

In June last year, NHS chief executive David Nicholson told senior managers that the service needed to create between £15 billion and £20 billion in efficiency savings over the 2011-2014 period.

Then in September, a report by management consultants McKinsey commissioned by the government was leaked to the Health Service Journal. The report recommended that the savings could primarily be met by cutting 10% of the current NHS workforce. The report also suggested that £600 million could be saved on the prescribing budgets, although the Labour government was quick to distance itself from the report’s recommendations.

The Wellards annual conference in late 2009 on the NHS was therefore well placed to review the latest debate and look ahead to the changes to come. Entitled ‘Looking Ahead to 2010/11: Healthcare Beyond the Next General Election’ the meeting was a chance to review forthcoming strategy in the company of key influencers.

A scene setter: into the next decade

Nigel Edwards director of policy, NHS Confederation, opened with a series of financial projections based on the recent King’s Fund/Institute for Fiscal Studies document entitled ‘How Cold Will It Be?’

 Edwards underlined the findings from the King’s Fund/IFS study which concluded that a £15-20 billion cost saving over five years represents the analysts’ most optimistic projections – the ‘tepid’ as opposed to the ‘cold’ or apocalyptic ‘arctic’ scenarios. Even the ‘tepid’ scenario would mean the NHS’s budget would be static “which the NHS has never had – let alone for five or six years,” said Edwards.

The ‘arctic’ scenario represents both a real-terms budget reduction and a reduction in cash. Edwards noted that no party was discussing such harsh possibilities, suggesting that it’s unclear how proposed ‘real-terms’ NHS funding growth promised by Labour and the Conservatives is possible.

Proposed savings cannot be ‘paper’ efficiencies of treating a few percent more patients for the same money, “It has to be cash, real cashable savings to pay staff and suppliers,” Edwards continued: “The NHS probably have to release fixed costs.”

He listed ‘doubtful ideas’ from past attempts to achieve savings: restructuring and mergers (apparently on the cards if the Conservatives are elected), allowing waiting lists to grow (saving only the variable costs, and only once-off – and delayed operations remain needed), and cutting training and prevention spending (though apparent soft targets, these would be damaging in the longer-term).

Instead Edwards outlined five better approaches to achieving savings:

• Operational improvements

• Removing waste by redesigning clinical processes

• Redesigning the care pathway between organisations, especially for treating long-term conditions

• Reconfiguring the estate and fixed costs (if the first three can be achieved)

• Disinvestment decisions

Edwards warned: “We’re still worryingly far from engagement in this, especially in some big hospitals’ wait-and-see attitude.”

Four enabling drivers for change in both main parties’ policy proposals are: information and accountability (choice is popular with both), skills and methodology for improvement and service redesign, payment policy changes, and behaviour changes – including a ‘sense of urgency’.

Nevertheless, Edwards’ central message was that NHS leaders were aware of the scale of the challenge, and that good planning would ensure that cost savings need not jepoardise the improvements in patient care seen in recent years.

World class commissioning

Andrew Donald, chief operating officer and deputy chief executive of Birmingham East and North PCT, (rated highly for its commissioning) told delegates that: “The intelligent and sophisticated answer is to try to commission our way out of the problem.”

When the NHS went into a ‘financial recovery’ cost-saving mode in 2006, Donald’s PCT achieved it without cutting any services. “We did it by commissioning far more cost-effective services,” he says, saving £250,000 by reducing emergency admissions through providing more services at home.

Donald referred to worrying signals from NHS foundation (provider) trusts’ whose five-year financial plans, ‘were all about growth’. He added: “Every other developed country is looking at contraction and remodelling health services.” NHS efficiency is, however, eminently possible: “There’s money in the system to create efficiency. Lots of services are commissioned inefficiently, and there is real cash we can get out.”

Donald’s PCT puts clinicians – a GP and a former hospital medical director – in charge of their commissioning: “Commissioning teams need more clinical validity – it gives us more chance of delivering on the challenges of change.” Donald believes that a good commissioner needs both collaboration and competition as levers to drive through differences in resource utilisation effectively, outlining a new service his PCT commissioned from a private provider, who “only get their profit if they deliver us cashable savings”. He called for the development of real partnerships with non-NHS providers.

A good joke about the NHS’s poor dissemination of best practice (“The NHS has more pilots than British Airways!”) led to Donald’s plaintive reply on the question of other NHS trusts using his PCT’s model of good commissioning practice. “I can get an idea taken up more quickly on the other side of the world than anywhere else in the NHS – the NHS is bad at learning from itself – let alone anyone else,” he said.

Primary and community care: implementing the new vision

The Department of Health’s primary care ‘czar’ Dr David Colin-Thomé provided an overview of how policy has developed in primary and community services, ending with Transforming Community Services (DH 2009), including plans to divest PCTs’ provider functions or separate them into arms’ length bodies.

He outlined how the government had responded to a severe shortage of GPs in poorer areas by creating 112 new GP practices in the most deprived areas, and introducing the target of one polyclinic per PCT to improve access.

He admitted that until recently community services had lacked managerial and political attention. “Although we spend more on them than on general practice, there are no national systematic metrics or real idea of what they do.” New quality accounts for all NHS providers and will include every GP and dental practice – all of which must achieve the registration standard with the Care Quality Commission by 2011.

Colin-Thomé also touched on the GP practice-based commissioning (PBC) and its failure to become the engine for reform the government had hoped for. PBC was subject to a fourth attempt at ‘reinvigoration’ in 2009, but Colin-Thomé suggested that aspiratons for the system had now been lowered. Colin-Thomé quipped: “The corpse is not for resuscitation! Progress has been patchy, and there doesn’t seem to be much traction. PBC is not taking off in any systematic way. It’s not seen as a major vehicle for change to deliver on QIPP (quality, innovation, productivity and prevention).”

Nevertheless, clinical involvement in commissioning is still seen as essential “because clinicians really understand the services we’re trying to change”. He suggested that hospitals should devolve budgets to doctors and clinical teams.

Possible future roles for the pharmaceutical industry could include redefining the interaction with doctors, and noted the demand for more cost-effective drugs was strong. He added that he had long thought that pharma could diversify like accountancy firms, to use its knowledge of marketing and health economics to offer the NHS services such as long-term conditions management.

The continuing evolution of NICE

NICE’s programme director for technology appraisals Meindert Boysen summarised the Institute’s work since its launch in 1999.

NICE took on new function many new functions, including NHS Evidence (a ‘Google’ for evidence-based health information). Future functions include the setting of quality standards in 2009, diagnostic evaluation tools and QOF indicators in 2010 and more clinical guidelines in 2011.

NICE is also enhancing its health technology appraisals (HTAs), releasing its economic models (as legally ordered following judicial review, applicant companies are also now required to share their models). Since November 2009 manufacturers have been able to attend HTA committee meetings to answer questions.

NICE is also becoming involved in handling patient access schemes and flexible pricing agreements, and now in topic selection and scoping.

NICE’s main assessment of new medicines remains based on costs to the NHS (not broader social costs), and on cost versus quality-adjusted life years (QALYs) gained. Acceptance remains likely under a £20,000 annual cost-per-QALY – and much less so over £30,000 – though recently NICE was ordered to give higher weight to expensive end of life medicines that offer a defined quality of life improvement to small patient populations where the prognosis is less than 24 months’ life expectancy.

NICE is now being asked to provide HTAs much closer to the time of marketing authorisations, and aims to get medicines appraised within three to six months of that authorisation.

A full 55% of NICE medicines decisions have been an ‘optimised yes’; and just 9% an unqualified ‘no’.

NICE is also involved with flexible pricing patient access schemes (via their liaison unit – not about cost-effectiveness – rather implementation) and roles in uptake and innovation. Boysen said NICE’s policy is that patient access schemes should not become the norm, bankrupt the NHS or disrupt its other activities. He advised delegates to examine NHS Information Centre graphs on medicines uptake post-NICE guidance publication, as they showed the institute’s recommendations have a very clear impact.

Dealing with a monopsony NHS

Dr Richard Barker, director-general, ABPI stressed the importance of pharma companies learning to regard the NHS as “a partner as well as a purchaser”.

ABPI communication with prime minister Gordon Brown led to a summit meeting with the secretaries of state of relevant departments, at which the industry expressed concerns over disjointed policies on life sciences.

“Three pillars of the environment needed to change: the NHS should become a champion of innovation, rather than resisting it, we need an integrated and effective R&D base, and an appropriate tax environment – especially for small companies whose venture capital has dried up.”

Lord Drayson (former head of Powderject) has been a dynamic minister for the new Office of Life Sciences (OLS), added Barker, citing the unusual achievement of ABPI weekly ministerial meetings for six months.

One of the most significant new measures set for introduction in 2010 is the ‘Innovation Pass’ which allows some medicines to bypass the NICE process at launch. The products will be those medicines are likely to be those which are judged to be innovative, treat a small and underserved patient population but have incomplete cost-effectiveness data. The scheme will be funded from a central budget (£25 million in this first of three years, and its overall effects will be assessed at the end of the trial).

Barker also cited the Kennedy review of NICE valuing innovative medicines, and the focus on cost per QALY: “The ice has begun to crack on that issue, which is good for future credibility of NICE, for the pharma industry and for patients’ access to new drugs.

“It’s early days for the PPRS renegotiation, but we think it will be positive for industry, as it will look at uptake rates in the UK vs. European comparators.” He also welcomed the new horizon-scanning mechanism for PCTs to see new medicines coming through development, helping the NHS budget for innovation.

On shadow health secretary Andrew Lansley’s keenness about value-based pricing (VBP), Barker said: “Personally I don’t think it’s worthwhile to oppose VBP, we’re past that point. Now it should be about discussing how VBP could work, recognising practical barriers, like limited cost-effectiveness data. Industry needs to think about how a value-system could look.”

Noting the NHS’s need “to become a champion of innovation, rather than resisting it”, Barker also told delegates that changing ingrained negative perceptions of the pharma industry among some NHS staff was “a body-contact sport. Get out there, meet these people, convince them that you really have patients’ interests at heart”.

Asked about this ‘Trust agenda’, Barker said that in his meetings with senior NHS managers, the atmosphere has been “positive and business-to-business-like. But when we got really talking, it became obvious that no one from the industry has ever been around that table,” said Barker. “Stay in contact with the NHS and behave like partners.” He cited one company’s work on redesigning oncology care which has produced an 11% efficiency improvement on delivery. Meanwhile, work in a North West PCT to stop unplanned COPD exacerbations and admissions to critical care, creating savings worth an estimated £120 million in a year.

“Knowing the worth of this is important to dialogue,” said Barker, adding that intensive joint working with the NHS would be a “substantial part of the future landscape”. He ended with grand challenges for the industry. “How do we as industry respond to the £15-20 billion NHS funding gap?

“Jim Easton (DH head of QIPP, and in charge of getting the £15-20 billion cashable savings out of the NHS) tells me he doesn’t want 152 PCTs all doing different pilots – he wants pilots at scale, and a business-to-business relationship with life sciences.

“He’s told me ‘I know how to cut your price, it’s more fulfilling to work out together how to deal with big nuggets of disease burden and improvement potential’.” Barker concluded by posing three questions to the industry:

1. What skills and assets can we bring to the £15-20 billion problem?

2. What kinds of partnerships can we propose to keep people out of hospital?

3. Might this not lead to new business models to industry? Has caution resulted in a lack of innovation – could outcome measures, pathways work?

Andy Cowper is a freelance journalist and editor of Health Policy Insight (www.healthpolicyinsight.com)