NHS reform: Only fools and horses

The ‘buried’ McKinsey blueprint for the NHS might just bear some resemblance to what the coalition government eventually serves up, says Jane Renton.

Management consultants as a breed like to ‘think the unthinkable’ – or as they might say, do their ‘thinking outside the box’ in private and behind closed doors. Best not frighten the horses, or, in the case of the NHS, the patients anymore than they already are. The last thing such consultants want is for their clients, in this case HMG, to start airing their confidential recommendations in public.

Thus the ‘slash and burn’ McKinsey report into the savings that the NHS could make was quietly buried by Labour. The damage, however, was done. Details inevitably seeped out into the wider public. They entailed hitherto unthinkable cutbacks in frontline staff.

On the principle that it’s good to get the last government’s dirty washing out in the open for all to scorn, the new health secretary Andrew Lansley decided unsurprisingly to publish the whole damn thing in its grisly 100-page entirety.

So that was the end of that – or was it? The report was commissioned by Mark Britnell, the splendidly titled director of world-class class commissioning, who like some senior civil servants before him has since left to join the management consultancy profession – in his case to KPMG where he now heads Healthcare for the UK and Europe.

An aloof bunch at the best of times, McKinsey was left feeling horribly exposed, even toe-curlingly embarrassed. Despite HefmA’s kind invitation to elaborate further on its plans for the NHS by authoring an article in this magazine, McKinsey declined to take up our offer.

On the face of it, McKinsey’s proposals were never likely to appeal to David Cameron, no doubt mindful of the former Conservative chancellor Lord Lawson’s warning not to meddle with the NHS. It is, as Lawson said, the nearest thing the English have to a national religion. That means defending the NHS’s underlying principles and de facto, Labour’s reforms. Anyway, the main priority for the Conservatives is education and like any good military tactician, they know it’s unwise to fight a war on many fronts.

But desperate times call for desperate actions. The coalition government aims to cut the NHS’s administration costs by a third and make £20bn in efficiency savings – interestingly this corresponds exactly to the top level of headline savings
flagged up in the McKinsey report between now and 2014. The only difference is that McKinsey believes this involves frontline staff.

The message is stark: “The next spending review period from 2011/12 will be much tougher with a potential funding gap of £10-15bn.” Page 83 makes the number of job cuts clear: “In the best case, headcount will have to be maintained fl at; if savings of £20bn are required, headcount will need to be 10% lower.” This means 137,000 losses.

Page 84 of the McKinsey report involves a radical proposal for limiting or removing mandatory staffing ratios in areas such as midwifery, as well as a hiring freeze with a potential churn of 100,000 or more NHS jobs. McKinsey dwells on inefficient processes that also involves sorting out the NHS estate. It focuses on district nurses, which it says could be reduced in numbers by 15% by increasing average number of visitors per day from 5.6 to 6.6. McKinsey’s study across
hospital foundation trusts found only 55% of midwives’ time was spent on patient facing activities.

The least productive 10% of doctors see one fifth of the patients seen by the most productive 10%. The report also recommends reducing prescribing variations and cutting back on “ineffective procedures”, such as, for example, knee joint surgery or hysterectomy for non-cancerous heavy menstrual bleeding. The report says that between 5% and 84% of all hysterectomies were inappropriate. That is something that is hardly likely to appeal to patients, especially those affl icted by such often painful and debilitating conditions. Better management of chronic disease, such as diabetes and cardiovascular disease, could cut the total annual spend of £22.5bn by up to £2.5bn. This could involve what Mckinsey calls increased levels of selfcare by patients, possibly involving them monitoring their own blood pressure from home.

Instead by targeting the most costeffective interventions, trusts could make savings of between £2.8bn and £4bn. McKinsey also calls for a renegotiation of PFI contracts, which it says could lower the £1.3bn of annual payments.

The majority of schemes were agreed when interest rates were generally high, typically between 6% and 8% because of the low infl ationary environment. However, it remains to be seen just how such long-term commitments could be unwound in this way.

On pages 70 and 71 McKinsey shows how various integrated healthcare systems in America are more efficient when compared to the high cost of UK healthcare. The UK spends considerably more per capita than France, Japan and Germany because of its over- reliance on hospital care.

The report also recommends:
• Reducing the tariff
• Renegotiating GP and provider arm contracts to drive down costs
• Reducing routine referrals to outpatient appointments and their variability
• Increasing the number of patients treated as day patients – the gynaecology and breast surgery rate could be increased by 40%
• Reducing prescribing variations by PCTs
• Reducing spending on supplies by £1.9bn – GP supplies could be 15% cheaper if they used national procurement contracts and the NHS Purchasing & Supply Agency
• Spare land and buildings could be sold to raise £8.3bn
• Underused space could be decommissioned to save £400m on heating and maintenance
• Introducing hot-desking
• Cutting the square metre to bed ratio

Despite the report’s apparent unpalatability, it does appear to offer the new government tempting opportunities and interesting ideas as it struggles to identify immediate savings in the NHS. Spending on health is now well above the European average and more than 50 per cent higher than the GDP shares of Scandinavia and New Zealand.

On a worldwide basis the public sector share of spending is likely to be the highest of any system.  There is no doubt that we are now caught in a serious affordability crisis.  There are commitments on the PFI, in some cases for hospitals that are no longer required, the General Medical Services (GMS) contract as well as Treatment Centres. There is already growing tension between all these commitments as well as funding for innovations and new therapies.

The NHS allegedly spends 14% of its entire budget, or some £15.4bn a year, on management and administration but still fails to commission services appropriately, according to a recent report by the Commons cross-party health select  committee.

Now a radical shakeup of the health service seems more than likely. Andrew Lansley says the NHS needs coherent and consistent reform. But it also needs a coherent timeframe for change, despite the legal and governance issues that might stand as obstacles in the path of such change.

“and a bureaucracy that demands somewhere in the order of 250,000 separate data returns from every trust, every year. Yet in the NHS today outcomes lag behind those of our European neighbours.”

Yet the sort of money-saving  reforms proposed by McKinsey involve an even greater degree of accountability. So too will the government’s own  proposals for GP consortia commissioning. The proposed independent commissioning regulator will also require the  same levels of data as the Department of Health to inform decisions. Funding and reform have been seen as mutually complimentary to each other by both Labour and Conservatives, but in these stark economic times, funding must inevitably assume far greater priority.