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Balance sheets come first in NHS-PLC

NHS-PLC* is a shocking indictment of Labour’s transformation of the NHS. Mike Davis spoke to Allyson Pollock about her book.

Market Prescriptions is the opening chapter of NHS-PLC. It carefully chronicles the numerous private companies that now have their fingers in the NHS pork barrel. From pharmaceutical to construction companies like Balfour-Beatty, Tarmac, Jarvis and Siemans reaping rewards from the Private Finance Initiative (PFI) to the transnational health care corporations such as BUPA, PPP, United HealthCare, Kaiser Permanente, Westminster Health Care and Capio, who are all seeking new market opportunities through joint ventures with the NHS.

In her new book, Allyson Pollock recounts how she questioned Gordon Brown on the rationale behind PFI, given that private borrowing is more expensive, and that the risks were not in practice transferred to the private sector. His response was to repeat the mantra that the public sector was bad at management and the private sector is more efficient.

In what way has Blair’s NHS shifted from Bevan’s egalitarian vision of a service ‘free at the point of delivery for all who need it’?

“The story begins long before Blair. Since 1979 we’ve seen a creeping process of privatisation which was quite covert to begin with, but is now overt. All Blair has done in many ways is to implement the policies of privatisation begun by Thatcher and take them to their logical conclusion with the break up of the NHS. With the removal of direct parliamentary accountability and its replacement by a regulator we see the model of a privatised welfare state.”

So what are the main features of NHS PLC? Once again, an historical view is necessary she argues. “It is a process that could not be achieved overnight. The NHS began as a nationalised hospital and community services infrastructure, with staff, especially clinicians, nurses and doctors, on national terms and conditions and also national ownership, control and accountability. The book sets out in some detail how privatisation has been achieved. Complex mechanisms have been used through the PFI and direct contracting out of services to the private sector.

Moving from an internal market, the Tories set up system of buyers and sellers and shadow pricing systems in 1991. This took more than ten years to bed down. The Government under Labour is moving to a full market introducing ‘for profit’ private providers. Now the NHS is the sole funder with a plurality of providers.”

So how would she counter the view of Brown and Blair that PFI and PPP is not privatisation just allowing some small measure of marketisation and competition to make services more efficient and effective?

“The argument can’t be answered by crisp soundbites. There is no simple rebuttal. The book details the complex processes that have been at work. In asking do markets make services more efficient you have to ask do they actually meet the basic goals and principles of the NHS which is universal care, services free at the point of delivery, provision on the basis of need and access for all. We know that markets operate by segmenting the risk pool. We now have the introduction of winners and losers. In terms of services we know this means the ability to pay or the ability to access the services.

The problem is in the way the government is establishing the new NHS, which is very provider dominated. Increasingly the provider’s eye will be turned to the balance sheet, the need to make profits from investment. So the problem is that it incentivises hospitals and hospital providers to behave in certain ways. If they have always got their eye on the balance sheet they have to select the most profitable patients to balance the books. Or they have to get into income generating activities which is not the core function of the NHS.

We see these scenarios being played out in the new Foundation Hospital Trusts, which will no longer be bailed out by the government when they get into financial difficulties, although inevitably they will.

The real strength of the NHS for its first 50 years was its geographic tiers, geographic planning structures, plans for vulnerable groups, be they the mentally ill or the chronically sick, on the basis of need and putting in services to meet these needs. The new providers and Foundation Trusts will be planning services on the basis of their balance sheets.

The element of competition is that providers will be competing among themselves to provide the most profitable services and treatments. Inevitably some treatments and services will be left off the list. This will include accident and emergency, mental illness, long term care, acute geriatric care and control of chronic diseases. Evidence of this is clear if we look at the US, the model NHS PLC is based on. The US has a health maintenance organisation (HMO) which is provider dominated. Providers are driven by the same sort of financial structures as the new NHS. Indeed the new pricing structures are a direct import from the US. So what see in the US is that the unprofitable treatments, patients and conditions are simply left off the list. This is not the same tradition of providing care for chronic illness, or people with learning difficulties or disabilities, irrespective of ability to pay.”

But what did she think about the argument that public services did need reforming. That they were bureaucratic, top down structures, often remote from the people, the users and the providers. Could Blair have taken another route to modernisation?

“The book tries to look at the causes behind the symptoms. Everybody knows a bad doctor is one who will just look at the symptoms and not try to understand the causes of the problem. Whether talking about education, transport, or health it is all too easy to talk about bureaucracy, lack of responsiveness, these are simply symptoms. We need to ask why.

On bureaucracy we know that all large complex organisations have to have one to make them work. The problem is if you look at market-based systems, bureaucracy is not actually geared to meet the needs of patients but those of the bottom line. A huge share of income actually goes on marketing, transaction costs, billing, administration and invoices. So in the US bureaucracy, even in the not-for-profit sector, can account for 25% to 30% of the operational budget. Whereas in the UK it was always around 6%, this has doubled to about 12% as a result of the internal market. So we need to ask how this money is being used. The second issue is about user involvement and public accountability”.

These are not the same thing, she hastens to add. “We know that the NHS at its outset was less than satisfactory, as many public services are, but that does not mean we shouldn’t be always aiming to reform and improve. We forget at out peril this historical legacy where people were fighting from within and without to improve the NHS. This did not mean moving to a market-based system. It is wrong to conflate the two arguments.

If you look at the new systems of public accountability they are individualistic, they are consumer based and not geared to meeting population needs and have absolutely no element of democratic accountability. Indeed, even the weak systems we had in place, like Community Health Councils (CHCs), have been diluted and replaced. CHCs had an important statutory role and right of appeal to the Secretary of State for Health. CHCs were never entirely satisfactory nor particularly robust. In some areas they functioned better than others.

But CHCs up and down the country have been opposing closures of services resulting from PFI. One of reasons why the government was so keen to extinguish them was because in some areas they were doing their statutory job of challenging decisions on behalf of the local population. They could undertake complaints at individual level, they kept an eye on services like chiropody and mental health and challenged reorganisations where they were not in the public interest. The Government didn’t like this. If you look at the extraordinary success of CHC campaigns in Birmingham, Kidderminster and Hertfordshire, where they became very good public watchdogs, they caused the government great embarrassment.

Local Authorities should be watching this carefully because increasingly that whole strength and vision of population planning, the hallmark of LA services and the NHS, is being lost. The market provider-oriented focus does not take into account local needs. This is as true of education or transport as it is of health. If you give the providers all the control, their mission has to be to exclude, to cherry pick, to cream skim the more profitable services and individuals.

The other big principle argument of the government is that it doesn’t matter who delivers care as long as it is provided. This is a travesty because the great strength of national, population based systems is that you have the element of risk pooling where groups are sharing the risk. In the case of health it’s the poor and the rich, the sick and the healthy.

The risk pool is a basic principle. The postal services operation is the best example where the people of Shetland and Orkney or in rural areas are not penalised. They will pay the same price as those living in London. The Government is now dissolving the risk pool. It’s using an insurance approach, fragmenting, decentralising budgets and devolving the risks. The costs of care and the burdens are falling to much smaller communities and much smaller risk pools.

This is exactly what happens when you privatise. You break up the risk pool. Then people say that health or education is failing, so why not privatise more.”

Pollock reserved her real bile for new Labour and its think tanks like the Fabian Society. “They appear to have forgotten more than 150 years of carefully documented, detailed analysis by Florence Nightingale, the Webbs and many others who were arguing for public health and education. They understood only too well the issue of the risk pool and public service delivery. It is a great indictment of the left that they haven’t actually bothered to acquaint themselves with the meticulous arguments, evidence based analysis and science of the early Fabians.

Instead they’ve been caught up in the mantra of ‘it doesn’t matter who delivers care’. It wasn’t a right or left argument, it’s about what was a sensible way to provide public services and what kind of society we wanted to live in. This is about the basic principles of public administration.

Unlike the early Fabians today’s young males in think tanks have never actually worked in these areas. The ethos of public service has completely deserted the think tanks.”

* NHS PLC-The Privatisation of Our Health Care, Allyson M Pollock, Verso £15.99