Show me the Money!

PB Deputy Managing Director Dan Jones writes…


Dan Jones

Dan Jones

Jonathan Ashworth, Labour Shadow Health Secretary, has called for the Conservatives to apologise for the 2012 Health and Social Care Act and the damage the reforms have caused to the NHS. This came shortly after rumours began circulating that the current Government is considering repealing the Act.

The key question is, if you were to repeal the Act and reform the NHS, what would you reform it into? One criticism of the reforms is that they embedded the market within the system, at a time when many health commentators were calling for greater cooperation and a need for commissioners and providers to come together and work on a ‘whole system’ basis.

Is this the answer then – begin to remove the purchaser provider split, shifting to the Accountable Care System/Organisations model that focusses on joint working and cooperation ahead of marketisation and competition?

A key challenge of shifting to this type of system is how money would move around. The current PbR system, whilst not perfect, has helped drive activity and supported the NHS to track patients through the system.

Removing the purchaser/provider split will inevitably remove the need for a PbR system. So how would NHS managers divide the money between hospitals, GPs, social care and other NHS organisations? Block contracts have been mentioned, alongside capitated budgets – where one provider, or a group of providers cover all the healthcare needs of a defined population. Both these systems have their merits, including improved financial management and control on both sides.

They naturally bring together commissioners and providers to focus on the needs of the population rather than negotiating tariff add-ons and local variations. They do not, however, necessarily provide an incentive to increase activity and can also drive providers away from the most difficult and expensive treatments.

One thing that has become clear over the last twenty years is that the NHS responds to financial drivers. Whether that is rewarding good behaviour or punishing bad behaviours such as missing targets, commissioners and providers have been quick to understand how money moves and how they can maximise budgets.

However a reformed system seeks to shape itself, be it ACOs or something different, they will need a payment system that supports this and allows them to move money around effectively. For those at the centre of the system, from Government Ministers to NHS England, the challenge is to agree just how much flexibility they are willing to allow to local NHS when it comes to the cold, hard cash.