In healthcare delivery, as in life, freedom brings responsibilities. No one in the NHS has had more freedom — or responsibility — thrust upon them in recent years than the managers of its first foundation hospitals, and the challenges they face should not be understated. They must balance fluid budgets and volatile expenditure while enacting centrally mandated reforms, meeting centrally fixed targets and persuading their patients (or “customers”) that they are also improving basic services across the board. In a system to which taxpayers feel entitled, these can all be thankless tasks. But this does not mean failure to accomplish them can somehow be excused. The £140 million in deficits accumulated by foundation and other NHS trusts, revealed this week by the National Audit Office, and the increased risk of death in NHS hospitals at weekends, on which we report today, are both serious management failures that cannot go uncorrected.
More money than ever is being spent on Britain’s public healthcare. The goal is a system that keeps the service free at the point of need while defying critics who say it can deliver value for money or excellence, but never both. Foundation hospitals were conceived not only as the flagships of that system but also as the key mechanism for implementing the internal market on which all new Labour’s health service reforms now depend. The scale of investment is formidable. The principle that funding should follow patients and that hospitals should be allowed to compete for them is as valid as ever. In short, foundation hospitals are too important an experiment to be allowed to fail, and the key to their success is not more management, but better management.
Last year the Bradford Teaching Hospitals became the first foundation trust to hit financial trouble. An independent report into its slump from a modest projected surplus to an £11 million deficit was attributed by independent analysts to “a barrage of changes” forced on it from outside. These included adopting a new contract for consultants, the European Working Time Directive and a complex system of payment by results — all precisely the sorts of changes that any private concern, including a private hospital, would have been expected to anticipate and accommodate without long-term damage to its quality of service or bottom line.
The Bradford hospitals leapt at the chance of foundation status as an opportunity to tailor their services to local needs without continuous central government oversight. The motive was laudable, but major hospitals inevitably function in a national context, especially when adapting to new pressures to compete. New, specialist treatment centres will draw potentially lucrative patients elsewhere. Improved drugs will keep others out of hospital altogether. Foundation hospitals must therefore use their freedom to expand, and to borrow to fund that expansion, with extreme care. Monitor, the foundation hospital watchdog, must likewise weigh up applicants more carefully than it did in Bradford.
The NHS spent £69 billion in England alone in 2004-05. Such spending cannot be maintained for long, and the law of diminishing returns is already raising the marginal cost of improved services. This does not mean they cannot be improved, but managers must understand: it’s not what you spend, it’s how you spend it.