The Forgotten Principle

Uniformity in the Quality of Care and New Labour’s Health Reforms

Sally Ruane Health Policy Research Unit, De Montfort University, Leicester

Ipswich 25/1/06

(Points made are not referenced – see list of suggested reading at end. Please let me know if you think I’ve got anything wrong or if you want to offer evidence or counter-evidence for any of the points made.)


This presentation focuses upon the potential of our new market-based approach to health for generating inequality.

There is one founding principle of the NHS which is rarely cited by New Labour Ministers: that patients should be able to get the best possible treatment wherever in the country they are – i.e. uniformity of quality of health care: ” we have got to achieve as nearly as possible a uniform standard of service for all – only with a national service can the state ensure that an equally good service is available everywhere” A Bevan, 1945

This presentation examines the ways in which inequalities and differences in health care are generated or could be generated by key aspects of New Labour’s health reforms: the market and the patient choice agenda.

We should remember the substantial increase in health funding under New Labour, currently around double 1997 levels of spending and to be virtually tripled by 2008. This is not an administration which is not committed to the NHS but it is an administration which could undermine its essential character.

The reforms I am focusing on concern the market in health care:

  • diversity of providers (e.g. NHS Trusts; Foundation Trusts; NHS diagnostic and treatment centres (DTCs); independent sector treatment centres (IS-TCs) commissioned by PCTs)
  • payment by results (PbR) (nationally set tariffs for each procedure; payment strictly follows performance)
  • patient choice agenda – (in relation to elective procedures, patients to be offered choice from around 4 providers from Jan ’06; still a substantial degree of confusion surrounding this policy)

It is worth clarifying how I am using two often confused phenomena:

  • Privatisation: transfer of resources (facilities, amenities, equipment, buildings) or staff or activity (including health care provision, regulation or funding) from the state into the commercial or informal sector
  • Marketisation: introduction of market forces – purchaser / provider split articulated through competition-driven contracts

First, I want to look at how markets and how the particular market we have in UK health care create inequalities among providing units. Then I consider how these inequalities among providers could result in compromised quality of care in some. Last I identify how this might translate into inequalities among different patient groups.

Inequalities among providers in the new market

(1) Any market: Markets create instability and disequilibrium -> winners & losers and inter-provider inequality. For example, new providers take business away from NHS hospitals -> financial shortfalls. Fear that some hospitals may become unviable when financial shortfalls reach a critical threshhold. Shortfalls may be self-reinforcing.

(2) This market: Tariffs, costs and surpluses Fixed, nationally determined tariffs are paid to providers for each procedure regardless of the cost to the provider of producing that procedure. Thus, some providers are ‘overpaid’ for each procedure while others are ‘underpaid’. Some providers have costs which are higher than the tariffs and may make a loss; others have costs which are lower than tariffs and can make a surplus. Costs may be high for a range of reasons some of which are difficult to alter: costs of maintaining old buildings; costs of paying for new PFI buildings; characteristics of the local labour market; complex case mix; inefficiencies. Surpluses are retained by providers. Under-performing or non-performing units lose income rapidly and regardless of ability to cope with income loss. NHS can have lower productivity and higher per case costs because elective procedures may be interrupted by emergency admissions.

(3) Inequalities arise from preferential treatment for Independent Sector Treatment Centres (IS-TCs)

    1. IS-TCs may be paid above tariff price and, according to Unison, are exempt from tariffs until 2008; the Dept Health acknowledges that higher rates may be paid and justifies this on the grounds of start-up costs and costs of bringing staff from abroad to add to capacity. Unison say ’03/’04 average cost per procedure 9% higher in IS-TCs that NHS equivalent. Details of contracts with IS-TCs are not in the public domain.
    2. At least some IS-TC contracts guarantee the company income even if it fails to perform or fails to perform adequately. According to a Health Service Journal report on the Keep Our NHS Public (KONP) news round-up, Netcare performed some 93 of its contracted 572 cataract procedures in its first 6 months; it was paid £255,000 instead of the £40,000 the NHS could have done them for. Local PCTs had to pay.
    3. Despite government rhetoric of local decision-making, IS-TCs have been given contracts to work in particular geographical areas regardless of the needs of the local health economy and local wishes. Such units can undermine high performing NHS units.

Inequality in the quality of care across providers

How might these inequalities among providers create inequalities in patient care? First of all, how might the quality of care offered by some providers be compromised as a result of these reforms?

(1) Where providers lose business Providers losing contracts and patients lose income –> attempts to cut costs –> wearing of equipment, greater difficulties maintaining safe patient environment, strain on staff, demoralisation, potential loss of good staff who seek work elsewhere in the market etc Potentially self-reinforcing.

(2) Where providers have high costs High cost providers try to cut costs of care to match tariff –> may affect complex cases or involve complete cut in provision. This has affected some NHS hospitals. KONP news round-up reports (2nd Jan), Oxford Radcliffe announced it is scrapping cardiac catheter ablation because it is paid £2007 per procedure but it costs it £4,000 per procedure and the funds for this don’t exist. Ironically to fulfil govt waiting list targets – i.e. get patients thru in 6 months, it has had to purchase some supplementary capacity from the private sector, where it has cost roughly £8,000 per procedure.

(3) The previous two points may disproportionately affect NHS providers because of the new capacity in the market but there are some concerns surrounding quality of health care in IS-TCs which arise from the character of these units. It is fairly early to be evaluating these units and evidence in the public domain is limited. The National Centre for Health Outcomes Development has produced a preliminary report which is fairly positive; some news reports (e.g. for Channel 4 News in late 2005) are more critical. IS-TCs without back-up facilities may pose threats to the quality of care where complications set in. Some IS-TCs operate from mobile units, posing threats to continuity of care and difficulties for patients seeking redress where procedures go wrong The private companies, based overseas, may use less rigorous recruitment and vetting procedures than those of the NHS in the hiring of staff who then come to work in the context of UK health system of which they have little experience. At least one former employee reports that there is great pressure on throughput. Some evidence that risky procedures to reduce high blood pressure rapidly are being used in order to avoid a cancellation.

But IS-TCs may be able to spend more on each case since they may be paid higher per case rates and may retain income even where procedures are not carried out.

So, which patients might end up with a substandard provider and poorer care? Not simple reflection of economic inequalities since health care not dependent on ability to pay Not a simple reflection of economic inequalities mediated via the mechanism of the catchment area through unequal access to differentiated housing markets, as with schools. More complex matter to identify which groups of patients might end up receiving poorer care.

(1) Those with more complex conditions As providers seek to reduce costs per so that they match the tariff and in the process cut the quality/quantity of care needed by those with complex cases, perhaps resulting from underlying conditions (skimping)

(2) Those for whom choice of provider is not a meaningful reality:

  • those with mobility restrictions (personal disability; transport problems; care responsibilities; income constraints)
  • those who lack access to information or the capacity to manage, interpret, act on information and articulate wants (cultural capital) Choice may become a burden not a source of power and liberation Not yet clear what information is to be made available and how
  • those for whom choice is harmful or dysfunctional
  • those who can’t enforce choices

Not yet clear what will happen when those choosing a provider exceed provider’s ability to give care. Ration through waiting list? As soon as you have a situation where provider chooses patients, can expect provider to avoid high cost cases (cream-skimming and dumping). IS-TCs are already reputed to seek ‘easy’ cases offering greatest possibilities for surplus.

· choice of acute treatment provider versus choice of provider for chronic conditions

Little is known of choice behaviour in this kind of setting but it is possible that choices are more meaningful where a patient has a long-term condition and can make a considered choice on the basis of knowledge of condition and experience of provider (in contrast to an individual with an acute condition needing one-off intervention.

· those needing integrated care

Market tends towards fragmentation.

But there are ways in which we all lose out

(1) Financial cost of market system Billing, contracting (though’ fixed tariff avoids some costs); marketing; making information available to patients; external regulation and strengthened governance arrangements.

(2) Cost of competition See excellent article by N Edwards. Duplication, wastage and redundancy – equipment and facilities lying idle.

  1. Providers will be very reluctant to let equipment and facilities go – so great pressure to keep underperforming or nonperforming units. Alternatively can be transferred to private companies as with new theatres in Birmingham
  2. As providers become more efficient they create spare capacity; market itself creates spare capacity – this leads to supplier-induced demand where suppliers try to get more money spent on their services. This will lead to PCTs having to create a whole infrastructure to manage demand, pre-authorise treatment and review use of services.
  3. Markets can speed the adoption of improvements as competitors try to out-do each other but these are often not shared so patients across the system don’t get the full benefit.

So – Markets tend to exercise upward pressure on costs – opportunity cost – what health care is not given as a result?


The aspiration to a service which provides equally good care for all has never been fulfilled but it remains an important aspiration. Now, health reform policies deliberately create a dynamic which generates inequalities. This undermines one of the founding principles of the NHS. Those with complex and chronic conditions and in need of integrated care may be particularly disadvantaged.

Perhaps the most insidious effect is upon ourselves as we are changed from citizens (who consider the impact on the collective, the needs of all and on an ongoing basis) to consumers (who consider: what do I want? what works for me?)

Where are we going? The direction of travel is clear – both marketisation and privatisation are occurring. Privatisation is moving forward on many fronts in health care: GP surgeries, cancer treatment centres, ambulance services, even attempts to contract out commissioning. We seem to have forgotten the rational basis of the NHS as a monopoly provider as well as our suspicion of the motives and consequences of business in health care. Suddenly, we find we might be about to lose much more than the health care foregone through high transaction costs.

“The National Health Service is the nearest Britain has ever come to institutionalising altruism. It is, as Professor Rudolf Klein put it, ‘the only service organised around an ethical imperative’. Aneurin Bevan knew its core philosophy transcended mere notions of socialist planning and progressive administration. ‘Society’, he wrote when piecing together his new scheme, ‘becomes more wholesome, more serene, and spiritually healthier, if it knows that its citizens have at the back of their consciousness the knowledge that not only themselves, but all their fellows, have access, when ill, to the best that medical skill can provide.'” (P Hennessy Never Again, 1993:132)


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