Economic Evidence and NHS Reforms in England

OHE collaborated with the Centre for Health Economics of the University of York in hosting workshop for policy makers and their advisers on NHS reforms. Discussion centred on economic evidence needed to drive the reforms and the gaps that now exist. The post reports key concerns and observations.

The NHS White Paper published in July 2010, ‘Equity and Excellence: Liberating the NHS', announced major reforms to health care in England.  In December, OHE and the Centre for Health Economics (CHE) of the University of York held an interactive workshop for policy makers, implementers and their advisers.  Its purpose was to identify the economic evidence needed for the reforms and the current gaps in evidence.  Sessions dealt with: the growing importance of measuring patient outcomes; the economics of commissioning based on consortia of general medical practitioners (GPs); the role of competition and private sector providers; and the productivity and efficiency of the NHS.  Key discussion points are outlined below.

A consistent theme of the reforms is measuring the outcomes for patients, often as reported by patients themselves, and acting on that information to improve both efficiency and results.  For example, early results of patient-reported outcomes from common non-emergency surgical procedures have raised fundamental questions about which patients are referred for surgery and how well they respond to treatment.  Making wider use of such outcomes measures may allow evidence-based resource allocation across a wide range of treatments and providers.  Much remains to be done, however, before the evidence is sufficient.

The reforms foresee substantially increasing the responsibility of local consortia of GP practices, giving them both the responsibility for deciding which health care services are available locally and managing the funds to pay for them.  This is different from the experiment with ‘fundholding’ by individual GP practices in the 1990s: the scale of responsibility is much greater and will include all GPs, not just those who volunteer.  Moreover, uncertainty about the volume and mix of demand for care means that GP consortia budgets are at risk of significant over- or under-spending, however well-managed.  The size of the consortia, as yet unclear, will be important: the smaller the population served by a consortium, the greater the need for an effective means for adjusting budgets to variations in actual demand.  Further research is required to understand the relationship between risk and consortia size.

The NHS internal market was created in 1991.  For the first few years, the emphasis was on both price and quality competition; more recently, the focus has shifted to fixed prices, with competition based of quality.  At the same time, the role for competition from private sector providers has been increased, although such providers still account for a very small portion of tax-funded health care in England.  The 2010 White Paper reinforces the intention to encourage and broaden competition among providers of NHS funded care, creating new forms of ‘social enterprise’ to run NHS services.  The impact on quality and efficiency will need to be evaluated.

Increasing health care productivity is a continuing challenge.  New, more sophisticated methods for measuring productivity suggest that the NHS is achieving broadly constant returns to scale over time.  Nevertheless, wide variations in productivity occur across NHS organisations.  Raising the performance of the least productive could save the NHS billions of pounds.