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While the NHS is special, going forward, there is an increasingly urgent need for it to be “untrapped” to achieve a step change in the cost-effectiveness of healthcare. This can be done by carefully and sympathetically applying the best principles of the private sector, to achieve efficiency, effectiveness and genuine value for citizens, taxpayers and patients.
“There’s six trillion dollars spent a year around the world on healthcare and some would suggest two trillion of that is a waste.”
The words of Paul Otellini, CEO of Intel, would make sobering reading at the best of times, but they’re particularly startling during the current economic crisis.
Applied to the UK, Otellini’s prognosis corresponds to some £90 billion in 2008 budgeted on the NHS, almost all directly funded by taxation. The Intel analysis suggests that the actual value for money from the spend on healthcare could be £60 billion. That’s possibly as much as £30 billion being “wasted” in the system every year.
Sixty-one years after its launch, the NHS is still not properly geared to maximising its resources for the full benefit of either the patient or the taxpayer.
The NHS can be compared to the computer industry of the 1960s and 1970s before competition and advances in technology put the consumer in the driving seat.
The issues are similar: an old and inefficient architecture, overly bureaucratic, delivering a set of bundled services, subject to special codes and rules, protected by tradition and becoming more expensive and inefficient.
There is a lack of a compelling customer focus in the current NHS structure. Its monolithic rigidity is a stumbling block to the creation of a genuinely cost-effective proposition for those who use its services (patients) and those who pay for them (taxpayers).
All too often, the constituent parts of the NHS work in isolation, preventing the creation of a customer-centric value chain. Add to this the confusion about the respective roles of the NHS and the Department of Health and you have a lack of clarity as to who is the policy maker, who is the commissioner and who provides the care.
For all its qualities, the NHS today is not delivering value for money. People want choice, flexibility, availablity and speed of service. They want to be in control of their health care, a case of “the patient will see you now, doctor”.
As the Chief Medical Officer, Professor Sir Liam Donaldson, put it: “The old cliché of the retail sector, ‘the customer is king’, perhaps has a resonance for modern healthcare.”
So what might a consumer-facing NHS structure look like?
A basic framework would be to segment the NHS, focusing on the needs of the patient and delivering bespoke healthcare sevices – giving consumers what they need, when they need it and at a fair return for their taxes.
Properly designed, there are a number of efficient and effective private sector strategies which could be adapted to the NHS without compromising its integrity as a public service.
One possible approach would be franchising. It’s an accepted business principle that franchising is effective where resources are scarce or where close monitoring or control is necessary.
As an illustration, take the Body Shop, where outlets are run by other businesses operating under the franchiser’s trade name. This makes no difference to the customer’s experience of the store which has a consistency of product, ambience and standard of service. A trusted brand is a trusted brand.
Applied to the health service, one might envisage a situation where, say, leading specialist hospital “brands” such Great Ormond Street, the Royal Marsden or the Royal Harefield are rolled out across the country and run by regional NHS or Foundation Trust “franchisees”.
The availability of world-renowned children’s, cardiology or cancer care, all within easy reach and as part of a region’s established primary and secondary care framework, would surely be a huge plus in the public perception of the NHS.
Even more importantly, such a scheme would free up clinics to concentrate on their core business, reduce management overheads and allow the NHS to generate scale for its services.
Another strategy might be to adopt the practice of “co-optition” where organisations simultaneously co-operate and compete, to their mutual benefit.
For example, Star Alliance, the global airline alliance, offers customers worldwide reach and a smooth travel experience by allowing them the flexibility to use different airlines within the alliance to get to their destinations.
In the context of the NHS – say when operating theatres are streched – co-optition might involve the sharing of private hospital facilities for NHS patients at no extra cost. This, surely, would be a win-win situation: helping the patient, generating economies of scale and maintaining the integrity of the NHS.
Work undertaken by Corporate Value Associates (CVA) with HM Treasury on the strategic restructuring of National Savings and Investments (NS&I) led to a new model based on a need to simplify the delivery of services to the customer.
The NS&I restucturing involved the retention of only the core commissioning areas: R&D, logistics, sales and so on. Other areas such as manufacturing were outsourced. A key aim was to ensure that the majority of services were delivered through the creation of strategic partnerships or the “contractorising” of aspects of the business.
As a result, customer satisfaction increased by over 90 per cent, customer sales effectiveness increased by 20 per cent, there was a 60 per cent increase in value for the business and there was a significant de-layering of management and administration.
Any policy to outsource services in the NHS is understandably a sensitive one. However, the outsourcing of some services and the retaining of “mission-critical” services in-house can help to build business impact and efficiency.
The NHS is special. But it requires a new approach if it is to change from a product-centric, site-based, inflexible and high cost institution into a flexible, customer-focused, competitive and efficient public body.
As Dr Jennifer Dixon, Director of the Nuffield Trust said: “A step change in the cost-effectiveness of healthcare must be the major challenge for the NHS…The challenge will be to design reforms that ‘untrap’.”
By carefully and sympathetically applying the best principles of the private sector, an “untrapped” NHS can achieve efficiency, effectiveness and genuine value for citizens, taxpayers and patients.
