We need radical reforms to raise NHS productivity
EVERY now and then academic disputes break out into the mainstream. In an article for The Lancet medical journal, Professor Nick Black claims it’s a myth that NHS productivity has fallen over the last decade. Productivity (what we put in against what we get out) may not actually be down 0.4 per cent a year since 2000, he says, but slightly up – although he doesn’t say by how much. This has excited opponents of reform who say the NHS doesn’t need to be more efficient, while the Office for National Statistics, the source of the 0.4 per cent figure, has pointed to misunderstandings in Professor Black’s analysis. However, this is a dead-end dispute. Whoever is right, productivity has been broadly close to zero and debates about deviations from this flat line don’t alter the urgent need to deflect it into an upwards curve.
Indeed, the NHS needs to raise productivity by 4 per cent every year for the next four years, as the NHS chief executive, Sir David Nicholson, has said. That equates to £20bn efficiency savings over four years – a lot more. To give a sense of how unprecedented this is, spending on the NHS doubled from £50bn to over £100bn from 1999 to 2010. This was based on the assumption that NHS productivity would match the performance of the UK economy (private sector productivity in the same years is estimated to have risen by 2.3 per cent annually), but it was nowhere near. Spending rose faster than in most rich countries but improvements in life expectancy were below average.
The crushing weight of evidence points to gross inefficiencies in the NHS. In no other part of the public sector has so much waste been identified. Similarly, the seminal 2010 OECD review of efficiency in health systems suggested that compared with the best countries like Australia and Switzerland the UK is way off the mark. Failing to effectively transform resources into health outcomes, the “quantity and quality of health care services remain lower than the OECD average while compensation levels are higher.” Roughly translated: our doctors are paid too much and they don’t do enough.
More fundamentally, we need to change the whole health and social care business model. The NHS was set up to deal with emergencies and infections; now the big threat is old age and long-term conditions. If we try to meet the new needs in old ways, spending is projected to increase by an estimated £40bn (in today’s money) by 2041. Yet, while other countries have been investing in new services, we have splurged on propping up the old structures. Other countries have invested in preventative care and moved treatment out of hospitals into more cost-effective settings; we have built more hospitals and sent more people to those hospitals. From 2000 to 2010, hospital admissions rose in Sweden by 1.6 per cent, but in the UK by 38 per cent. A third of our hospital admissions are unnecessary.
Measuring productivity is hard. Maybe Professor Black will come up with an authoritative measure in due course. But the rest of us mustn’t get waylaid fighting yesterday’s battles. Making the NHS better prepared to fight tomorrow’s battles requires totally new approaches to health and social care.
Nick Seddon is deputy director of the independent think tank Reform.