NHS & McKinsey: The Professor & 10%

Professor Allyson Pollock is at it again and this time in The Guardian:

Professor Allyson Pollock

The NHS is about care, not markets

The Guardian Thursday 3 September 2009

Downsizing the workforce is a business response to loss of profit – but it doesn't account for the NHS goal of universal healthcare.

I will attempt to look at Professor Pollock’s article in detail especially as we come up to the anniversary of the failure of Lehman Brothers.

Healthcare in the market place:

The core goal of universal healthcare and services planned on the basis of need and not ability to pay is being jettisoned by the turnaround teams and management teams brought in to manage anticipated reductions in NHS budgets. Downsizing the workforce is a traditional response of business to loss of profit where businesses have to pay the costs of operating in a market and earn surpluses for shareholders. Unlike Scotland and Wales, the NHS in England is continuing to pursue market-oriented healthcare in its reform of the NHS. So it should be no surprise that management consultants firm McKinsey have come up with market-oriented solutions to anticipated budgetary shorfalls. They have advised ministers to cut 10% of the NHS workforce in England by 2014, a reduction that will affect services provided primarily to the old and the poor who have among the highest healthcare needs. But strategies to reduce the NHS budget need to pay attention to the role of market structures and how they reduce the ability of the NHS to pool the risks and costs of care across its population.

Administration costs:

The diversion of health spending from patient care to paying for a market are not apparently McKinsey's concern. Take for example the costs of the new market bureaucracy; for more than 40 years administration costs were in the order of 6% of the total budget a year, they doubled overnight to 12% in 1991 with the introduction of the internal market. We have no data today for England, but what we know from the US is that the introduction of for-profit providers increases administrative costs to the order of 30% or more.

Different to Scotland and Wales:

So why hasn't McKinsey advocated making savings along the lines of Scotland and Wales by reintegrating trusts into area-based planning structures and thereby abolishing billing, invoicing, the enormous finance departments, marketing budgets and management consultants, lawyers, commercial contracts? In this way one could project savings of anything from £6-24bn a year for England.

PFI:

A second set of savings would be the high costs of PFI where the taxpayer, having bailed out the banks, is now paying almost twice as much as it should for some PFI hospitals through high rates of interest and returns to shareholders. The total money raised from private finance so far is £12.27bn but the NHS will pay out £41.4bn for the availability of buildings and a total of £70bn over the life of the contracts. The irony is that the patient and the public are rebuilding the banks' balance sheets using scarce NHS funds intended for patient care and staff, especially in community-based services.

ISTC:

A third saving could be made by cancelling the contracts for the £5bn ISTCs programme – research in Scotland extrapolated to England has shown as much as £1bn has been wasted by giving money to for-profit ISTCs for work that was not carried out in the first wave.

Then there are all the other contracted out services including the pharmaceutical bill of £14bn. Are these contracted out elements part of the McKinsey scrutiny? It is doubtful since the company travels the world advocating market solutions.

Failures:

And here we run up against the fundamental problem of retaining marketeers to advise on healthcare. Markets mean reducing the capacity of the NHS to pool the costs of care across the whole service, substituting instead hospitals, clinics and practices that have to pay their way like businesses and, like businesses, can fail. Needs-based planning, once the hallmark of the NHS in England, is being replaced by strategies to deal with artificially created market failure.

Solutions are sought from outside consultants and turnaround teams using unsubstantiated assertions that the NHS is inefficient and can increase productivity. What the selective use of data and evidence mask is the failure to view the system as a whole and to remember that its core goal is universal healthcare, not concocted operating surpluses.

Winners and losers should not be what universal healthcare is about:

In contrast to Wales and Scotland, England has established hospitals and services as competing trusts or firms operating in a market; competition has replaced the mechanisms which enabled health authorities to monitor and respond and direct resources to the needs of the populations that are being served. But markets create winners and losers – and the unpublished McKinsey report is an attempt at refereeing.

The moral is that if the Department of Health in England commissions private management consultants that derive their profits from markets you will get market solutions. It is the commissioning, not McKinsey's report itself, that should give offence.

From the Book by Allyson Pollock: NHS plc

“The NHS is being dismantled and privatised. Very soon every part of it will have been ‘unbundled' and commodified...a new business dynamic is taking charge of the ways in which services are provided and patients are responded to. The dramatic costs involved - in terms of loss of equal access and universal standards, as well as of money - are concealed by claims of ‘commercial confidentiality' and by tearing up the once-exemplary systems of NHS accounting”

I just hope the Professor will not be one of the 10%.

Grand Rounds: Vol. 5 No. 52 Suture for a Living

What is wrong with the market approach:

Cars: Rover-MG, GM Europe, US Cars

Banks: Northern Rock, HBOS, RBS, Bonus at RBS

Others:

NHS & the Repeal Of The Glass-Steagall Act

To Intervene Or Not: A Colossal Failure Of Common Sense.

Related: Corruption: Three Doctors and a Professor.

NHS: Business Model? Spare Us Please!!!

Article: The Guardian