More Reform of the English National Health Service: From Competition Back to Planning?

Policy Shift in an Age of Austerity

The use of fixed-price tariffs for episodes of care is intended to provide economic incentives to improve access and increase capacity within a health care market. ³ This approach can be understood within an environment where the key problem facing policymakers was that of excessive waiting times for planned hospital care. An important contextual factor during this period was the decision by the Labour government to provide the NHS with funding increases that were large by historical standards (over the period 1996–1997 to 2009–2010, the NHS received an average real-terms growth in funding of 6.4% a year compared with a longer term average of 4% over the lifetime of the NHS).^6,7

However, this financial largesse ended with the onset of the global recession and the election of the Coalition government in 2010. During the period 2009–2010 to 2014–2015, real-terms annual spending on the NHS in England reached a historically low increase of 0.85% per year. This was followed by a similar spending review in 2015, which delivered a funding settlement again proposing only an average of 0.85% real-terms growth per year between 2015–2016 and 2020–2021, with some years of negligible real-terms growth. A proportion of the funding growth was already earmarked to meet deficits within health care providers that were already evident and growing. ⁷

Compared to the long-term average, this represents a significant and historically unprecedented financial slowdown, causing a coalition of independent health think tanks to comment in 2015 that the NHS was “halfway through the most austere decade in its history,”^7(p2) Additional funding made available in the 2017 budget did not alter this pessimistic analysis.

Moreover, not only was funding restricted, but demand and costs continued to rise. Authoritative independent analysis, based on the assumptions of the government’s own economic advisory body (the Office of Budget Responsibility), estimated that the NHS required a 4.3% annual rise in expenditure in the 6 years from 2017 to keep pace with anticipated cost and demographic pressures. ⁸

Provider Collaboration and the Rise of “Accountable Care”

In 2014, halfway through the first spending period in this decade of austerity, NHS England published its response to these new financial circumstances and presented a revised set of policies, titled the Five Year Forward View. ⁹ According to NHS England’s own analysis, if NHS reform was not forthcoming and instead the NHS chose to “muddle through,” the NHS faced emerging “gaps” in health and well-being, in the level and quality of care, and in funding. The key trend underpinning this analysis was the rise in the proportion of the population experiencing long-term conditions – a cohort that now accounted for 70% of the NHS budget. In financial terms, if nothing was done, a projected gap of £30 billion would emerge by 2021.

NHS England asserted that a “broad consensus” existed about the future shape of the health service in England. A key aspect of their treatment plan relied on the dissolution of the boundaries between hospitals and primary care, between physical and mental health services, and between health and social care.

A central innovation introduced by the Five Year Forward View was “new care models” that were intended to test out new structures and incentives designed to deliver more integrated care, better care and population health management, and a reduced reliance on hospital services. The performance of individual organizations was to attract less prominence. In the words of NHS England, “Increasingly, [the NHS needs] to manage systems – networks of care – not just organisations.”^9(p16)

Several new care models were introduced, drawing on experience from within the NHS. A program of development and expansion (the “vanguard” program) was set out to implement these models. Underpinning all of these models was the strengthening of primary and “out-of-hospital” care.

The majority of the new care models introduced means by which integrated, inter-sectoral care would be delivered, in particular by shifting resources away from traditional hospital settings. ¹⁰ The two models gaining most attention, and with most significance for the preexisting policy on competition and integration, are the following:

Multispecialty Community Providers (MCPs) – extended groups of general practitioners (as networks, federations, or new organizations) that take responsibility for a wider range of services. These could include employing hospital specialists to shift outpatient and ambulatory care into community settings (including the possibility of direct access for the patients of MCP general practitioners and specialists into local acute hospitals); employing or contracting for community health nursing and therapy staff; and running local community hospitals, thereby expanding diagnostic capability. The MCP would be based on the existing registered patient list of the general practitioners, and a health and social care budget could be delegated to the group.

Primary and Acute Care Systems (PACS) – a more overtly “vertically integrated” model of care whereby a single organization can provide primary, hospital, community, and mental health care to a population that is registered to that organization. This model allows NHS hospitals to recruit their own general practitioners and register patients for general practice services, although it was also posited as an evolution of the MCP model (i.e., the general practitioner-led MCP takes over the local hospital). The “most radical” evolution of the PACS would see the organization take responsibility for all the health needs for a registered population in return for a capitated budget.

The result of this new policy was that 50 “vanguards” were selected and received support for local design and implementation from 2015. ¹⁰ Of these, 23 vanguards took the form of MCPs or PACS. The agreed “mandate” between the Department of Health and NHS England in 2017 underscored the strength of ambition for this program (the mandate is a collection of requirements set by national government for which NHS England is held accountable by the Department of Health for delivery). During 2017–2018, 20% of England’s population was expected to be covered by a new care model, rising to 50% by 2020. ¹¹

The faith in new care models as a “solution” to the gaps identified in the Five Year Forward View was in part a function of early (albeit tentative) evaluative results as set out in a follow-up policy document published by NHS England in 2017, Next Steps on the Five Year Forward View. ¹² According to NHS England’s own figures, the PACS and MCP vanguards had slowed the rate of increase in emergency hospital admissions and emergency bed days, perceived to be two key measures of the effectiveness of out-of-hospital care, when compared to the rest of the country. In the prior year, for example, growth in per capita emergency admission rates for England excluding vanguards was 3.2%, whereas it was 1.1% for PACS vanguards and 1.9% for MCP vanguards.^12(p30)

At the same time new care models were being developed, a new and more encompassing approach to care integration was also evolving. In 2016, Sustainability and Transformation Partnerships (STPs) were implemented across England with the expectation that they would create conditions for inter-organizational joint planning and delivery of health and social care for a large, defined population. This was to be known as “place-based planning.”

While STPs were not formal organizations in their own right, they did provide forums for NHS commissioners and providers and for local government social care commissioners to prepare joint plans for integrated services. ¹³ These plans were to set out a common vision for care services that encompassed general and highly specialist hospital care as well as health and care services provided in the community. Importantly, these plans were to draw together a common financial plan, with agreement over the distribution of funding across providers and care sectors to create a single financial planning framework. The new guidance stressed the need for “local leaders [to come] together as a team,” a far cry from the more competitive rhetoric earlier in the decade.^13(p4)

The Next Steps document put STPs center stage. From April 2017, a board drawn from the constituent local organizations strengthened STPs, and a leader was to be selected (ratified by national regulators) with a clear role defined nationally and with performance measures published at STP level. NHS England described STPs as “the biggest national move to integrated care of any major western country.”.^9(p31) In practice, the early experience of STPs has been characterized by a number of implementation challenges, such as the development of effective shared decision making. ¹⁴

Importantly, the notion of an Accountable Care System (ACS), described as an “evolved” version of an STP, was also introduced (later renamed as an Integrated Care System). The purpose of the ACS was to create a more powerful vehicle for integrated care through the introduction of greater freedoms for local NHS organizations together with local elected councils. These freedoms came with concomitant accountability for performance. ACS arrangements include more power to create a single shared financial envelope comprising all local budgets, the potential for different local funding and contracting mechanisms that supplant the existing case-based payment systems, and the development of collective decision making and governance that binds the constituent organizations together.

ACSs are expected to pursue horizontal integration at the level of the hospital (either through merger or networks) and vertical integration by partnering between hospitals and local collective general practitioner organizations (the commissioning of these general practitioner services would be delegated to the ACS). An initial tranche of 8 accountable care systems was launched in the summer of 2017 with the promise of more to come. ¹⁵

The endpoint of the “evolutionary” process (albeit one that was expected to be some years away for most of the NHS) was held out to be the creation of an accountable care organization, where a contract with a single organization is let by local care purchasers and encompasses the large majority of health and care services for the population.

Beyond Competition?

Growing austerity appears to have forced a change in policy (or at least given fresh impetus to policies promoting “integration” compared to those promoting existing models of competition). This observed trend in English health policy can be seen mirrored in other countries. The rise of “accountable care” in the United States and similar concepts elsewhere encourage the use of global budgets and risk-gain sharing contracts and the coordination of activities between providers to deliver integrated care and overall cost containment.^16,17 Indeed, global development of these approaches has become a frequent point of reference for health policy discussion in England to the extent that the development of accountable care in the United States, Singapore, and Spain is specifically cited in the Five Year Forward View.

References to market mechanisms in recent NHS policy documents, however, are rare and more noticeable by their absence. While patients’ choice of provider of elective hospital care, once the centerpiece of policy in England, is referred to in the Five Year Forward View and in the NHS Mandate, this is done so without reference to competition between providers.

This reduction in emphasis on competition may have a number of causes. Competition was seen primarily as a means of addressing access to and quality of elective hospital services (and, to an extent, general practice services). It is unlikely, given recent evidence that waiting times are rising, that this reflects a belief among policymakers that the job is essentially done.

More likely, the relative importance of elective care access has diminished in the face of the financial challenge, which has been fueled by reduced funding and an increasing demand for non-elective care. Indeed, with a candor perhaps hitherto uncharacteristic of NHS headquarters, NHS England has quite explicitly stated that waiting times for routine elective care will henceforth be a lower priority (and thus will rise) compared to commitments to improve accident and emergency services, cancer services, and access to general practitioner care.^12(p12) In these new priority areas, the market mechanisms introduced previously are far less pertinent. Non-elective care and networked highly specialized services are generally less amenable to competition in the market due to the interdependence of different services (such as emergency and intensive care, access to 24-hour surgery, and so forth), the need for a critical mass of patients to ensure quality of care and the scarcity of specialist skills, In this context, collaboration rather than competition has become a hallmark of current health policy.

Not only has the attention of policymakers shifted away from prior competition policy, but the infrastructure itself has begun to be dismantled. NHS purchasers and providers are able, subject to regulatory approval, to replace the standard tariff system (“payment by results”) that underpins the NHS approach to competitive markets with local contracting mechanisms. ¹⁸ This freedom has been taken up, as evidenced by the reemergence of “block contracts,” which seek to provide greater guarantees of funding to local providers and serve to dampen competitive pressures. Recent analysis suggests that 25% of providers now mostly contract through a form of block payment or other risk-sharing approach. ¹⁹

As the Next Steps document explicitly suggests, one corollary of the development of collaborative goals among providers and between providers and their purchaser is that it “effectively abolish[es] the annual transactional contractual purchaser/provider negotiations within the area.”^12(p36) Indeed, the power of the purchaser has arguably been reduced as key functions, such as the allocation of resources within a care network and the design and implementation of new services, are increasingly delegated to the providers forming new care models. Moreover, the separation of purchaser and provider, once seen as a fundamental characteristic of the NHS market, has been blurred by the creation of the collective arrangements such as the STP and the ACS, which bring purchasers and providers together into a single governance structure.

It is worth noting, however, that despite a distinct change in narrative and approach to the NHS market, competition law remains unchanged. The legislative basis for the NHS remains the Health and Social Care Act (2012), which was introduced to support a competitive market. In this sense, new care models and STPs are having to work around the current system (although NHS England has begun to consult on new regulations to smooth their introduction). ²⁰ In practice, managing the public procurement of accountable care arrangements is complex (as admitted in the Next Steps document), and most NHS organizations are being encouraged to establish the collaborative planning arrangements without proceeding as far as the formal procurement of an “integrated care organization” for the time being. In any case, following a legal challenge from opponents to the introduction of accountable care, NHS England has announced that it will pause the introduction of the proposed contract for accountable care organizations until it has completed a consultation exercise.^21,22

An alternative narrative exists that explains the rise of accountable care in terms of an increasing privatization of publicly funded and provided health care services in England. Proponents of this narrative suggest that accountable care will lead to greater involvement of private sector companies in commissioning and providing services and that services are likely to become more fragmented rather than more integrated. Public accountability will be lessened as these non-NHS bodies will not be subject to the same obligations of public accountability. Moreover, they point to technical challenges in constructing appropriate budgets that may undermine the principles of universality and equity that are enshrined in the English NHS. ²³

However, the suggestion that accountable care will stimulate more competition, in particular with private companies, has been rebutted by other independent commentators on the grounds that arrangements for accountable care are already progressing in local areas based on partnerships between public bodies and without the need for competitive procurement; this suggests that accountable care will foster more collaboration (if not public sector monopolies) rather than more competition.^24,25

The Collectivization of Primary Care

General practice services have in theory always been open to competition through patient choice even if, in practice, competition in this sector has generally been minimal. However, policies introduced over the last 2 decades have sought to sharpen these competitive incentives by increasing the proportion of general practitioner pay that is determined through the enrollment of patients and by more actively procuring new types of general practice provider.^26,27 In addition, relaxation of regulations on general practice boundaries have allowed competition outside of tight geographical areas, enabled by digital technology. ²⁸ However, this sector, too, is also subject to a similar shift in emphasis towards collaboration and integration.

New care models are based explicitly on creating general practice “at scale” (i.e., by combining separate, small, and independent general practice organizations). In practice, this means the creation of large general practice networks, federations, and “superpractices” to deliver primary care services (including collective efforts to provide access outside of normal surgery hours) as well as “extended” services that might be transferred from a hospital setting.

Given that the currently fragmented nature of general practice, based on a multitude of relatively small and independent organizations, lends itself (in theory at least) to competition for patients, this horizontal integration and collaboration between general practices may result in a decrease in competition. The policy aim of patient choice is increasingly being redefined as a choice of location at which to receive service rather than a choice of entity providing it – a very different prospect in terms of the economic incentives at play. ²⁹

The rise of accountable care also represents an attempt to harness primary care leadership to deliver care coordination and cost containment. The creation of new vehicles, in particular the MCP, relies on leadership by primary care in general and general practitioners in particular. These are not new to the English NHS. Initiatives such as “GP fundholding” and “total purchasing” were created in the 1990s to achieve similar aims of primary-secondary care integration and the development of the primary care sector.

While these initiatives were described largely in terms of general practitioners acting as a purchaser rather than as a provider, in fact these initiatives had the development of primary and intermediate care as an explicit objective. One outcome was the closer working of general practitioners with specialists (with some specialists contracted directly by general practitioners) and with the transfer of hospital activity to community-based settings. The parallels with the aims of MCP and PACS care models are clear.

Similarly, the new contracting forms for general practice (“personal medical services”) introduced in 1998 enabled the creation, in theory if rarely in practice, of integrated primary and specialist services with a single budget and for a registered population – again clearly foreshadowing the aims of MCPs and PACS.^30,31

Conclusions

The nature of the competitive landscape within the English NHS is changing significantly. Collaborative governance arrangements between local providers and between providers and purchasers, all signatories to a single “sustainability and transformation plan,” do not smack of market disciplines.

The creation of large-scale accountable care “systems” or “organizations,” where horizontal and vertical integration is designed to create a coordinated and mutually reliant division of labor within a local supply chain, suggests a decisive shift away from competition “in the market” (i.e., competition between providers to offer services to individual patients). It is of course possible that other forms of competition will increase over time, such as competition “for the market” (where providers compete for the monopoly right to serve given populations) and for more private companies to enter the NHS as accountable care providers. However, notwithstanding the belief by some critics that this is a significant threat to the founding principles of the NHS, to date at least, little evidence appears to support this prospect.

Instead, there is something familiar about the new architecture. The “place-based” STPs are redolent of the traditional planning approach that existed in the 1990s and before. The new care models bear similarities to total purchasing and other primary care initiatives from an earlier era. So if “new” care models are not entirely new, the question must be asked as to whether they are likely to be more successful and long-lived than their predecessors. The decade of austerity suggests at least that policymakers have a determined focus to reduce spending on hospital care and to use enhanced primary care (and better coordination between the sectors) to deliver cost containment and better population health. Perhaps it is this determination, rather than the concepts and structures that are being promoted, that will prove to be the genuinely “new” element in English health policy.