Intended for healthcare professionals

Editorials

The coalition government’s plans for the NHS in England

BMJ 2010; 341 doi: https://doi.org/10.1136/bmj.c3790 (Published 14 July 2010) Cite this as: BMJ 2010;341:c3790

Good intentions butter no parsnips

There are a lot of good intentions in the Health White Paper
and Chris Ham provides a good analysis of some of the key
challenges. But I think he understates how much the
government's antipathy to managers could undermine the good
intentions.

Andrew Lansley has imposed savage cuts on the management
costs in the current system and though the white paper
proposes to give the commissioning consortia "sufficient
freedom to use resources in ways that achieve the best and
most cost-efficient outcomes for patients", just two
paragraphs later it envisages a "maximum management
allowance". Other recent reports suggest that the expected
management costs will be tiny relative to the GP's budgets.

But what if managers are not the bureaucratic stick-in-the-
mud types of political rhetoric but actually make the
essential decisions that will drive up quality and
productivity? What sorts of decisions do they need to take
to drive improvement? How many of them do we need to do
those roles?

My observations suggest that one of the reason why PCTs were
not very good at commissioning was lack of management
capacity. Earlier this year in its report on commissioning
the health select committee said "weaknesses are due in
large part the PCT's lack of skills, notably poor analysis
of data...and the poor quality of much PCT management".
Savage cuts in management don't seem like the best way to
increase the capacity of the system to do commissioning
well.

So how many managers do commissioners need? This is not an
easy question to answer but a quick comparison with other
organisations whose primary purpose is to spend money
effectively to procure services should help. PCTs spent
between 1% and 2% of their budgets on "management" using the
DH definition and the new target will just about halve this
total. Big charities spend money for a variety of purposes
and they have to allocate that money well without wasting it
on overheads so there is some comparison with the role of a
commissioner in health. UK charities are not obliged to
split out the relevant categories of spend in their
accounts, but charities in the USA have to categorise
spending on management in ways that allow fundraising and
programme management/service delivery to be separated from
the costs of deciding where and how to spend their money. Of
course the analogy is not perfect and the definitions not
exact, but some insight still exists. Only the most
outstandingly frugal charities spend as little as 1% of
their turnover on management. Typical large charities spend
3%-5% (the American Diabetes Association and the American
Cancer Research Fund, and the American Red Cross for
example). But some big health charities spend much more. The
Mayo Clinic spends about 12.5% of turnover on management;
the Salk Institute 19%. [These figures available on
www.charitynavigator.org]

This crude quick and imprecise comparison suggests that we
will be lucky if GP consortia can do a good job of
commissioning with the tiny expected costs of management
(<1% of their NHS spend). A more prudent approach would
allow them to decide for themselves how much to spend since
they can them make intelligent choices about how much they
need to spend to improve outcomes or productivity.

And it is not as if good management doesn't sometimes pay
for itself. Here is an example. The estimated error rate in
clinical coding by hospitals is more than 10%. This often
affects the payment for the activity. PCTs who devote
management effort to checking how much they pay for their
activity have been known to find they overspend by 5%. The
majority of PCTs have probably never either noticed or
recovered that money. If they spent say 0.5% more of their
budget on management, they would have 4.5% extra to spend on
other services: that is a pretty good return on investment
in management cost.

In short: the centralised drive to meet the politically
attractive target of cutting management (there is no public
lobby for more "bureaucracy") runs a serious risk of
undermining the capacity of the new NHS to actually improve
and to spend its money well. Good intentions are not enough:
we need some people who know how to spend NHS money wisely.

Competing interests:
None declared

Competing interests: No competing interests

21 July 2010
stephen black
management consultant
london sw1w 9sr