We need fewer, Better hospitals…

Few politicians – with perhaps the notable exception of the unpopular Andrew Lansley – embrace the notion of radical NHS reform, but the beleaguered Health Secretary has found support from a surprising quarter

Even Lansley’s own Government has pledged to defend hospitals in their current form. But that would be an enormous mistake, says Tony Blair’s former special advisor on health.

Professor Paul Corrigan believes that unless radical reform is forthcoming, the NHS will limp from one financial crisis to another, with up to 40 hospitals failing over the next two years.

His recent report for the influential think-tank Reform, which he co-authored with Caroline Mitchell, a healthcare business advisor, argues that Trusts need to adopt more innovative “factory-style” working. One of the reasons why too many NHS hospitals are failing is because they try to be all things to all people. Unless radical change is forthcoming, Britain will end up paying a further £5bn a year just to bail out failing Trusts, he warns, when the Government should really be allowing failing hospitals to go under.

“To achieve scale we will need to close down under-performing units so that activity can be concentrated in centres of excellence.

“By applying the lessons from assembly lines, aviation and service industries, managers can introduce a ‘factory’ mode of production offering streamlined ‘value added processes’ for patients.”

These reforms are driven by “unprecedented” financial pressure on the NHS. Over the course of this Parliament, the health service will be compelled to deliver £20bn of efficiency savings. With 50% of the budget absorbed by hospitals, NHS Trusts ought to be in the front line of these efficiency savings. But all too often they were protected by political fear and the public’s misguided affection for all things to do with the NHS.

Yet services clearly need reforming, with fewer beds, smaller wards and in some cases complete conversions in the way some hospitals perform.

None of this should be a short-term fix. Many hospitals had been facing problems for years, providing poor service and many of them are financially unviable. Currently, hospital failure is averted by various forms of interim financial intervention. But that “inefficient hospital fund” could swell to as much as £8bn if the Government carries on protecting hospitals from closure or reconfiguration. It will mean the Chancellor having to find a further £5bn to bail out the NHS by 2013.

It’s not just financial pressures that are driving change. People are living longer and many of them suffer from long-term chronic health conditions. It is therefore imperative that new and better health services are developed for them. Hospitals not only need reforming, but integrated services need to be designed especially for the chronically ill in the community and at home, harnessing the potential of modern medicine and new technology delivery systems.

Survival depends on hospitals changing their business models accordingly, says Corrigan. They should become “solution shops”, focused on diagnosing patients, or organising treatment efficiently and safely in a “factory” mode of production, delivering “value added processes” for patients.

This trend, which to a limited extent is already underway, is likely to become more pronounced once the Health and Social Care Bill takes effect, creating yet more pressure on hospitals to change through better commissioning and better patient choice.

But Corrigan argues that national policy should support this emergence of better healthcare in England by:

• Refusing to bail out failing hospitals, even if it means political embarrassment
• Better commissioning by disinvesting of expensive and poor quality acute services and investing in more primary and community care
• Intensifying market forces by allowing greater patient choice, which again could force poorly run inefficient hospitals out of business
• The Government setting up a transparent, enforceable failure regime for hospitals.

But while there is much political discussion about health reform, there is also reluctance by Governments generally to embrace reform of the main part of the NHS, which is the hospital. Yet without that necessary political leadership, many hospitals will continue to disintegrate.

As things currently stand, about 20 to 30 Acute Hospital Trusts will never become Foundation Trusts and it is also conceivable that about 10 hospitals who have made that status will struggle to maintain that position over time. This means that in the next four years a minimum of 40 hospitals will have to go because their current clinical and economic status is unsustainable.

There are simply too many hospitals – they have increased dramatically over the years - and too many people believing that a local hospital is their right.

The modern hospital embraces three core functions: emergency treatments; elective surgery; and outpatient consultations. But these are radically different functions and bringing them together in one building creates “a jumble of different activities” that trip over each other as they compete for resources.

Hospitals are based on the wrong business model

One of the problems with the current system is the degree to which the system is based on the quantity, rather than quality, of service it supplies. Payment by results are assessed on the number of patients seen, rather than quality of service. This has incentivised hospitals to do more work than before to cut waiting lists – an historical problem in the NHS.

Simply put, hospitals get paid for the work they do, rather than for the results they achieve. As a result, they are incentivised to find more sick people to secure more resources. They benefit financially by seeing more patients. This is confirmed by a Nuffield Trust study showing increasing emergency admissions over time and significantly a lowering of the clinical threshold for admission. You no longer need to be as sick as you had to be in the past to get an emergency hospital bed.

While GP practices are not paid on a fee for service, hospitals are. The amount of money hospitals make is directly proportional to the number of people getting sick: a perverse yet accurate statistic.

“Consequently, we have a funding mechanism that encourages the most expensive organisations to deal with more people, without there being a similar encouragement for the less expensive part of the NHS,” say the report’s authors.

This contrasts with much of what is happening in other health services internationally, where there are incentives for reducing avoidable hospital admission. In America, for example, the Veteran’s Health Association has been using telehealth, coupled with an individualised management approach, for some time. This approach has meant a 25% and 20% reduction in bed days and admissions respectively. It has also resulted in an 85% patient satisfaction rating. In fact, the use of hospital beds in the NHS is over 50% more than the standardised rate of bed use witnessed in Medicare in the United States.

Looking after those with long-term chronic diseases

Patterns of healthcare have changed dramatically since the NHS was set up in 1947, when working men lived for only a few years after retirement and who usually died from some short acute illness. Today, some 70% of the NHS’ resources are devoted to treating the 15m people suffering from long-term conditions. For a hospital to thrive, a major part of any new business model should depend on new ways for working with such people, harnessing new technologies to transform patient care and maintaining wellness rather than treating the disease.This disruption is central to the vision of an improved and reformed NHS, say the authors.

New hospitals for new needs

There needs to be new community-based hospitals set up to treat chronic or long-term conditions, working with patients to help them modify their lifestyles so that they can become as healthy as possible. To achieve this, hospitals will need to develop a set of “radical business models” where nearly all care is based outside the walls of traditional hospitals. In England this year, some 40 hospitals have this very opportunity, since they are taking the community health services previously provided by Primary

Care Trusts.

Some hospitals have started to recognise this and are starting to address the issue of care beyond traditional hospital walls through the effective use of telehealth. At the Ulster Hospital in Dundonald, diabetes management was tackled by Dr Roy Harper in 2009, with the aim of empowering patients to become better self-managers. Patients are trained to use monitors, including glucometers, so that readings can be transmitted back to medical experts. Protocols are established with specialist nursing teams, who escalate treatment according to the information they receive. Virtual clinics review patients who require additional support or a change in medication. Thus the team is able to review real-time data, without the need for a hospital visit by the patient or a home visit by the community nurse.

Change will happen anyway

Even if the Government fails to grasp the policy nettle on the crucial issue of NHS reform, change will happen anyway, says Corrigan. Patients are already getting more information through media and social networking sites. If only 10% of patients begin to make choices based upon this information, hospitals that do not have a good reputation will start feeling real financial pain.

A corresponding 10% drop in income would force them to undergo business model change in order to survive.

This report is based upon the Reform report: The Hospital is Dead, Long Live the Hospital. Reform is an independent, non-party think tank with a mission to set out a better way to deliver public services and economic prosperity.