Ota Sik Kenneth Clarke
THE PURCHASER/PROVIDER SPLIT
The paper then goes on to discuss the 'internal market' and the purchaser/provider split:
'Hospital and Community Health Services providers, which had previously all been run by DHAs as Directly Managed Units/District Managed Units (DMUs), became (progressively, in a series of “waves” of applications, over several years) separate organisations, called NHS Trusts.
'Different Trusts were established to provide acute hospital, ambulance, mental health and community services. Each Trust had its own management and “sold” its services to NHS “purchasers” as part of an “internal market” ...
'Trusts were not accountable to their local District Health Authorities; they were accountable (through the Regional HAs) to the Secretary of State, but not in respect of detailed operational matters.
'The role of purchaser in this system fell to some GPs, and to DHAs and FHSAs [Family Health Services Authorities, which, in 1990, replaced the old Family Practitioner Committees], as well as RHAs in some respects' ...
'Under a scheme called GP Fundholding, volunteer GPs (in successive waves of development) were given cash budgets with which to buy a range of elective inpatient (admitted patient) treatments, as well as all outpatient hospital visits, for the patients on their lists.
'In addition, Fundholders were responsible for buying outpatient diagnostic tests, drugs prescribed by their practices (effectively placing a cash limit on the previously open-ended, demand-led GP prescribing budget), and (from 1993) community health services and outpatient mental health services. Fundholding practices also effectively controlled budgets for ancillary practice staff, since, unlike non-Fundholding practices, they were not required to seek approval when they employed staff.
'Fundholding thus added financial responsibility to the GP gatekeeper role [The GPs were 'gatekeepers' of the hospitals since patients were normally only admitted on their recommendation - PB]. Fundholders were incentivised in this by being able to retain any surpluses they generated, to use in their practices (to the benefit of patients) as they saw fit [ie they were discourage from recommending hospital treatment since it cost them money - PB].
'Over several years, substantial numbers of GP practices volunteered to become Fundholders, either singly or in groups. Fundholding practices (which apparently tended to be in rural and suburban areas) eventually covered over half the population. '
The reason for acceptance of the fundholding scheme lies partly in a re-organisation of the administrative structure that took place in 1996. Regional Health Authorities were abolished and replaced by regional offices of the NHS Executive, now the central management of the NHS. The District Health Authorities were replaced by Health Authorities, whose non-executive members were appointed by the Secretary of State.
'Purchasers (Fundholders and District Health Authorities/Health Authorities) entered into (primarily bulk-purchase) contracts with Hospital and Community Health Services providers – although the contracts were not enforceable by law, being only internal NHS Service Level Agreements. These arrangements were drawn up locally, there being no standard national contract. The lack of a national pricing system meant that providers were, in theory at least, able to compete with each other on price.
'In the original model of the NHS, where there were no such contracts, clinicians had been entirely free to refer patients wherever they thought fit ... It had been an important founding principle of the NHS that patients should be able to access care anywhere in the service, as appropriate, untrammelled by the artificial boundaries which had existed between different healthcare providers in the “patchwork” pre-NHS system.
'The need for contracts with providers led some GPs to conclude that, in order fully to retain their clinical freedom of referral, they must become Fundholders. If they did not do so, they would be bound by whatever contractual arrangements their local DHA/HA saw fit to make. '
But there was a continued strong opposition in principle to fundholding and the 'commercial opportunities and financial incentives' it brought. It was 'abolished in 1999 by the then Labour government. The purchaser/provider split, though, remained ... in a modified form. It was now described as a split between the planning and provision of care; and the purchasing aspect of the purchaser/provider split was increasingly referred to as “commissioning”.'
Which brings us back to the New Labour policies outlined in the first article and in The Plot against the NHS. This fake internal market, with the people who had previously simply administered funds made available from central government now pretending to be buyers and sellers of services, and therefore to a limited extent having to think in market terms, might ring a bell. That is if any of my readers happen to be familiar with the British and Irish Communist Organisation pamphlet Marxism and Market Socialism. For is this not what was done in the Soviet Union and Eastern Europe in the sixties under the influence of 'revisionist' economists such as Oskar Lange and Ota Sik? Kenneth Clarke, incidentally, who introduced the system, claims that he was simply trying to avoid worse, since Margaret Thatcher was keen to introduce a US style health insurance system:
'The best jobs he ever had, he says, were as health secretary and chancellor – "both fascinating stuff" where he had a long stint that gave him the chance to "deliver my own agenda". His first challenge at health was heading off Thatcher, who "wanted to go to the American system", he reveals. "I had ferocious rows with her about it. She wanted compulsory insurance, with the state paying the premiums for the less well-off. I thought that was a disaster. The American system is hopeless … dreadful."
'He prevailed on her to take a different route by introducing more competition into the NHS. It became known – in a phrase he didn't like – as "the internal market". Ever since then, successive governments have pushed in broadly the same direction.' (Andrew Rawnsley interview with Kenneth Clarke, Observer, 19th July, 2014)