Author: Clive Savory

Innovation in the NHS: a game of two halves

Updated Sunday, 2nd March 2008
Initiatives designed to promote efficiency sometimes reduce effectiveness. How can the NHS keep the balance?

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Like football, innovation in the public services is a bit of a game of two halves. The first half is concerned with improving efficiency; the second half is about improving effectiveness. Public healthcare services and in particular the NHS is currently engaging in its own innovation game. The first half is concerned with improving efficiency of services through a process of continuous innovation.

Plenty of national, regional and local level initiatives have attempted to encourage efficiency improvement through cost reduction, process improvement and lean thinking. The second half is concerned with effectiveness and is concerned with producing better services, in new ways. Lord Darzi’s report last year is the most recent indicator of this part of the game. It suggests the need to innovate services within a vision of an NHS that is fair, personalized, effective and safe.

Unfortunately, again as in football, joining the two halves together is not always easy. But at this point the comparison with football starts to break down. Football managers get a break between the two halves, they can reprimand, inspire or empathise with their players and then hope the second half goes well. In the NHS’s innovation game, the two halves are actually happening simultaneously.

What is more, the two halves are tightly interrelated, involving and impacting on the same staff, resources and operations. It is a bit like getting footballers to play in two games simultaneously on pitches lying parallel to each other.

It is for this reason the decisions about innovation faced by NHS managers, are far more complex than those faced by their more highly paid equivalents in the football industry.

The inter-relationship is well illustrated by one of the NHS’s recent reform, the implementation of Payment by Results (PbR). This was introduced in 2003 and aimed to improve the fairness and transparency of hospital payments and to stimulate provider activity and efficiency. The main impact was that healthcare providers would be paid for the number and type of patients treated, using a national set of rules and a national tariff.

At face value this was an initiative very much concerned with the efficiency half of the innovation game. It sought to get NHS trusts to trim the waste in their provision and ensure that their costs did not exceed the national average. But what was the impact on the other half of the game, effectiveness of NHS provision?

Nuffield Orthapedic Centre, Oxford
The Nuffield Orthapaedic Centre, Oxford

My interest in PbR was raised in a conversation with a friend who works at the Nuffield Orthopaedic Centre (NOC) in Oxford. He drew my attention to the plight of the NOC, caused by the PbR initiative. The NOC, through continuous innovation of its services, provides both routine and specialized orthopaedic services. It is common for patients to be referred from a wide area because it is able to carry out the difficult or more specialised procedures. The NOC is one of five centres of excellence in the UK for othopeadic service.

The impact of PbR has however meant that the payments the hospital receives for treatment do not take into account the added complexity of treatment. The result has been that a hospital that provides high quality services and is innovative in its approach to delivering care, has struggled to remain viable in the long term. This is where the inter-relationship between innovation aimed at efficiency and effectiveness has resulted in unintended consequences.

In February this year the Audit Commission reported on PbR and have made some recommendations. The report makes some interesting reading. It concludes that there have been some positive outcomes. Since introduction of PbR the number of day cases has increased allowing more elective activity to take place. This is certainly an improvement in efficiency – treating more patients with the same resources. Encouragingly, the Commission concluded that quality of day case treatment had been maintained and was not adversely affected by PbR.

But what of improved effectiveness? Well the report is less positive about PbR in these terms. It concludes that the emphasis placed on rewarding efficiency and volume of work has lead to some less desirable effects. The first of these is in relation to the advice provided by the National Institute for Clinical Excellence (NICE). PbR only in limited cases adjusts tariffs in response to new NICE guidelines; to the point where in many cases PbR rewards NHS Trusts for ignoring guidelines and even penalizes them for applying them. Second, PbR is institution focused and does not take into account co-ordination across boundaries. This is very limiting as to provide personalized care it is imperative that a patient’s journey crosses smoothly between different NHS organizations. A tariff system that does not reward the inter-organisational co-ordination of services will have limited impact on personalized care delivered nearer the community, as advocated by the Darzi report. Finally, the commission concludes that PbR does not directly reward high quality care. One of the key recommendations of the report suggests that the granularity of detail handled by the tariff system needs to be improved, allowing indicators of complexity and quality to be truly reflected in the tariff paid.

Given that innovation is a game of two halves, PbR seems to provide a contribution to the first half, but has had negative impact on the second half. The Darzi report may well contribute to the second half, but the ultimate challenge for the NHS is to bring the two halves together. Unfortunately, illustrated by the difficulties experience by the NOC, reliance on levers of change like PbR will always have unintended, though not always unforeseen, consequences.

My concern is that the wider agenda for an innovative NHS will continue to be blocked by the unintended consequences of performance management initiatives. There are already several examples in our public sector services of where poorly conceived performance indicators skewed attempts at improvement and innovation. For many public services, including health, policing and education, initiatives such as payment by results risk taking managers’ eyes off the innovation ball in both halves of the game.




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