Ian Kirkpatrick, Professor of Work and Employment Relations, Leeds University Business School and editor of the journal comments on government plans to reform the NHS.
Government plans to reform the NHS have left some people feeling rather ill. Since the proposals were unveiled last summer, critics have been lining up to cast doubt on how much they will cost to implement, asking how much disruption they will cause and whether core services will become fragmented at a time when overall government spending is being cut. They have questioned whether GPs will be willing to take on the increased responsibility and workload associated with their new commissioning roles and expressed scepticism about whether the proposals will deliver improvements in the quality of services on the front-line.
But what has gone relatively unchallenged until now is the startling claim that the ‘new’ NHS will be more efficient and need fewer administrators and bureaucrats. The White Paper said a 30% saving in administrative costs and a 45% saving in management costs would be delivered in four years.
But let’s take a step back and ask two questions – is the NHS actually management-heavy? And what is the evidence that government’s plans will result in fewer managers and more efficiency?
Statistics show that the number of managers in the NHS has grown in recent years. It is estimated that that total administrative and management staff (including central functions such as HR, Finance and IT) in the NHS in 2009 was around 13% of workforce. The proportion of managers in the workforce in the UK as a whole is 16%, so by this metric the NHS is management light!
NHS administrative costs significantly lower than in the US
Overall administrative costs in the NHS as a proportion of total is currently around 5% - amongst the lowest in the developed world. This means overall administrative costs are significantly lower than in the US, where it is estimated to be around 20% of total expenditure, and where administration and clerical staff account for between 25-30% of the total health workforce.
It’s true that markets can generate efficiency through competition. But it’s also true that they involve ‘transaction costs’ as well. These hidden costs are things like writing and monitoring contracts, marketing and advertising services, paying for capital, insurance, invoicing and accounting. Taken together they can place a heavy administrative burden and it is partly for this reason that the costs of the US – market based system – are so high compared to the UK.
The healthcare systems in the UK and US are of course different and comparisons between them are not straight-forward. In the US, costs are generated by having numerous health insurance funds and things like marketing and new product design. But it’s likely that as with so many things, the UK will follow events across the Atlantic and we will see a larger number of organisations involved in buying and selling services.
The White Paper also makes clear that services in the future should be delivered on budget. This sounds like a good thing, and in some ways it is. It’s important to remember that there is a degree of flexibility in the current system– which works well when you consider that the NHS isn’t an ordinary service provider. The NHS is a public good, existing to make people better and save lives, in these situations, balancing the books simply isn’t the top priority.
The White Paper talks about “radically simplifying the architecture of the health and care system”, but ironically the proposed changes seem to point to a far more complex system. More importantly, far from reducing the need for managers and administrators – if the US experience is anything to go by - the demand for these services will be greater than ever. As taxpayers, we will need to get used to the fact that for every pound we pay towards healthcare, administrative overheads will account for a larger not smaller cut. The irony will not be lost on the critics or on those who ask – with good reason – what any of this has got to do with actually improving patient care.