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Capital planning or market chaos?

What is the future for London’s NHS afteer Tomlinson? Can — or should — the great London teaching hospitals survive? Paul Martin analyses the background to the latest crisis in the NHS

Another crisis in London’s health service is upon us. Trusts are shedding jobs, wards are closing and managers and unions alike speculate apocalyptically about how many teaching hospitals will have to close. The streets are filled with bright banners and resound with the familiar ring of ‘no more Tory cuts’, as campaigners start another in the endless round of protests, lobbies and days of action. In the corridors of power, civil servants and politicians pore over the recommendations of another confidential inquiry into ‘the London problem’, as the Minister makes yet more empty promises of urgent action. After 16 years of cuts and closures, the constant feeling of crisis in London’s NHS is taken for granted. Yet there is an increasingly anxious mood that this time round the chickens really are coming home to roost, and that what is happening in London today may spread to the rest of the country tomorrow.

It is important to understand the real significance of London’s crisis. In most discussions it is treated as a special case, a peculiar regional problem. This view has been reinforced by numerous government reports and a near constant tinkering with policy towards the capital. Yet a more critical analysis reveals that, whilst some aspects of what is happening are due to London’s unique history and role in the NHS, most of the problems represent an extreme case of the dynamic instability and unresolved tensions inherent in the NHS reforms. How these dilemmas are tackled in London will inform the shape of health policy nationally.

The orthodox view of ‘the London problem’ is that the capital has had the lion’s share of NHS resources, with more beds and more costly services than any other part of the country. That this was unfair was part of the thinking behind the RAWP funding formula in the late 1970s, which led to a shift of resources out of the capital and a rapid reduction in acute beds, especially in inner London. Between 1982 and 1990 over 26 per cent of acute beds in inner London were lost, compared with a 16 per cent reduction nationally.

More recently the reduction in beds and services has accelerated as the creation of the internal market has emphasised the high cost of services in inner London compared with the home counties. It has been estimated that the cost per acute episode is, on average, twice as high in an inner London teaching hospital compared with an outer London non-teaching hospital. Given that, historically, the outer London health authorities have ‘exported’ large numbers of patients to inner London hospitals, there is now a strong financial incentive for purchasing authorities to treat such patients locally. The consequences for inner London hospitals will be dramatic, since they depend on this migration for nearly a third of their income. In the first year of the market, Middlesex and University College Hospitals in central London lost over 70 per cent of their referrals from a number of outer London purchasing authorities, leaving a gaping hole in their finances.

For many in the capital’s health service a Domesday scenario is emerging: as resources are drained from the city and public spending is tightened, massive cuts will be made in a chaotic manner, with several major hospitals closing. The closures will not be planned to ensure that local people continue to get the care they need, but will result from short term expediency and horse trading between powerful interest groups. The most likely outcome is that waiting lists will increase as beds are cut, and community and long stay services will be run down further in order to protect the teaching hospitals from the full force of the market.

In response, campaigns that have recently been relaunched to protect health services in London are trying to prevent more hospital closures by arguing that underfunding remains the root problem. But there are good reasons for believing that the number and power of the inner London hospitals are part of the problem, not part of the solution. The crisis calls for a more thoughtful analysis and a creative alternative plan for improving services for patients, not simply defending the status quo.

The King’s Fund recently commissioned a major study on London that provides detailed information about the hospital sector. Although the report’s recommendations were sanitised for the government, a number of important conclusions can be drawn from the evidence presented.

First, London’s health services are relatively inefficient. Roughly twice as much is spent on the NHS in London, per capita, than the national average, and London has 80 per cent more beds per capita. When London is compared with similar inner city areas in Birmingham, Manchester and Liverpool, it still spends some 27 per cent more than expected, though it has roughly the same number of beds per capita.

This relative cost inefficiency of services is greatest in central London teaching hospitals where the average length of stay is 12 per cent longer, and cost per acute episode 20 per cent higher, than in comparable hospitals. Although cases are more complex in teaching hospitals, the main reason for these higher costs appears to be the much higher staffing levels, particularly of medical staff, per case. Surprisingly, the hospitalisation rate in London is very similar to the national pattern.

Despite the clear evidence that more resources are available in inner London, there is still a strong feeling among Londoners that access to care is poor. This is borne out by the fact that, while waiting lists have been improving in many parts of the country, in London they have increased by 40 per cent over the past decade. There are now a larger percentage of patients waiting longer than one year in London than in the rest of the country.

Second, health service planning in London has failed. The inefficiency caused by higher unit costs in inner London is compounded by a complete failure to successfully plan services. In the late 1970s and early 1980s a number of important policy commitments were made: to improve efficiency and service delivery; to reduce the number of specialist acute units; to improve primary health care; and to increase services for ‘priority groups’. Yet in the last ten years none of these objectives have been met. The number of specialist units, beds and outpatients clinics has hardly changed, with some specialist services actually expanding at a time of swingeing cuts in local acute services. There has been little improvement in GP services, so that inner London still has 70 per cent more GPs who are single handed and 40 per cent fewer support staff than the rest of the country. Most disturbingly of all, in many London districts ‘priority’ services for people with mental health problems and learning disabilities, and for elderly people, have suffered larger cuts than hospital based care.

Third, private healthcare in London has expanded rapidly. In marked contrast to the sharp reduction in NHS acute services in London, the number of private medical and surgical beds increased by over 90 per cent over 1977-91, compared with an increase of 55 per cent nationally. It is estimated that over 30 per cent of all elective surgery in the four Thames regions is now performed privately. In the prosperous outer metropolitan area of London, private health insurance covers nearly 20 per cent of the population in some counties. The size of the private sector is such that in 1989/90 London health authorities spent £153m on medical consultants, but in the same year these consultants received £175m in private practice fees, with the top 20 per cent earning more than £95,000 each from private work alone. Disturbingly, it is not clear how many consultants are able to honour their NHS commitments and still carry out so much private work.

These three factors highlight the power, and resistance to change, of the inner London teaching hospitals. Attempts to rationalise these remote and relatively inefficient hospitals have failed miserably, as they have successfully resisted merger and protected their high-tech specialities. Their influence has been strengthened further in the last decade, as smaller local hospital services have been centralised and community services run down. While teaching hospitals may be important for medical education and research, there is a strong argument that in inner London their presence has fundamentally distorted the pattern of healthcare at the expense of local services.

The concentration of teaching hospitals, with their regional and national specialities, also helps account for the size of the private sector in London. Private medicine depends on NHS consultants to carry out the bulk of its operations and investigations. London has an abundance of doctors, many of whom have established good reputations through their work in the prestigious London hospitals. The combination of a large number of consultants, a big and prosperous population, and deteriorating local services, has provided the impetus for the massive expansion of private medicine in London.

The London teaching hospitals institutionalise the interests of the elite of the medical profession, with their interests in private practice, research and specialist services. These interests have been successfully defended at a time of cuts and closures, and at great cost to services for local people. Any strategy for improving the NHS in the capital must place its emphasis on access to care and service outcomes for local people, instead of focusing on inputs -- the number of hospitals, beds and staff. As the market takes off, resources will inevitably move out of the capital and jobs will be relocated. The priorities must be to ensure that waiting lists don’t get any longer, that community and primary care services are strengthened, and that firm limits are placed on the diversion of resources to the private sector. This will only be possible if the power of the senior medical profession in the teaching hospitals is challenged, so that specialist services and medical education can be rationalised, private work controlled and the pattern of care focused on local needs. If this is not done, local services will deteriorate further and private medicine will continue its seemingly inexorable growth.

History does not give much hope that such a rational solution can be found. But one of the real strengths of the NHS reforms is that medical power is explicitly challenged, with the potential to shift services away from historic patterns. This will only be possible if purchasing authorities are genuinely able to control providers and take a London-wide approach. The case for a London purchasing consortium managing the process of change and challenging the teaching hospitals is overwhelming.

’The London problem’ is a key battleground for Conservative policy, since it will test how far health authorities will be allowed to regulate the market, change patterns of care and take on provider interests. In recent simulations managers found that the internal market ‘froze’ as purchasing authorities were unable to make radical changes to traditional patterns of care, because provider units formed alliances and the medical profession mobilised political influence. The only alternative to effective regulation of the market by purchasers is the continued dominance of services by powerful acute hospitals, with primary care and community services losing out. This may be the more likely scenario, since it would further other government policy goals, particularly by increasing the importance of private insurance and nursing care. At the same time, it would be in step with the broader goal of ‘deregulating’ service providers and reducing the power of the local state.

If London is special in any way, it is because it matters to MPs in Westminster and to the national media. The struggle over the future shape of London’s health service will have a high political profile and be decisive in shaping national policy. There is a real danger that the more successful the broad based campaigns to protect the teaching hospitals are, the harder it will be to genuinely improve services in London. The focus for those campaigning for the NHS in London should be to ensure that change is carefully managed by a London-wide planning body. Without tight regulation of the London market and a serious commitment to shift the emphasis of care away from the big hospitals, Londoners will continue to suffer from the paradox of a famine of local services in a city with a glut of NHS resources.