Feature

Is the future fundholding?

GP fundholding was supposed to ‘kickstart’ the internal market of the new NHS. But the policy could now be on a collision course with the rest of the reforms. David Hardy reports

On April Fool’s Day, breathless and excited, health secretary Virginia Bottomley announced that the number of GP fundholders was to double to 6,000. GPs, she said, were ‘clearly signalling their approval of the scheme’, one of the most controversial aspects of the reforms - which were themselves ‘the biggest and most successful improvement in the UK’s healthcare system since the NHS was formed’. But the joke is on her.

For just as she was extending fundholders’ numbers and powers in defiance of their many critics, there appeared the first tangible omens that the beginning of the end had finally arrived for fundholding. Since the Department of Health first mooted the concept in its Working for Patients white paper in 1989, it has been told repeatedly that fundholding is incompatible with the rest of its internal market reforms and will destabilise the NHS. Now evidence is emerging that before this financial year is out, the day of reckoning will be upon ministers, who will be forced to take further far-reaching decisions on the future, not only of fundholding but on the nature of the entire health service.

What are these omens? In January came a renewed spate of warning that a ‘two tier’ service was developing, with fundholders’ patients being given preferential ‘fast-track’ access to elective hospital treatment, in clear contradiction of guidelines drawn up in 1991. Two years ago, fundholders themselves had been leaning on hospitals to admit their patients first; this year it was the hospitals, finding their main purchasers - health authorities - running short of cash before the year end, which were seeking out fundholders’ patients in preference to others.

Such trends serve to reiterate the pundits’ warnings that fundholding is the ‘wild card’ in the reforms, undermining access and equity, and that its benefits - outweighed by its risks - have been secured only at disproportionate cost. But to be fair, it undoubtedly has brought some significant benefits, mainly in catalysing the shift in power from secondary to primary care.

For example, more GPs are now performing minor surgery instead of having to refer patients to hospital; in some places consultants are holding outpatient clinics in GPs’ surgeries - more convenient for patients and less costly for the NHS.

Fundholders have been able to use their purchasing power to stimulate improvements in certain hospital services which have long caused frustration, such as laboratory tests with slow turnaround times. And many districts report better communication between GPs and hospitals.

But until now fundholding has been tested on only a small scale and with the advantage of feather-bed funding. The 300 first-wave fundholding practices, all with list sizes of 9,000 or more, were predominantly in the suburban ring around London or in the more affluent rural areas: few had to cope with social deprivation or pockets of high morbidity.

The Labour Party has calculated that in their first year fundholders had lavished on them £14m to pay for practice management support. In addition, family health services authorities spent £9m on fundholder management, while other purchasers and providers spent £44.8m in management time dealing with fundholders. Labour also claims each fundholding practice spent on average £12,500 in the private sector - money lost to the NHS - and that each was underspent by an average of £44,000.

A National Association of Health Authorities and Trusts survey found that half of all HAs thought too much money had been transferred from their budgets to fundholders. As fundholders’ financial returns for the end of their first year began to reach the DoH it became apparent that they had made a 4 per cent overall saving. But this figure masked some massive anomalies: one Norfolk practice, for example, was alleged to have saved £280,000 on a £2.3m budget.

In March came another ill omen for the scheme. A first-wave fundholder was expelled for overspending. The Far Lane Medical Centre in Sheffield is believed to have exceeded its £1.1m budget for 1991-92 by £100,000, and is though to have been accumulating a similar deficit in 1992-93. Trent regional health authority condemned this as a ‘failure to manage the fund effectively and efficiently in line with regulations’.

The practice itself claimed its budget had been ‘inadequate’ to fund its activity increases, and added that it was ‘sad that the only yardstick to measure the success of fundholding is whether the books balance or not, rather than judging the speed and quality of the service’’.

Far Lane looks set to be the first of many such examples. With the government’s economic problems persisting, and chief secretary to the Treasury Michael Portillo demanding every department help trim public spending, the goldrush is over for GP fundholding. Any practice with a list of 7,000 is eligible for the scheme now, provided it has enough computer back-up and managerial skills. Since April fundholders have covered 25 per cent of the population in England, and by next April another 3,000 are predicted to be ready to join the scheme, taking coverage to 40 per cent. Clearly, from now on what money there is will be spread much more thinly.

This is causing discontent already. Among the third wave who joined this April, many were disgruntled to find the gravy train they had expected had long since departed. Rumours of mass withdrawals were rife, though they are hard to substantiate. But as the new financial year began, many contracts remained unsigned, especially for community services - the powers to purchase which, GPs have only just acquired. Budgets for these have fallen far short of expectations and led to several disputes.

Patterns are being set for the future. Fundholders will have a choice - either to overspend or to begin explicitly rationing services to their patients. Some say they joined the scheme in the first place convinced it would expose the extent of NHS underfunding - so they will not balk at embarrassing the government by choosing the former course. When that point is reached, ministers will be forced to acknowledge what they have so far evaded: that fundholding is incompatible with the NHS reforms as a whole.

But the threat of large-scale fundholder overspending is not the only factor which may lead the scheme to subvert other aspects of the reforms. In several places fundholders are combining into ‘superfunds’ to wield greater spending power, and in so doing they are whittling away the role of health authorities as purchasers.

In Kingston and Richmond, for example, 22 fundholding practices plan to combine from next April. They will then be able to commandeer 14 per cent of the district health authority’s budget. HA chief executive Richard Gibbs has been quoted as saying he has ‘nightmares’ about the future and what could happen if the fundholders decided their priorities did not match the HA’s.

This is not an isolated or even extreme example. In Oxford region a pilot study is planned to give fundholders power to buy all primary and secondary care - a step which would need legislation. In Ayrshire and Arran, all 250 GPs in 30 practices are intending to develop a single management team with the eventual aim of creating an agency to buy secondary care. This too would need a change in the law - and entirely eradicate the role of the health board.

Elsewhere, the kamikaze nature of fundholding has stimulated a search for alternatives among health authorities and the GPs whose views are now more crucial than ever. Last year the Medical Practitioners’ Union launched a helpline offering advice on alternatives.

In North Yorkshire, 440 GPs have formed ‘practice advisory groups’ to feed views to the HA via elected representatives who make up a ‘GP advisory forum’. The object is to exert influence over the HA’s contracts.

Bath HA has split its funds into notional budgets for each practice. Every GP has notional responsibility for the money spent on all hospital services except accident and emergency. The proponents of this system, dubbed ‘practice sensitive purchasing’, argue that it involves GPs in much less administrative work than fundholding, while giving them power over many more services than the 20 per cent fundholders enjoy.

Perhaps the most famous alternative so far has been pioneered by the 100 GPs in Tower Hamlets in London’s East End, none of whom were interested in fundholding. Their GP forum has elected a commissioning committee to play a direct role in purchasing hospital services. GP representatives sit with a HA manager and public health doctor on eight purchasing groups which negotiate contracts with local providers. City and East London family health services authority has put up £25,000 to pay for regular consultation with the GPs. One notable success has been the reduction in waiting time for ENT from two years to three months - an achievement to rank with those touted by fundholders.

Ministers may be grateful to these refuseniks in the months ahead for providing ready-made alternative models which offer the benefits of fundholding without the drawbacks. For one thing is certain: fundholding and the rest of the reformed NHS are on a collision course.