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The National Health Service: Changes in the

Management and the Delivery of the Services

ROTIMI A. K. JAIYESIMI, MBBS, MRCOG, FWACS
Consultant Obstetrician and Gynaecologist
North Tyneside Hospital, North Shields, England

April 1998

This article explores the management changes that have occurred in the National
Health Service (NHS) since its inception in 1948 up to the present time. The
changes have seen a shift from the Old Public Management Structure to the New
Public Management structure. The reasons for these changes, their effects and
the pitfalls associated with both management structures will be discussed. The
pros and cons of the two structures will form an integral part of the discussion.
The proposed plans for the future will be analysed.

Outline
Introduction
The history of the NHS
NHS Management Structure (1948-1974)
Problems associated with the Old Public Management
NHS Organisation and Reorganisation
The New Public Management (CCT, Resource Allocation, Decentralisation,
Performance Management)
Shift from Administration to Management
The future of the NHS
Conclusion

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The National Health Service - changes in the management and
delivery of services (1942 1998)
It is apt at this time of the 50th anniversary of the inception of the National Health
Service to cast our minds back at its origins, how far its come and explore the
prospects for the future. Health is about promoting the physical and mental well
being of the individual.

The History of the NHS
The National Health Service (NHS) was founded by Act of Parliament in
response to the Beveridge report on the Welfare State of 1942. Prior to this, most
hospitals in the United Kingdom had been operated as non-profit making
concerns. With the NHS act, the hospitals were compulsorily acquired and
subsequently administered by the State. The Basic Principle was the provision of
health services to everyone, irrespective of means and on the basis of need.
These services were provided free at the point of use (Ham, 1991). With the NHS
act, all the hospitals were compulsorily taken over and run by the State. In effect,
the NHS is a public service whose function is to deliver health services and it
has always been run as a public service.


Funding and Administration of the NHS
Following the enactment of the Act, the NHS became centrally funded by
taxation. Hospital doctors, nurses and other hospital staff became employees of
the State. This in effect made the government (or state) the monopoly employer.
However, General Practitioners (GPs) have remained outside the direct
employment of the State and ever since been contracted by the government as
private businesses providing Primary Health Care. Though the government was
effectively the monopoly employers of GPs, they were nonetheless classed as
self-employed. The Government did not have direct control over what activities a
General Practitioner undertakes but decided what services it will and will not
purchase from GPs. A contract, The Red Book, was drawn up between GPs and
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the government describing the list of General Medical Services the GP agrees to
provide (Rogers, 1988). Failure to provide the core services agreed in the
contract was an offence, which resulted in disciplinary hearing by the contracting
authority.

The NHS Management Structure (1948 - 1974)
The original management structure of the NHS had 14 Regional Hospital boards
and 35 Teaching Hospital Boards, all reporting directly to the Ministry of Health.
This set-up persisted from the inception of the NHS in 1948 until 1974. This was
The "Old" Public Management.

The 14 Hospital Boards supervised about 400 Hospital Management
Committees, who in turn supervised the hospitals. Primary Care services were
run by 117 Executive Councils and Community Care by the Local Authorities.
This meant that the NHS was a large organisation, a sole employer and provider
of Health Services. It was centralised and hierarchical, with the features of the
classic bureaucracy, and with no distinction between determining levels of
service and providing services (Boland, 1998).

Attempts were made in 1974 to reduce the bureaucracy. The NHS was
reorganised into 5 tiers of management:
Parliament
Departments of Health and Social Services (DHSS)
Regional Health Boards
District Health Authorities
Area Health Authorities.

General Practitioners and Dentists were employed by Family Practitioner
Committees, which were answerable directly to the DHSS.
Inspite of this, the NHS remained as one large organisation, characterised by
economics of scale. Management and funding were centrally controlled while
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delivery of service was at a local level. Each tier was served by full-time
administrators and advised by an array of advisory boards representing the
professions. As with the Civil Service, the idea of management as distinct from
administrators, using consultation and consensus, was not a feature of the NHS
(Flynn, 1997).

Resource Allocation in the NHS
Within the context of the Old Public Management, resource allocation in the NHS
was tied in with the bureaucracy of the NHS. This process of allocating funds
failed because the process was ad hoc. Budget allocation was based on the
previous year's allocation- the principle of annuity; budget proposals were inflated
because of competition between different departments for funds, which were
limited. Central funding departments were separated from planning and as such
resource allocation was fragmented. The Political leaning of the government also
resulted in certain areas of the nation being 'starved' of funds while other areas
had large allocations. This at times depended on the bargaining power or skill of
the ministers. Politicians also imposed constraints depending on the economic
state of the nation.

Until the mid 70s, the money allocated to individual Regional Health Authorities
(RHA) was calculated as 'the previous year plus a percentage', perpetuating the
particular care-up of resources decided upon at the inception of the NHS
(Rogers, 1998). The Control system was not effective because of the size of the
NHS. This led to the setting up of a Resource Allocation Working Party
(RAWP) in 1976. The remit of the group was to decide how to reallocate the total
NHS budget within the nation and this resulted in a relative diversion of money
away from certain parts of the nation, to other parts of the nation, based largely
on geographical area rather than an assessment of need. The government
commissioned a report in 1977 to study the interplay of social class on health
needs. This culminated in the publication of the Black Report - "Inequalities in
Health" in 1980 and ultimately to some form of social weighting being added to
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resource allocation calculations.

Problems created by the Old Management Structure
In addition to the issue discussed above, the old Management Structure had no
mechanism in place to address issues such as accountability, evaluation of the
efficacy and the effectiveness of clinical and non-clinical aspects of the Health
Service. There was limited autonomy as the direction of the NHS depended on
the orientation of the government. There were no clear objectives and no
judicious planning of the utilisation. As a monopoly of employees and as a
dominant player in the provision of health service there was no competition
between NHS Hospitals or with Private Hospitals.

The ethos of the service did not augur well for attracting skilled managers to the
NHS. This had an effect on the smooth running and efficiency of the service.
Incentives for efficiency were absent. There was too much bureaucracy, red-
tapism and a daunting hierarchical system.

NHS Organisations and Reorganisations - The New Public Management
The problems created by the "old" management structure in the NHS led to
reorganisations, notably those in 1974 and 1989. Significant changes have
included the abolition of Area Health Authorities and the introduction of general
management in 1983 in response to the Griffith's report. It was aimed at
running the NHS as a business. The Griffith report (1983) was highly critical
of management at all levels in the NHS. Sir Roy Griffith came from the Private
Sector where he was Managing Director and Deputy Chairman of Sainsbury's.
His report stated
"One of our most immediate observation from a business background is the lack of a
clearly defined general management function throughout the NHS. By general
management we mean the responsibility drawn together in one person, at different levels
of the organisation, for planning, implementation and control of performance."

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"Absence of this general management support means that there is no driving force
seeking and accepting direct and personal responsibility for developing management
plans, securing their implementation, and monitoring actual achievement."

"The centre is still too much involved in too many of the wrong things and too little
involved in some that really matter."

"To the outsider, it appears that when change of any kind is required, the NHS is so
structured as to resemble a 'mobile', designed to move with any breath of air, but which
in fact never changes its position and gives no clear indication of direction."

"The nearer that the management process gets to the patient, the more important it
becomes for the doctors to be looked upon as the natural managers."

"Action is now badly needed and the health service can ill afford to indulge in any
lengthy self imposed Hamlet-like soliloquy as a precursor or alternative to the required
action."

The Shift from Administration to Management in the NHS
Public administration is usually associated with big organisations and for as long
as the public sector is small there will be less practical adherence to the
traditional model of Public Administration (Lane, 1993). The era of Margaret
Thatcher as British Prime Minister saw the shift in the Public Sector from
Administration to Management. The forces of change included the desire for
greater accountability in the Public Sector, enterpreneurship, and a market
economy, decentralisation of services and the application of the Private Sector
ethos.

The reasons for change were further driven by high expectation from consumers,
value for money for taxpayers and the Public Choice Theory. While the Old
administration operated through political experiences, the NPM operates on the
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premise that the market is the best means of allocating resources. Public Choice
theory redresses this by allowing market to allocate resources through individual
rational choice (Boland, 1998). This results in allocative and professional
efficiency.

New Public Management and the NHS
What is New Public Management (NPM) and why is there a need for the
NHS to imbibe this structure?
A spate of reorganisations has taken place within the NHS. Under the
Conservative Government was the Government White Paper of 1989, entitled
'Working for Patients'. It introduced the concept of Trust Hospitals, Fund-Holding
General Practices and the Purchaser/Provider Split. The 1989 White Paper
resulted in hospitals becoming Trusts and self-governing. This led to
devolvement from the centre to these units. Such units were in a position to
decide what services they will provide, negotiate the price of those services to
their various customers and thereby generate income. They were able to
determine their management structures independent of any Health Authority or
Central Control, responsible for staff employment and determine their own levels
of pay and conditions of service. They also had the power to acquire and dispose
of assets, retain operating profits and to borrow money. They were answerable
directly to the Secretary of State for Health. This is in stark contrast to operational
activities within the Old Public Management Structure.

This degree of freedom was also extended to Fund-holding general practitioners.
They controlled their budget and were able to purchase services required by the
local people they served. It meant for the first time that GP fund-holders were
enabled to purchase services from the NHS and non-NHS hospitals. This is
keeping with the spirit of New Public Management, which espouses market
orientation and consumerism, accountable management and performance
measurement and quality.

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The increasingly customer and market oriented service within the NHS led to
The move towards Resource Accounting, an initiative to create an
accounting and budgeting regime similar to those used in the private sector,
The Citizen's Charter, a programme launched in 1991, to raise the standard
of public services and make them more responsible to the needs and wishes
of their users
Compulsory competitive tendering (CCT)
Market testing of services, a process of testing the value for money offered
by in-house services through competitive tendering involving private sector
suppliers. Services affected included cleaning, catering, and laundering
among others and
Private finance initiatives (PFI)

Though laudable ideas, it in part led to the division of the NHS into individual,
competing "Businesses" that militated against any sort of co-operation to make
the best use of wider resources (Rogers, 1998).

The central government has finite funds and is responsible for other non- health
sectors. In view of this the government is encouraging the private sector to be
involved in the funding of health services through schemes such as the Private
Finance Initiative (PFI). Options available are management buy out,
outsourcing, joint venture or the setting up of a private sector company.
Examples of these include the outsourcing of non-core (non-clinical) services:
St.Peter's Hospital, Chertsey, contracted out of all non-clinical services, resulting
in a 30 million deal, breaking new ground in the NHS market testing. (Adler,
1994). Hospitals have also developed schemes to maximise income such as car
park management, (Royal Victoria Infirmary, Newcastle), Clinical waste
incineration, Private patients Unit and Facilities management. Not all PFIs have
been success stories. A hospital built in Scotland ran into difficulties because of
the low uptake of its services by its target population - foreigners from the Middle
East.
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Total Quality Management Issues in the NHS
With the increasing shift from the old public management to New Public
management quality issues have come into the foray in the NHS. Fundamental
changes in the business environment of organisations have produced a
competitive need to use resources more efficiently and effectively. Moreover,
increased customer awareness and expectation have promoted quality as an
important issue, providing competitive advantage; organisations are striving to
produce quality products or services, at little or no extra cost (Moore, 1993).

Total Quality Management (TQM) is a challenge to change the classical or
historical structure of a hospital. There is no doubt about the importance of
quality within any organisation, private or public and this applies to the NHS.
Business-process- quality management is applied to key processes including
medical care. There is no doubt that quality measurement is fundamental for
quality improvement. With the ever increasing cost for health care, the NHS or
hospitals have to determine how to effectively manage the business and seek
market differentiation based on quality.

Introduction of TQM in the healthcare sector raised a lot of controversy, as there
was difficulty in recognising or admitting that the NHS has customers (as applied
in the private sector). However, with the NPM ethos resulting in competition
within the NHS, Trusts have been left with no choice than to be more effective
and efficient in their use of resources. TQM concept is reinforced by the
purchaser-provider split in the NHS as the purchasers rather than the
producers usually drive the market.

We now have a clinical service that is health gain centered, patient focussed, and
resource effective. In North Tyneside General Hospital, North Shields we pride
ourselves in providing Consultant-led services. This ensures that patients are
treated by highly trained doctors, thereby providing quality service. The three
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components of quality healthcare are technical care, interpersonal relationships
between patient and practitioner and environment facilities (Donabedian, 1974).

Total Quality Management is an important approach to help healthcare providers
to gain competitive advantage in the NHS marketplace of the 90's by promoting
the delivery of a quality service. It is patient focussed, depends on prevention not
detection, and gets it right the first time (Moore, 1993). TQM includes continuous
improvement programme and all members of staff should be involved. Quality of
healthcare is the principal goal that individuals would seek and expect.

Performance Management in the NHS
The Conservative government of Margaret Thatcher introduced performance
measurement in the NHS through schemes such as League Tables, Patient's
Charter and Clinical Audit. Tony Blair's Labour Government has indicated its
intention to drive improvements in NHS Performance. Measuring performance in
the health sector is not straightforward. It is not a science and parameters used
could be crude and at times manipulated to suit set objectives. Examples include
counting patient attendance (Completed Consultant Episodes). Nonetheless,
standards have to be set and performance in various sectors measured against
these standards.

Approaches to the assessment of quality care include
The structure, representing human, physical and financial resources
The process, representing the clinical activities, leading to a clinical outcome
and
The outcome, representing the health status of a patient after healthcare
intervention.

Performance indicators (PIs) are designed to emphasise the critical examination
of health services. They raise questions, provide a means of helping to diagnose
problems and then suggest possible solutions to those problems. PIs are directly
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related to care and treatment. They should be made simple and easy to use and
feedback should be given to staff.

The New Labour Government produced a consultation document - 'The New
NHS' (NHS Executive, 1998) that
sets out the reasons why the approach to assessing and managing the
performance of the needs to change
describes a new National Framework to drive improvements in NHS
performance
illustrates how the framework can be used by a range of different
organisations
considers the development of indications of NHS Performance for the new
framework and
puts forwards proposals for an initial small set of high-level indicators to
provide an overview of Health Authority performance across the areas of the
new framework.

Management and Administration in the NHS
New Public management as operational in the NHS is likely to result in a stronger
emphasis on performance - motivated administration and inclusion in the state of
the art texts of new institutional arrangements, structural forms, and managerial
doctrines, fitted to particular context (Lynn, 1997). The NPM is not the panacea
for a flawless National Health Service. Recent events have shown that large self-
governing Trusts have run into financial difficulties while smaller Trust have not
been in a position to deliver the services for the consumer. This has led to a
wave of mergers of Trusts in the last eight weeks.

Conclusion
The current government proposals are in line with the principles of NPM. It is
hoped that the NHS will be a national service providing consistently high quality,
prompt and accessible services, driven by local doctors and nurses,
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characterised by partnership and competition. It should provide an efficient
service, focussed on excellence and quality. The NHS is 50 years this year and I
hope in the coming years, it will be a public service accountable to patients,
shaped by their views and run efficiently.