NHS in chaos / FRFI 188 Dec 2005 / Jan 2006

FRFI 188 December 2005 / January 2006

Foundation trusts ‘should adopt the same marketing techniques as Tesco in their bids to win customers in the new choice-based NHS market’.
Sir Nigel Crisp, NHS Chief Executive

In FRFI 182 (December 2004/January 2005) we argued that the massive increase in NHS funding since 2003/04 had two purposes: first, to ensure there was an adequate level of service to meet the needs of the middle class and the better-off section of the working class, and second, to pay the costs of a necessarily more expensive privatised system. We also predicted that such a system would ride rough-shod over the needs of the working class. With widespread ward and hospital closures now on the cards, that prediction is about to be borne out. Robert Clough and Hannah Caller explain why the NHS is descending into financial chaos.

On 17 November, Patricia Hewitt, Secretary of State for Health, made it clear that she expected the NHS to break even at the end of the financial year in March 2006. This will require a total of £750m cuts over the next four months – equivalent to an annual total of £3bn. The extension of Payment by Results to cover emergency admissions from next April will compound the financial instability that has followed its introduction this year for elective (non-urgent) treatments. On top of this comes yet another re-organisation: Commissioning a Patient-Led NHS which will reduce the number of Primary Care Trusts (PCTs) from over 300 to about 120, and Strategic Health Authorities (SHAs) from 28 to about ten. The aim is to cut management costs by £250m per annum, approximately 15%. This is a consequence of Labour’s steady drive to privatise delivery of NHS services.

The significant rise in NHS expenditure over the last three years has been used to meet the demand for treatment that built up over the preceding period. Hospital trusts have managed their finances so that any overspend incurred by meeting government targets for waiting list reductions one year has been covered by the next year’s funding increase, using a system called brokerage. This involves hospitals or PCTs with surplus cash at the end of the financial year lending it to those with a deficit. However, the limits of this arrangement were exposed when the NHS reported its first annual deficit of £536m for 2004/05. As the rate of funding increase has slowed, so the underlying deficit has increased, and the capacity for dealing with it without cuts has now disappeared. Even before Hewitt’s announcement, a survey by the British Medical Association was predicting a budget shortfall of £2.4bn this year. Examples are:

• Three PCTs in Suffolk have a budget deficit of £48m on expenditure of £380m. In an attempt to save money, they are denying hip and knee operations to those deemed clinically obese;
• The NHS in Cambridge has a forecast deficit of £23m;
• Peterborough and Stamford NHS Foundation Trust may have to make 200 out of its 3,000 workforce redundant over 16 months as it closes four wards to claw back a near-£8m deficit;
• Trafford Healthcare Trust is proposing to close Altrincham General Hospital to sort out debts of £12.5m;
• Walsgrave Hospital will lose up to 250 posts to address an £8m deficit;
• After posting a deficit of £30m in 2004/05, Surrey and Sussex Healthcare have an additional estimated £33m deficit this year.

Throughout the outskirts of London hospitals are reporting huge deficits as well. These deficits will be immediately deducted from the money they receive in the new financial year. Since they are having great difficulty in predicting their income because of the extension of Payment by Results, their financial plans will amount to little more than guesswork. Redundancies and service cuts will be the consequence.

Payment by Results is central to the government’s privatisation plans. Each operation or hospital stay has had a price set against it, and PCTs will have to agree the number of such treatments they buy from each hospital. This sets hospital against hospital as PCTs try and find the cheapest healthcare provider. However, with patients supposedly having a choice of four NHS and one private healthcare provider from the end of 2005, it is almost impossible to predict what levels of care have to be contracted for from each hospital. There are further complications. Each hospital trust needs to have a certain level of services to remain in operation. If its costs are higher than average for elective, non-urgent treatments, it may lose contracts. As its income falls, so it needs to cut back the services it provides. These are, however, part of an integrated whole, and at a certain point the hospital ceases to remain a viable entity. This is the reason why the Audit Commission, reviewing the effects of Payment by Results on A&E departments, stated that ‘the level of risk inherent in the current policy...is too great’ and that hospital departments could be forced to close. Many District General Hospitals (DGHs) are at risk.

The accelerated introduction of privately-operated independent treatment centres compounds this. Labour’s plans are now to extend private provision to 15% of all elective care by 2008. These centres are protected in two ways: first, by receiving a 15% premium on top of the national rate for the operations they undertake, and second, by having guaranteed contract periods of 5-10 years. A significant proportion of DGHs will not be able to survive: mergers and closures will be the order of the day. Those Trusts with the highest fixed costs will be most at risk – which will be those Trusts servicing Private Finance Initiative repayments. Meanwhile the annual £1.5bn the private sector will receive from the NHS over the coming years will compare favourably with their private patient turnover of £2.3bn in 2003. The private sector will leach off the NHS.

Another pillar of the privatisation drive is the Foundation Trusts, the first 32 of which published a joint report after their first 18 months to show how they had improved health care for the communities they serve. Amongst the inspiring examples they cite are a new car park for Basildon hospital and upgrades to bathrooms and toilets at Guy’s and St Thomas’s.

‘One of the attractions of being a Foundation Trust is that if we manage our work within budget we can keep the surplus to use to fund developments in the hospital’, said the chief executive of the Homerton University Hospital Trust at its launch. However, by this September it was a different story: in a letter to staff describing the financial problems facing the Trust – £1 million overspent against an annual income of £130 million – she wrote that ‘the real problem with having a deficit is that all development work grinds to a halt and everyone becomes obsessed with money...Not only will there be few, if any, new posts, we will have to start to take posts out. All building and capital projects will have to be reviewed to see whether we can afford the new running costs associated with them’.

It is not just hospitals that face the threat of privatisation. Commissioning a Patient-Led NHS proposed that all PCT-delivered community services such as district nursing, health visitors, chiropody, family planning and other local health services be hived off – whether to voluntary or privately-run organisations it did not matter. Since then Hewitt has had to backtrack to some extent: she is now trying to reassure community health chiefs that the staff will continue to be employed directly by the NHS unless local trusts decide otherwise. In another retreat, plans to contract out healthcare commissioning in Oxfordshire have been postponed after staff opposition. Bidders to run the service included Group 4, BUPA and a US health insurance company. However, the direction is clear: privatisation will take place if not by government diktat then by local decision – health service managers know what is expected of them. Hewitt has also declared that if GPs are unwilling to build good practices in poor areas with evening and weekend opening, then alternative private sector operators will be called in.

Rationing, cuts, redundancies, deteriorating services: these are the consequences of Labour’s privatisation drive. Whilst the working class will bear the brunt of this, even the more affluent sections and the middle class will find that their demands for an adequate service cannot be squared with a profitable service. Now is the time to build resistance.

It is estimated that exposure to cold causes an increased 30,000 deaths a year in Britain. This figure includes those who die solely because of hypothermia due to lack of heating. Those over 75 years old are five times more likely to die than those under 75.

The Office for National Statistics recently released figures that show men in the most prosperous parts of London live 11.5 years longer than their contemporaries in central Glasgow (life expectancy 80.8 years in Chelsea and Westminster versus 69.3 in Glasgow).

Bird flu hysteria

In mid-October, the Chief Medical Officer warned that more than 50,000 people could die from bird flu pandemic with a quarter of the British population (over 14 million) becoming ill should the virus mutate into one that is contagious in humans. Seasonal human flu, typically affecting 10-15% of the British population each winter, leads to around 12,000 extra deaths (although this figure was 30,000 in 1989/90). The death toll from pandemics is much greater: ‘Spanish flu’ in 1918 killed 40 million people worldwide and 250,000 in Britain. The pandemic contingency plan presented by the Chief Medical Officer is 450 pages long. However, at present bird flu is not at all contagious: although tens of millions of poultry have been infected over vast geographical areas for more than two years, to date, only 121 cases of infected humans have been identified globally, of whom 60 have died. In late October, a virology professor, chair of the European scientific working group said that isolated outbreaks of avian influenza in western Europe did not ‘substantially increase the risk of a flu pandemic’.

This has not prevented a panic reaction, with a report that the government will extend laws to allow surgeries and hospitals to be placed under armed police guard in case there is a stampede for antiviral drugs that the government is stockpiling. Such a frenzied rush has already happened, but for seasonal flu inoculation. This will not protect against bird flu, yet the national supply of 14 million doses has already been exhausted, mainly by the ‘worried well’, overwhelmingly middle class people who care only for themselves rather than for those who really need it, the over 65-year-olds and people with long term illness.

We should contrast the growing middle class hysteria over bird flu and flu pandemics with the indifference towards the very real AIDS pandemic. More than 25 million people have died of AIDS since 1981; Africa has 12 million AIDS orphans; by December 2005, women will account for 46% of all adults living with HIV worldwide and for 57% in sub-Saharan Africa. Young people aged 15-24 years account for half of all new HIV infections worldwide and more than 6,000 become infected with HIV every day. Only one million of the 6.5 million people in the oppressed nations who need life saving anti-retrovirals are getting them. UNAIDS/ WHO estimates for 2005 give total new HIV infections globally as almost five million and total global AIDS deaths as over three million.

121 bird flu deaths are as nothing compared to this. But AIDS is far away, it seems, and flu knows no social boundaries in Britain – it affects the rich as much as the poor. Hence the middle class is looking after number one.