Improving NHS performance: human behaviour and health policy

Why reforms?

The Thatcher government was particularly concerned to tackle the perverse incentives facing hospitals. Specifically, hospitals were penalised for productivity improvements because they operated within fixed budgets that were insensitive to changes in activity.

At the heart of the reforms introduced in the 1990s was the devolution of control to NHS trusts and general practitioners and the use of competition to improve performance. Within the so called internal market, the intention was that money should follow patients in order to reward hospitals and other healthcare providers that offered services which were efficient and responsive to users. In pursuing these policies, the government was emulating trends in other organisations and sectors in which there was delegation to profit centres and business units within a framework that ensured accountability upwards for performance. Consistent with these trends, central control of the NHS was therefore not abandoned by the Thatcher government. Rather, central direction was joined together with delegation and competition in the oxymoron that became known as a politically managed market.1 The result was an uneasy hybrid in which central control over some areas of the NHS was strengthened while in other areas managers and clinicians were allowed greater freedom to bring about change.

The Labour government that was elected in 1997 has introduced a further set of reforms which claim to be different from both the command and control mechanisms used after the establishment of the NHS and the market oriented policies of this government's immediate Conservative predecessors. Indeed, the government has argued that these reforms represent a “third way” that goes beyond both planning and markets In reality, the third way comprises a mixture of policy instruments, embracing elements of planning and competition, directives and incentives, and centralisation and devolution. Furthermore, similar instruments have been applied in other areas of public policy like education as politicians seek to modernise government as a whole.

Underlying assumptions

What do these policies reveal about the assumptions made by politicians in relation to the motivation of managers and clinicians? The first way followed the traditional precepts of Weberian bureaucracy. The core assumption was that those at the centre of organisations had the task of securing the implementation of their objectives through specifying these objectives and ensuring that staff at lower levels carried them through into action. There was also an assumption in the first way that those at the top knew better than those at the bottom what needed to be done. It followed that discretion on the part of managers and clinicians was a problem that had to be reduced through central control and supervision of performance within the organisation concerned. Reorganisations of the structure of the NHS during this period were designed with this purpose in mind, the changes occurring in the mid-1970s exemplifying the concern to “get the organisation right” by detailed definitions of functions and roles and the introduction of a national planning system.

The second way, by contrast, was based on the assumption that planning was likely to be less effective than competition in producing change According to this school of thought, health service staff, like those in other sectors, respond positively to the structure of incentives with which they are faced. If they are able to enhance the resources of their organisations by competing successfully, then they will do so. Equally, if they are faced with the threat of bankruptcy, merger, or closure by not competing successfully, then they will be motivated to change their behaviour in order to survive. The second way further assumed that there are inherent limits to the ways in which those at the centre can control those at the periphery and therefore it relied more on empowering staff than controlling them.

The third way recognises the limits of both central control and staff empowerment. However, rather than rejecting these approaches, it seeks to combine them in a complex cocktail of policy ingredients.2 Alongside planning and competition, the third way makes use of other mechanisms, including new forms of inspection, regulation, and the publication of information on comparative performance within the NHS. The implicit assumption of the third way is that human behaviour has more, and more complex, motivations than were recognised by proponents of the first and second ways. Accordingly, policy makers need to have access to a range of instruments if they are to deliver their objectives.

Numbers of managers and of hospital and community health services doctors in the NHS, 1986-98. The new system of classifying non-medical staff, based on job function rather than pay scale, means that figures from 1995 onwards are not directly comparable with earlier years. Source: Department of Health, NHS hospital and community health services non-medical staff in England

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Testing the third way

The question that arises is, how well founded are these different assumptions? Evidence from the first phase of the NHS indicates that central planning and national directives were successful up to a point in addressing the weaknesses of the NHS when it was established. It was through central planning that greater equity was achieved in the distribution of medical staff and that a start was made on the modernisation of hospitals. On the other hand, there continued to be wide variations in performance, and the record of the NHS in implementing national policies was uneven. Equally important, attempts by the centre to tighten its grip on managers and clinicians, like the NHS planning system introduced in 1976, did not succeed in overcoming these problems.

Evidence from the internal market is similarly equivocal. As the most thorough review of the evidence has shown, competition had little measurable impact and where it did make a difference the effects were felt at the margins.3 As an example, the incentives contained within general practitioner fundholding produced changes in clinical practices in some areas such as prescribing and among some practices, but they did not deliver the transformation in performance that was hoped for by the architects of the internal market. While one explanation of the limited impact of empowerment and incentives is that the government did not go far enough in delegating control within the NHS and strengthening the incentives facing managers and clinicians, an alternative view is that markets are no more a panacea than is planning and although they will achieve some of the objectives of policy makers, they are unlikely to be sufficient.

It is, of course, precisely this rationale that lies behind the third way Put simply, the architects of the Labour government's approach seem to believe that policy makers are analogous to golfers, requiring a collection of clubs in their bag to enable them to play the most appropriate shot in the circumstances in which they find themselves To extend the analogy, the success of the third way will therefore depend on the selection of clubs and the execution of shots. It might be added that the advice of the caddy will also be of some significance, not least because of the current influence over health policy of specialist advisers and members of the policy unit at No 10. The next phase of the Labour government will enable the assumptions of the third way to be tested in practice.

Are staff the problem or the solution?

Given the eclectic nature of the current government's approach, it might seem that all possible means of improving performance in the NHS have already been deployed. There is, however, a lacuna in the government's thinking, and in the longer term it could prove to be a significant omission. One of the assumptions about human behaviour that does not loom large in the third way is that NHS staff are fundamentally well motivated to deliver service improvements and simply need training, development, and support to enable them to realise their potential. Indeed, the autumn refrain of the prime minister and his senior ministers, to the effect that the “forces of conservatism” are blocking the modernisation of public services, indicates that staff in these services are seen by the government as part of the problem rather than part of the solution.

The argument that public services like the NHS may be run more for the benefit of staff than patients is of course not new. What is unusual is the espousal of this argument by a Labour government and its apparent willingness to challenge the power of its traditional support base in the trade unions and entrenched interests of the health professions, including doctors. Yet if the assumptions that lay behind the first and second ways encompassed elements of truth without seeing the whole picture, so too the critique of the forces of conservatism risks turning an accurate perception of part of the problem confronting the NHS into a programme that is applied without discrimination. If this were to happen, it would alienate managers and clinicians who support the direction of travel that has been set out by the government and whose continuing commitment is needed to deliver the modernisation agenda.

These observations take on added force because, in the life cycle of governments, Labour is moving from a preoccupation with policy development to a focus on implementation and delivery. Its impatience to see the delivery of service improvements is manifested in the prime minister's close personal involvement in domestic policy priorities and the stated commitment of ministers to increase rather than reduce the pace of change. In this context, the limited direct management experience of politicians in power may explain the approach they are pursuing, and their failure to appreciate the scale of the task that has been taken on in turning around major public services like education and health. An appeal to the altruism of those working in the NHS and recognition of the key role they have to play in delivering the modernisation programme are just as likely to succeed as an attack on their conservatism, and unless this is taken on board health policy will once more become a battleground between politicians and NHS staff.

Recognising the forces of innovation

What, then, should be done? The priority of the new health secretary, Alan Milburn, should be to add to the instruments at his disposal by recognising the forces of innovation within the NHS and providing them with the resources required to implement the government's vision. Delivering NHS modernisation depends fundamentally on ministers acknowledging this fact and not losing the support of those who are committed to providing a modern and dependable service. No amount of guidance from the NHS Executive or hectoring by politicians can substitute for a drive to improve performance that comes from within and is acknowledged and valued by those steering the process of change.

Above all, ministers should champion entrepreneurial managers and clinicians who are leading the modernisation drive within the NHS, and they should support the more rapid dissemination of good practices as they are identified. These measures may not be sufficient but they are certainly necessary in enabling the third way to be realised. And who knows, they may ultimately give credence to the claim that New Labour's approach really is different.