Allyson Pollock’s response to McKinsey. Guardian 04.09.09

The NHS is about care, not markets

Downsizing the workforce is a business response to loss of profit – but it doesn’t account for the NHS goal of universal healthcare
Allyson Pollock The Guardian 04 September 2009

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The core goal of universal healthcare and services planned on the basis of need and not ability to pay is being jettisoned by the turnaround teams and management teams brought in to manage anticipated reductions in NHS budgets. Downsizing the workforce is a traditional response of business to loss of profit where businesses have to pay the costs of operating in a market and earn surpluses for shareholders. Unlike Scotland and Wales, the NHS in England is continuing to pursue market-oriented healthcare in its reform of the NHS. So it should be no surprise that management consultants firm McKinsey have come up with market-oriented solutions to anticipated budgetary shorfalls<>. They have advised ministers to cut 10% of the NHS workforce in England by 2014, a reduction that will affect services provided primarily to the old and the poor who have among the highest healthcare needs. But strategies to reduce the NHS budget need to pay attention to the role of market structures and how they reduce the ability of the NHS to pool the risks and costs of care across its population.

The diversion of health spending from patient care to paying for a market are not apparently McKinsey’s concern<>. Take for example the costs of the new market bureaucracy; for more than 40 years administration costs were in the order of 6% of the total budget a year, they doubled overnight to 12% in 1991 with the introduction of the internal market. We have no data today for England, but what we know from the US is that the introduction of for-profit providers increases administrative costs to the order of 30% or more.

So why hasn’t McKinsey advocated making savings along the lines of Scotland<> and Wales<> by reintegrating trusts into area-based planning structures and thereby abolishing billing, invoicing, the enormous finance departments, marketing budgets and management consultants, lawyers, commercial contracts? In this way one could project savings of anything from £6-24bn a year for England.

A second set of savings would be the high costs of PFI<> where the taxpayer, having bailed out the banks, is now paying almost twice as much as it should for some PFI hospitals through high rates of interest and returns to shareholders. The total money raised from private finance so far is £12.27bn but the NHS will pay out £41.4bn for the availability of buildings and a total of £70bn over the life of the contracts. The irony is that the patient and the public are rebuilding the banks’ balance sheets using scarce NHS funds intended for patient care and staff, especially in community-based services.

A third saving could be made by cancelling the contracts for the £5bn ISTCs programme<> – research in Scotland extrapolated to England has shown as much as £1bn has been wasted by giving money to for-profit ISTCs for work that was not carried out in the first wave.

Then there are all the other contracted out services including the pharmaceutical bill of £14bn. Are these contracted out elements part of the McKinsey scrutiny? It is doubtful since the company travels the world advocating market solutions.

And here we run up against the fundamental problem of retaining marketeers to advise on healthcare. Markets mean reducing the capacity of the NHS to pool the costs of care across the whole service, substituting instead hospitals, clinics and practices that have to pay their way like businesses and, like businesses, can fail. Needs-based planning, once the hallmark of the NHS in England, is being replaced by strategies to deal with artificially created market failure.

Solutions are sought from outside consultants and turnaround teams using unsubstantiated assertions that the NHS is inefficient and can increase productivity. What the selective use of data and evidence mask is the failure to view the system as a whole and to remember that its core goal is universal healthcare, not concocted operating surpluses.

In contrast to Wales and Scotland, England has established hospitals and services as competing trusts or firms operating in a market; competition has replaced the mechanisms which enabled health authorities to monitor and respond and direct resources to the needs of the populations that are being served. But markets create winners and losers – and the unpublished McKinsey report is an attempt at refereeing.

The moral is that if the Department of Health in England commissions private management consultants that derive their profits from markets you will get market solutions. It is the commissioning, not McKinsey’s report itself, that should give offence

Replies (best of):


03 Sep 09, 8:31pm

Burdened as it is with the weight of market-based reform, I find it remarkable that our NHS still performs so well.

Just 2 years after cuts in staffing imposed by a turn around team of top managers, my local hospital Trust has once again lost control of its finances and needs to find £13million ‘savings in the budget.

Patients, apparently, are in hospital for too long, due not to them being poorly, but rather, it seems, to poor systems and communications preventing them freeing up their beds earlier.

Having put the squeeze on the workforce by a moratorium on using agency staff, the Trust has now invited them to come up with suggestions for savings. Savings mind you, not cuts.

The longstanding objective of attaining the golden uplands of foundation status – the dominant and abiding corporate mission for at least 3 years – has been ditched for the time being as an unnecessary distraction that must not deflect from getting the new PFI extension completed and operational on time.

This unique outbreak of common sense is read by staff to mean that the Dept of Health has simply said Foundation status? – with that financial black hole? – no chance matey

Meantime, striving to earn its spurs as a world class commissioner, the separate local patient care trust (PCT) which serves the same people has split itself into two new entities; one for commissioning NHS services and one for providing them directly to the people.

All the top bods are, of course, on the commissioning side; amply supplemented, by the way, with experts in market intelligence, contract specification, bid evaluation, and procurement. Job titles come ready-prefixed with the term strategic.

The regional strategic health authority (SHA) which also deals in strategy, but of an undoubtedly higher order, doesnt much like direct provision.

This, I understand, is where the existing workforce and managers successfully bid to carry on doing what they do but offering improvements and economies over the years ahead.

Oh no, the SHA much prefers private health care operators to come in and do precisely the same thing with one minor difference.

They like to insist that the workforce leave behind their NHS pensions as a small token of their personal commitment and gratitude at working for a reformed NHS but with a private sector employer.

The icing on the cake was the PCT conjuring up legal advice to say they couldnt award a service contract to the in-house team (despite them submitting the best bid) only for the provider part of, (yes, I know) the same organisation, to counter with separate legal advice saying, precisely the opposite – that they could.

And all the while the overwhelming majority of NHS front line staff simply get on doing the best that they can for the people they care about.

Both staff and patients of the NHS deserve better than this.

Keep up the good work Allyson Pollock”


03 Sep 09, 10:00pm

lespetroleuse: all excellent points clearly spoken by somone with experience!

a few more:
* Foundation Trust Status: the Holy Grail, but who will drink form it: the directors of the new FTs, (who until recently got paid less than £100k per year but now have doubled their salaries).
*Watch pensions and grading for lower paid staff be the first to suffer in the cuts
* Watch Cameron carry on where the consultant driven incompetents of new labout have left off… what are hospitals but lage gotels anyway? Make Alan Sugar the new CEO of the NHS.
Staff and patients will need to find some new solidarity to opose and redress this nonsense, but I fear the socialist foundation of the NHS has been already holed below the waterline by a labbour government.


03 Sep 09, 11:53pm

The moral is that if the Department of Health in England commissions private management consultants that derive their profits from markets you will get market solutions. It is the commissioning, not McKinsey’s report itself, that should give offence.

Why did the bureaucrats at the had of the health system bring in McConsultants?

Ya do it for the same reasons you bring in a pro from Chicago when ya need some moak wacked in St Louis, or a guy from Vegas to ice a rival in Brooklyn. You bring in an outsider so the locals don’t take the heat. In the Sopranos they even brought in paisans from Naples

So you got the government telling you that you absolutely gotta save 20 billion then obviously something has to give. Painful choices.

So you bring in Yank hit men so that nobody says that the UK government is penny pinching and saving 20 billion to spend on Trident, and so nobody says that the NHS wants to fire your beloved GP – It’s the damn Yanks.

The Mac-something consultants. They do the work of Tony’s hit men from the Camorra, but with obnoxious Yank accents.

The other reason to bring them in is to produce a report that will create outrage – “if you cut our budget by 20 billion we will have to get rid of your GP and your nurses”

Huge commotion, recriminations all around, government drops plan, takes the Trident money out of Education instead, NHS officials return to status quo ante

From what I can tell the report says nothing about marketing or market-oriented systems. It just lists things to cut if the elected British government insists on cutting 20 billion out of the health budget.

Nothing to do with profit. Does the NHS make a profit? No. It has a budget. If London cuts its budget what happens?

Also, the UK spends far less on health care than the more compassionate countries on the Continent.

So you are going through all this commotion to save £333 per capita? Screwing up your already parsimonious system to cut a further amount equal to about 2 months health insurance in the US or maybe 3 months insurance in Germany?

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