How NHS targets caused NHS deficits
Updated on 05 July 2007
Though the NHS is now in balance overall, some trusts are still in the red. How did this happen?
Gordon Brown has announced a major review of the health service, to work out what went wrong during the past decade, and try to find a way to fix it.
It will try to solve one of the big mysteries of recent years: how did an NHS - which is receiving big increases in funding every year - get into a position where more than one in five NHS organisations is still in deficit?
Though the NHS is now in balance overall, many individual trusts are still in the red, which means that the problems associated with deficits, such as cost cutting and redundancies, are still going on.
So why did this happen? Well, lots of things have been blamed over the years: ministerial incompetence, non-stop reorganisations, or changes in accounting rules. But one of the major causes has been overlooked - the target regime imposed by government itself.
Good progress comes at a price
In fact, it's one of the major causes mentioned by none other than the NHS's chief economist, Professor Barry McCormick.
His report looked at one of the key targets that the NHS has been pushing through in the past few years - the drive to make sure no-one who turns up at A and E has to wait more than four hours.
On the whole, progress against this target has been good. For 2006, 98.2 per cent of patients were seen within four hours - above the 98 per cent target.
If you force NHS organisations to meet a large raft of targets, but don't oblige them to balance their books, then it's not surprising that they don't balance their books.
But the cost of achieving this has been significant. The trusts which have made the biggest improvement in A&E waiting times were also the ones which had the biggest deficit.
As the report notes: "The health economies which achieved the greatest percentage point rise in patients seen at A&E within four hours were also those with the greatest in-year deficits in 2004/5."
Trusts in wealthier areas were asked to make the biggest improvements in waiting times. But trusts in wealthy areas also ran up the biggest deficits.
The report continues: "It would be a mistake to suppose that this demonstrates beyond doubt that improvements to A&E performance, with their focus on expenditure in 2003-5, 'caused' deficits, but rather should be viewed as one of a number of factors that prompted considerable expenditure at relatively short notice to raise standards."
This echoes what external commentators have been saying for some time: that if you force NHS organisations to meet a large raft of targets, but don't oblige them to balance their books, then it's not surprising that they don't balance their books.
Stepping away from targets
Professor Glyn Bevan of the London School of Economics helped to draw up the star rating system, a target system which was phased out in 2005, but helped to put the NHS in the financial state it is in today.
Under that system, an NHS trust had seven targets, only one of which was a financial one. If a trust missed two targets, it would be zero rated, putting the chief executive's job at risk.
So a trust could avoid a zero-star rating and the possible sacking of its chief executive by deliberately going into deficit. If it made its other star ratings, the financial target was less important.
The government is now stepping away from targets. Gordon Brown's review will make sure that 'the future of the NHS is clinically led'. And in one of his last acts as a health minister, Andy Burnham told Channel 4 News that his government would be setting fewer targets for the NHS.
The NHS could probably do with fewer targets.
The NHS could probably do with fewer targets. In the past, it has had targets from the treasury, targets from the Prime Minister's delivery unit, the star ratings system, the Traffic Light system, the departmental operating standards, and now the Annual Health Check.
Alan Johnson promised to make the NHS "clinically led, patient centred and locally accountable".
His review will have to find a way to preserve the progress that has been made under the target regime, but re-impose financial discipline - at the same time as handing power back to clinicians, patients and local administrators, and restoring staff morale.
Doing one of those things successfully would be tough enough. Doing all of them will be close to impossible.
