Exposing the myth of NHS waste boosts case for investment

This week another great NHS myth should bite the dust. NHS productivity, as far as the latest information shows, is on the increase.

Research by the Centre for Health Economics at York University reveals NHS productivity took a clear step forward in the two financial years to March 2012.

Crucially the researchers used the widest possible output and input data to measure productivity and not the reductive set that has commonly been employed to create the false impression of a bloated NHS wasting public billions.

Energy to change

York’s research exposes the lie that the huge increase in funding over the last decade knocked NHS productivity off course. Productivity was declining before the largesse delivered in the 2002 Budget really began to feed through the system. From 2004-05 the NHS went through a five year period in which its productivity fluctuated - growing some years, declining others.

‘Provide the assurance of long term investment and couple that with robust reform to weed out inefficiencies and you start getting a bigger bang for your buck’

At the turn of the century the NHS had experienced decades of underinvestment. It had very little capacity or energy to change. It is only when that deficit began to be made up that some significant productivity gains were secured.

What is more, the lesson of the two year period to March 2012 is that real gains only come after a significant period of investment.

Robust reform

A starved health sector cannot cope with radical change. It becomes too fragile.

The political realities surrounding the NHS mean the politicians and public servants charged with its stewardship will shy away from pushing too hard when there is a real risk of failure. But provide the assurance of long term investment and couple that with robust reform to weed out inefficiencies and you start getting a bigger bang for your buck.

‘A starved health sector cannot cope with radical change. It becomes too fragile’

Of course, some of the investment made in the last decade was wasted and not all the efficiency programmes currently being pursued are worth the paper they are written on. Others will question whether productivity gains of 2-3 per cent are anything to get excited about - pointing to more dramatic increases in other sectors.

There is no doubt, for example, that the NHS’s investment in technology lags some way behind other sectors and healthcare systems and that the service’s attempts to catch up have resulted in scandalous waste in some areas.

The NHS’s record as an effective buyer of services leaves a lot to be desired − partly again because of its failure to fund in necessary back office systems, which would enable greater transparency.

Regional variation

York’s researchers also indicate that changes in productivity are subject to significant regional variation and some high profile financial reforms have had little impact on efficiency. Meanwhile, parts of the NHS − notably mental health − will struggle while making even significant productivity gains as their “Cinderella” status puts them at the front of the queue for reduced investment.

‘The hard heads at the Treasury who demand evidence the NHS is making best use of its relatively protected position should study this work closely’

Last week’s leader referenced the ministerial debate over whether increased funding for the NHS would be wise given competing demands to fund tax cuts or mitigate reductions in spending on other public services.

There is a political answer to that question (which is that the electorate rarely punishes those who boost health spending), but there is now also a pragmatic economic one.

The hard heads at the Treasury who − rightly − demand evidence the NHS is making best use of its relatively protected position should study York’s work closely.

HSJ also hopes senior Conservative Liam Fox and others who try and tar the NHS with the broad brush of inefficiency will eat their words, but recognises this is unlikely. That is the trouble with myths - even when they are exposed as make believe they still have the power to sway minds.