Bureaucracy: hit and myth

Part of the reason for this stoical acceptance of their inevitable downsizing is that they saw it coming. The attack on NHS bureaucracy had been trailed so often by Labour during the months before the white paper that the moment of the announcement was something of an anti-climax. Manager-bashing has already been an occupational hazard in the NHS for many years. Quite apart from the fact that 'bureaucracy' is an enduring folk-devil for the public, managers have already experienced the cost-ceiling targets imposed by the previous government. The word 'bureausceptic' was first uttered from a Conservative conference platform by the then health secretary, Stephen Dorrell.

So is managers' resignation to their fate simply the recognition of stark political reality? Probably not entirely. The acceptance has gone too deep for that. Remember that cutting back on bureaucracy in order to invest in patient care was not a side-issue in the white paper: it was the first of the four key themes mentioned in chapter one. Managers do seem to believe there is too much bureaucracy in today's NHS.

They are wrong. The poor image and reputation of NHS bureaucracy is largely undeserved, and much of the ignominy heaped on it is founded on myths which should be exploded.

The first myth concerns the sudden growth in the number of managers and administrators. Burgeoning bureaucracy has been repeatedly cited as one reason why the internal market failed. According to this account, the internal market's major achievement in its seven-year history has been an unparalleled increase in white-collar workers.

Closer examination of the facts reveals this to be an exaggeration. Although there was a marked growth in managers' numbers during the lifetime of the previous government, the most striking increase took place before the implementation of Working for Patients. It began in 1987, four years before the internal market started operating. Not only that, but much (though by no means all) of the increase since 1991 has been the result of the broadening of the term 'manager' rather than a direct consequence of the internal market reforms.2

There is plenty of evidence to suggest that the expansion of managers' ranks was to do with Conservative reforms and initiatives pre-dating Working for Patients which have gone unchallenged by New Labour: the Griffiths- inspired introduction of general management in the mid-1980s, the Korner- inspired reforms to information collection and analysis, and the roll- out of the Resource Management Initiative. These, with the general drive to contain costs, were at least as responsible for the increase in bureaucracy as the internal market.

To declare that the NHS has too many managers implies a knowledge of what the correct number should be. The traditional retort has been that there were not enough of them before. And indeed the Griffiths management inquiry of 1983 lent strong support to the thesis that the NHS was under- managed.

However, if there is substantial agreement that the NHS was under-managed in the mid-1980s, nobody is quite sure at what point the increase in managers and accountants overstepped the mark beyond which the service would be judged to be over-bureaucratic.

Senior NHS managers were quick to compare the NHS's management costs with those of other large businesses. All of these comparisons apparently showed the NHS still had low management costs. Not only were the numbers of managers low by comparison, but they were also paid less than their private sector counterparts.

The second myth is that bureaucracy is associated with another of the key criticisms of the internal market: the distorted incentives in the system which reward the purchase or provision of ineffective healthcare. As Kieran Walshe and Chris Ham have argued, 'cash-limited budgets, cost and volume or block contracts, and performance targets based on the Patient's Charter or the Efficiency Index all contain perverse incentives to reduce rather than increase effectiveness'.3

The administration of these failings has indeed been the responsibility of health service managers. Only a manager, for instance, could have thought up the Efficiency Index. A clinician could never have thought of something so dysfunctional because clinicians, if anything, are more interested in pursuing workloads with more complex case-mixes, which are not recognised by the Efficiency Index. This is all true, but it overstates the case. There were significant problems, but the internal market only distorted incentives at the edges of the system. It did not create root-and-branch problems. The balance of power between managers and clinicians ensured that the market's influence was restricted and that the worst excesses were avoided.

The third myth is that the expansion of NHS bureaucracy is synonymous with the overwhelming amount of paperwork associated with the internal market. The new white paper cites a fundholding practice which received 1,000 pieces of paper a year as part of the administration of a contract worth just pounds150,000. Labour makes explicit its intention to reduce contracting paperwork and thus cut the number of managers needed to shuffle it around. On the face of it, this is the hardest myth to rebut. It is impossible to deny that NHS contracting is characterised by an immense amount of paper. Not just invoices, pre-invoices and receipts, but large volumes of papers used as discussion documents between contracting parties at monitoring meetings, each volume containing reams of tables. Managers and clinicians have been deluged by statistics since the introduction of the internal market.

But one interpretation of this accumulation of statistics is that it has been merely the NHS's attempt to measure its performance. Although there was nothing in Working for Patients that said the NHS had to develop contracts based on the numbers of inpatient episodes and outpatient attendances, the reality was somewhat different. In fact, a re-reading of Working for Patients reveals that it was careful to avoid suggesting that contracts would be blunt instruments measured only by the numbers of patients treated.

The most explicit section merely states that 'contracts will need to spell out clearly what is required of each hospital in terms of the price, quality and nature of service to be provided'.4 Nothing too over-bureaucratic there; but eight years later we know what actually happened in most cases was that only the price and quantity were spelled out clearly. The quality and nature of the service were concepts barely touched on in contract documentation. And this emphasis on price and quantity led to the avalanche of pricing and activity-monitoring data which has drawn so much criticism.

This last criticism points to the deeper problem. Because pricing and counting patient activity was the internal market's attempt to measure what the health service does and how well, criticism goes beyond sniping at bureaucracy. True, performance measurement was at the heart of the internal market, and true, the NHS has so far failed to come up with suitable currencies to perform the task.

But it is dangerous to judge the attempt ineffective and over-bureaucratic without being sure the alternative system will be less bureaucratic and more effective.

To its credit, Labour has proposed new methods. Its emphasis on outcomes- based performance indicators, for instance, has to be welcomed.

But there are at least two reasons for caution. First, there can be little doubt that there will still be a demand for bureaucracy in Labour's new NHS: a revamped information management and technology strategy; the management support for the new primary care groups; the infrastructures needed to support the National Institute for Clinical Excellence and the Commission for Health Improvement; the support needed for supercharged health improvement programmes; the performance-monitoring arrangements in trusts required to implement the recommendations of national service frameworks and to benchmark their costs against the national schedule of reference costs.

Second, to quote from chapter three of the white paper: 'Experience shows that the way in which performance is measured directly affects how the NHS acts; the wrong measures produce the wrong results.' The performance measure which has been embraced most warmly by Labour so far - judging the effectiveness of the NHS by counting the number of bureaucrats it employs - is a long way from being a credible outcome measure.

At an Institute of Health Services Management conference 12 years ago, a BUPA hospital manager was asked by an NHS manager about his management costs and replied that such figures were no more relevant to him than statistics about the number of fruit trees in Kent. The measures of performance which mattered to him - about clinical quality and patient satisfaction - were quite different from those which appeared to concern his NHS colleagues. Labour has taken the step of recognising the importance of quality and outcomes, but has yet to rid itself of its obsession with the costs of bureaucracy. By its own standards, it is in danger of achieving the wrong results

by using the wrong measures.