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Thursday, 15 March 2012

McKinsey and The National Health Service - Part One

Much has been written about the American management consultants, McKinsey’s, who were asked to undertake a review of the English NHS by the last Labour government in 2008-9 and to prepare a report identifying possible efficiencies (savings) that might be found to help reduce the service’s ever growing financial cost to the English Exchequer. The report produced in March 2009, despite being commissioned by the Labour Party, was largely rejected, not least because of the substantial efficiencies that the report’s authors believed could be found, simply by making cuts of between 15-22% across the board and basically by getting the NHS to work more effectively, “more bang for each buck” if you will. Unfortunately, such were the level of efficiencies suggested by the report, with some £13-20 billion of cuts being proposed and the possibility of around 140,000 jobs being lost, it was never likely to be the sort of reforming agenda that a sitting government would even begin to try and sell to the English electorate, not if they expected to be re-elected for another term of office anyway.

No doubt the McKinsey executives tasked with preparing the report, spent many expensive hours poring over the hundreds of thousands of documents and millions of dry statistics provided by the Department of Health, in an effort to identify where exactly any potential savings could be made. Like the old-fashioned “time and motion” studies that were so fashionable in the 1950’s, 60’s and 70’s, McKinsey employees were thought to have looked into virtually every detail of running a modern day health service, comparing like-for-like against similar, but supposedly more efficient providers outside of Britain, before delivering their much anticipated and highly expensive expert recommendations, i.e. make cuts of between 15 and 22% across the board. Although the publicly available copy of the McKinsey report is no doubt much reduced to the one presented to government, one cannot help but be struck by the often flawed logic and over-simplification of relevant facts that have inevitably led to a series of highly questionable conclusions and associated recommendations. The fact that McKinsey’s final report was thought to have cost the British taxpayer millions of pounds to produce, simply makes matters worse, as many of the observations, calculations, presentations, conclusions and recommendations contained in the report, are for the most part fairly obvious; and are exactly the same sorts of problems, weaknesses and failures that are and have been endemic to the National Health Service for the past 40 years or so. For any national government, let alone one that is supposedly dedicated to cutting public expenditure, to spend millions of pounds in order to commission a study that simply repeats previous studies and reports is just complete and utter nonsense, although the fact that the current coalition government believe that the McKinsey report offers some new insight into, or indeed solutions to the pre-existing problems within the NHS is just sheer madness.

Sadly, given that we now have a political administration that is almost totally percentile driven and have little understanding of how a 10% cut in one area can have a highly deleterious effect on other parts of the wider market, it should come as no surprise at all that some, if not all of the McKinsey report has been eagerly adopted and then ideologically amended by the likes of David Cameron, Nick Clegg and Andrew Lansley. With McKinsey suggesting that cost cutting measures in the region of 15-22% can deliver anything between £13-20 billion over a 4-5 year period, what’s not to like for two political parties who are not only devoted to small government and limited public spending, but also to the ability of the free market to deliver, especially when there’s a commercial profit to be had. It would perhaps be wrong to conclude that McKinsey’s executives were driven by the same imperatives as the Cameron government, although it is likely that both share a belief in the supposed infallibility of the private sector and its ability to provide goods and services more efficiently and more cheaply than the public sector, a faulty premise that has ruthlessly been exposed over the part 40 years by the inefficiencies, uncompetitive pricing structures and corporate greed that have become increasingly evident in Britain’s transport, communications and utility industries, all of which were formerly in public ownership.

According to McKinsey, the largest savings or efficiencies in the NHS could be found in markedly reducing frontline provider costs (i.e. hospitals, treatments, drugs and staff), which it was estimated could reduce public spending by anything between £6.0 and £9.2 billion, while a further £4.7 to £6.6 billion could be saved by the various NHS trust’s no longer commissioning what are termed as “low value healthcare” (i.e. those treatments where no provable clinical benefit is evident or observed – as in alternative or holistic therapies perhaps?) McKinsey’s reporters also suggested that additional saving of between £2.7 and £4.1 billion might be found by switching certain types of healthcare away from main hospitals to alternative settings, including GP surgeries, clinics, care homes and the patients own home. Although such a suggestion will undoubtedly result in significant savings for the hospital unit’s themselves, unfortunately the authors of the report fail to mention that all of these same former hospital patients would still require either personal care and/or medical treatment, so this would simply shift the financial burden from one health provider to another, thereby undermining the argument that significant savings could or would be made by the local health authorities.

Additional money saving strategies proposed by McKinsey included the proposal to enforce statutory charges on healthcare providers, essentially eliminating incidents of overcharging or price fixing that might occur within a highly disparate and often unregulated industry. The report also suggested the adoption of new oversight structures and processes that would bring some degree of standardisation to the whole of the English NHS, something that most people recognise has been missing from the service over the past number of years, largely because of constant government tinkering and alterations to the way in which the system is governed. The problem with this particular solution, as proposed by McKinsey, is that successive British governments have singularly failed to regulate the existing 150-odd Strategic Health Authorities and Primary Care Trusts, so what chance is there that they will be able to impose a single national standard on the multiplicity of Clinical Commissioning Groups, Hospitals, Treatment Centres, Poly-Clinics, Walk-In Health Centres, etc. etc. etc that are currently being proposed by the coalition’s own health reform bill?

Associated with these changes, McKinsey’s consultants also suggested that a number of national barriers should be removed, allowing both staff and patients to move freely around the country, something that could well prove to be an administrative nightmare, in the event that NHS money is allowed to follow individual patient’s around the country. The final two proposals offered by McKinsey was for incentive schemes to be established, presumably to encourage staff, administrators and hospital trusts to run their organisations more efficiently. Quite how such schemes might work on a day-to-day basis is unclear, but given that hospital managers or owner/operators might well be encouraged to process their patients faster, or cut the basic costs of medical treatments in order to qualify for these unspecified incentives, it is hard to see that particular strategy having any sort of positive patient outcome. Finally, the report suggests that skill levels should be increased through better training (presumably costing more money) thereby creating a more highly skilled and effective workforce, which should then allow numbers to be reduced and staff costs driven down.

Unfortunately, this particular proposal touches upon one of the most glaringly obvious flaws in McKinsey’s entirely commercial thinking, in that patient care could in any way be equated to more generalised industrial production and that the standard economies of scale could be applied in a hospital environment as easily as they could to an industrial workshop. By comparing the duties of a midwife, to those of an acute care nurse, or an orthopaedic healthcare worker is massively misleading, not least because of the level of care that individual patient’s might require. Where a midwife might well be observing and overseeing the delivery of a baby, an acute care nurse would be observing the vital signs and perhaps medicating a seriously ill patient, whilst an orthopaedic healthcare worker might be having to hoist an immobilised patient, in order to wash them, transfer them or simply to change dirty bed linen. Nursing care is not only highly diverse, but is also a 24-hour a day job that is labour intensive, dirty and emotional, unlike that of a factory worker who might pull a lever, turns a screw or fix an attachment, so to even try and make a comparison between the two, or indeed between different groups of nursing staff, is not only foolish, but is patently absurd.

As part of their proposed efficiency savings McKinsey also believed that something in the order of £1.9 to £3.0 billion could be saved by reducing the variation between clinical and non-clinical staff productivity, mainly through smarter working and cutting out the “dead wood”, most notably those staff that perform worst against a pre-set performance average. Suggestions range from changing working patterns to employing in-car GPS systems in order to minimise travelling times between patients, to making use of other new technologies that allow healthcare workers to spend more time in face-to-face meetings with their patients, all of which will inevitably have a direct and increased financial cost to the individual hospitals, clinics and GP surgeries, without any mention being made of where these extra funds are likely to come from? A further £1.3 to £1.9 billion might be saved by increasing non-acute provider activity, with district nurses, midwives, practice nurses, health workers and GP’s taking on more responsibility for patients who could be treated at home, rather than in hospital. It is perhaps little wonder that GP’s and their associated community healthcare workers might be alarmed by such proposals, given that in all likelihood that they would be asked to take on more work and longer working hours, for no additional money. Not surprisingly, the McKinsey report also identified potential savings of between £2.3 and £3.7 billion simply by reducing NHS expenditure on drugs and optimising the service’s supply chains, both of which could have been achieved many years ago, had the political will and management expertise been there to oversee such blindingly obvious strategies. McKinsey’s executives also identified further savings of around £0.5 billion in better management of existing NHS estates (including renegotiation of the scandalous PFI contracts), savings of between £1.1 and £1.7 billion by stricter enforcement of PCT contracts and standards, while another £1.9 to £2.5 billion might be saved by encouraging and enhancing self care strategies and improving disease management programmes. Such proposals would see diabetics, epileptics, the obese, smokers, alcoholics and breastfeeding mothers given far more responsibility for their own conditions and ongoing care, thereby reducing the cost to the NHS overall, although quite how these self-care programmes would be monitored on a regular basis is not specified by the report’s authors, so one can only assume that oversight would be passed to community based clinicians, such as GP’s, Midwives, District Nurses and Health Visitors.

Some of the most obvious and contentious proposals suggested by the McKinsey report revolve around the subject of staffing levels in the NHS, plans that essentially try once again to mistakenly equate healthcare to any other industrial production, with a ballpark figure of around a 22% reduction in the workforce being mentioned, although 10-12% reduction seems far more likely. That 22% figure is said to be made up of cuts to non-clinical staff (5%), other non-clinical (3.2%), Nurses (8.1%) and Doctors (5.7%), with the overriding logic being that existing staff would and should spend more time in their primary task of treating patients face-to-face, rather than being diverted to other non-clinical activities such as administration, ward meetings and patient handovers. According to McKinsey, many of these changes could be achieved by increasing diagnosis throughput, standardising pathways and speeding up patient treatments, thereby leading to fewer bed-days in individual hospital wards. Of course the downside to these largely generic proposals is that with fewer consultants, doctors, nurses and healthcare assistants per ward, or per hospital unit, McKinsey’s conclusions are almost entirely based on other unfunded non-clinical staff having to undertake the administrative tasks currently done by nurses; and all of the remaining 78-90% of medical staff (depending on the level of cuts) working longer, harder and smarter to achieve the same result. Once again there is a perception that McKinsey executives have been misled by the idea that every hospital unit throughout the country is identical in terms of the services it offers and the staff levels required to run them efficiently, which clearly is not the case. Logic would dictate that acute services, such as Intensive Care Units, Orthopaedic Wards and those other medical units where patient disability is a major contributory factor will require higher staffing levels than those where most patients are entirely mobile and able to carry out basic functions for themselves. Simply to calculate an across-the-board reduction in staff, without giving any thought to the specifics of individual hospitals, wards or specialisation and the level of care being provided by them and their staff, simply proves the point that expertise in one particular field, does not necessarily make management consultants like McKinsey’s experts in all areas of work, which seems to be fairly evident in this case.

However, it would be wrong to suggest that all of the McKinsey report is simply about rationalising the cost of the NHS entirely through the use of cuts, because that isn’t the case. The report’s authors also propose much more efficient use of existing NHS facilities and equipment, many and much of which is grossly underutilised by most health trusts that continue to operate on a traditional daytime system, rather than the 24-hour-a-day service that NHS hospitals continue to offer. Because of staffing contracts and management failures there are absurd occurrences where millions of pounds are being spent on clinical equipment, which nobody has been trained to use, medical facilities lying unused because there’s no-one there to staff them, managers being given access to luxury cars as a perk of the job, the list of waste within the NHS goes on and on. Unfortunately, rather than tackling these rather more mundane issues of waste and mismanagement, McKinsey’s report chooses to focus on criticising and trying to reform the front-line medical staff (the soldiers if you will), rather than rationalising and examining the savings that could be made at management level (the General Staff), where much of the financial waste is thought to originate. Sadly though, because the report is largely seen as a charter for government spending cuts the fact that McKinsey’s report proposes significant increases in the fields of breast surgery, vascular surgery and orthopaedic surgery by increased and better use of the scanners, operating theatres and treatment rooms that currently stand idle for most of the time, many of these commonsense suggestions are going to be generally overlooked. That particular issue does of course also raise the question of how the increased use of such facilities would be managed and funded, given that anything up to 10-22% of NHS frontline are likely to be released by their employers over the course of the next few years, although this fairly obvious discrepancy is not actually dealt with by the report’s authors, unless of course it is implied that this extra funding will be found through private money, in the form of personal health insurance, etc. It is also worth noting however, that in another part of the same report, the authors suggest that substantial savings could be made by health authorities actively decommissioning certain types of non-effective operations and procedures, including tonsillectomies and cosmetic surgery (even those that are to redress naturally occurring problems), whilst at the same time hospitals and GP’s should seek to limit or refuse procedures, such as back pain operations, knee wash-outs, minor skin surgery, certain types of hernia operations, varicose veins, some dental procedures and hysterectomies. In what is yet another glaring error by its authors, it seems that the report seeks to have its conclusions and recommendations both ways, firstly by suggesting that such non-effective operations should be carried out to gain maximum use of NHS facilities and equipment; and then by recommending that the same sorts of procedures should be cut or refused in order to reduce financial costs. Taken in one context or another, each in their turn is logical, but for the report’s authors to suggest that they can have it both ways, simply serves to undermine the entire basis of their own supposedly well thought out argument.

Allied to the greater levels of staff efficiencies (i.e. reductions) that McKinsey might expect to see by cutting out the worst performing staff and reducing hospital patient numbers by shifting some of the work to the various GP surgeries, Walk-in Centres and clinics, etc. cutting the numbers of “sick days” taken by NHS staff is also thought to be a priority for the authors. Notably, the incidents of sickness amongst healthcare staff generally are reportedly running at around 4.5%, with the largest amount of sickness occurring amongst frontline medical staff. However, when one considers that such staff, ambulance, nursing and healthcare personnel are the ones directly responsible for carrying, moving, treating and interacting with often highly immobile and seriously ill patients, it should come as little surprise to anyone that these are the very same people who suffer the highest level of workplace injury or illness. In a perfect world, on every occasion, in every instance and with every patient, the appropriate equipment would be available and statutory procedures followed. Unhappily though, we don’t live in a perfect world and NHS staff do not work in a perfect environment, which will inevitably lead to physical injuries being caused, illnesses and diseases being transmitted and nursing staff being rendered too sick to work. Like it or not, nursing is an incredibly messy business for obvious reasons and so, for McKinsey to try and draw a parallel between hospitals and any other workplace, especially in terms of sick days, or instances of staff illnesses, is a pretty futile exercise, when few, if any other non-clinical jobs can actually compare to nursing in the first place.

A possible solution to the vast workloads undertaken by England’s NHS hospitals is for many of the more non-acute and routine procedures to be completed elsewhere, such as GP surgeries, local clinics, Walk-in Centres, Care Homes, or even in the patient’s own home, thereby reducing the cost to local hospital units. Even though some of this extra community based work might be done by existing medical staff working harder, longer and smarter, it is hard to imagine that existing GP’s, Surgery Nurses, Midwives and District Nurses are going to be able to absorb such increased levels of patient care, implying that more community-based staff will need to be recruited, otherwise patients will simply flood back to the hospitals as they did before. Astonishingly though, rather than anticipating a significant increase in the numbers of community based clinical staff to meet their increased workload, McKinsey’s authors actually suggest that all of these new services could be delivered by 10-15% less staff, which is yet another absurd suggestion, based on an uninformed and ill-thought out judgement. A similar solution is suggested for fields such as mental health, where existing mental health visitors would be expected to take on more responsibility for patients, as existing full-time mental healthcare facilities either reduce their services or close altogether. McKinsey does seem to propose that new Crisis Resolution Teams could be established to help co-ordinate such care in the community for vulnerable patients, although whether or not these teams would be comprised of existing mental health staff, or new staff members is unclear, but the assumption is that no new staff would be recruited to help fill the void.

When the McKinsey report was released in 2009 its conclusions and recommendations were said to be so unpalatable from a political point of view that it was immediately and publicly disowned by its original commissioners, the Labour Party, while for their part, the Conservative Party of David Cameron were said to have simply used it as a stick to beat their Labour adversaries. In reality though, all three mainstream political parties in England have irrevocably tied themselves and their parties to the idea of expanding the public sector’s so-called “internal market”, allowing privately owned, run-for-profit companies to participate in the NHS, although only to a fairly limited extent thus far. However, when the coalition government was elected to office in May 2010, it soon became apparent that significant parts of the up-until-then much maligned McKinsey report had indeed found its way into Conservative Party thinking and was likely to form the basis of Andrew Lansley’s much vaunted Health and Social Care Reform Bill 2011, which is due to become law in the next few months. Even though Cameron, Clegg and Lansley have publicly dismissed suggestions that their bill is fundamentally based on the earlier McKinsey report, similarities between the two documents tend to indicate that the coalition government has indeed adopted many of the McKinsey’s reports conclusions and recommendations pertaining to the restructuring and refinancing of the English NHS. Even now, some two years into the coalition’s first and hopefully last term of government there is ample evidence to support the charge that Cameron, Clegg and Lansley have indeed implemented many of the proposals put forward by the McKinsey executives, despite the fact that there is more than enough evidence to suggest that the report itself is and was based on inherently flawed reasoning and a complete lack of understanding of the English healthcare service by the authors of the report. Some of the developments and resulting outcomes from the blatant implementation of the McKinsey report will be dealt with in the second part of this blog article – McKinsey and the NHS – Part Two, which I hope to publish in the next day or so.

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