UK: Are New Organisational Forms The Solution To The Current Performance And Sustainability Challenges Of NHS Providers?

Last Updated: 11 February 2015
Article by Karen Taylor and Catherine Skilton

Most Read Contributor in UK, August 2017

This week's Thoughts from the Centre discusses the highlights from a publication developed by our colleagues in the Health Transactions and Restructuring Team on the Dalton review and implications for NHS providers.

The closing months of 2014 heralded two long anticipated reports on the NHS, the Five Year Forward View (5YFV) in October1 and the Dalton review in December2. Both these reports have significant implications for the Boards of NHS providers, specifically around the type of organisation and the structure of provision of care that is likely to be clinically and financially sustainable in the current political and policy landscape. The 5YFV signals support for "a small number of radical new care delivery options" and "a geographically based intervention regime for poorly performing health economies". The Dalton review advocates an examination of the current provider model to "determine whether or not an alternative organisational form would deliver a better outcome".

Whatever the position of individual provider organisations, all NHS providers would do well to consider the implications of these new options. More specifically:

  • to consider organisational form as a toolkit that can be used to remove barriers to collaboration and cooperation
  • enable successful implementation of service change, for example integrated models of care
  • leverage strong leadership across a greater footprint.

The tools in this "organisational toolkit" range from shared budget arrangements to joint ventures, management contracts to the more traditional response - mergers and acquisitions (M&A) - as well as more innovative forms such as hospital chains.

In considering the benefits of changing organisational form, Deloitte's Health Transactions and Restructuring Team surveyed trusts involved in M&A since 2010 to review their pre and post-merger performance and key lessons learned; considered how the approaches signalled by the 5YFV and Dalton review might work; looked at existing evidence from the different models; and considered the competition implications (click here for more information).

The literature review of the rationale behind the proposals in the two reports shows that there is limited evidence in the UK for some of the more innovative service delivery models; particularly hospital chains, which will require a fundamental shift in mind-set and risk appetite at a time when financial and operational pressures are causing Boards to focus on managing day-to-day performance. Likewise, a review of pre-2010 M&A deals, found that past transactions often failed to achieve their stated objectives and risk was underestimated. Indeed for 2012, of the 112 acute hospital mergers that took place between 1997 and 2005, there were no observed improvements in productivity and financial performance.3

The results of our 2014 evaluation of eight, post 2010, M&A transactions, all of which took place under the current regulatory regime, showed more positive results with improved or no difference in performance of around half of the situations reviewed. Key determinants of success included leadership, organisational culture, and stakeholder support, which are likely to apply equally to any new type of organisation. However, a number of system leaders who responded to our survey believe the NHS is not yet geared up to support cross health economy management.

While pilots that build an evidence base are likely to be the ideal way forward, the NHS cannot afford to stand still and a number of more challenged organisations may now need to bite the bullet. The organisational toolkit proposed by the Dalton review offers a potential route to support the ambitions of the 5YFV and the financial and clinical sustainability of individual providers, with simple one-to-one acquisitions, management contracts and buddying, likely to be the primary organisational mechanisms to address the majority of the difficulties being encountered.
For organisations that find themselves considering an alternative organisational form, the top three tips identified by the survey respondents were:

  • engaging with internal and external stakeholders through timely communication, ensuring that staff are well informed and involved throughout the pre and post-merger process 
  • undertaking detailed due diligence and reaching agreement on heads of terms as early as possible
  • obtaining sufficient levels of support post-merger, including support from regulators to allow for breathing space to implement the required transformation 

Indeed, the Boards of all NHS trusts and Foundation trusts should consider the proposals in the 5YFV and Dalton review and ask themselves how these might affect their 2015-16 strategies; what rle the trust might play in a more integrated health economy; what, if any, model might apply; is there an ambition to be a kite marked/accredited trust; and what can be done to lead rather than be the recipient of imposed changes?

Footnotes

1 NHS Five Year Forward View (2014): See also  http://www.England.nhs.uk/wp-content/uploads/2014/5yfv-web.pdf

2 Dalton Review: options for providers of NHS care. Department of Health 2014. See also:  http://www.gov.uk/government/publications/dalton-review-options-for-poroviders-of-nhs-care

3 Can governments do it better? Merger mania and hospital outcomes in the English NHS. Gaynor M, Laudicella M, Proper C (2012). See also:  http://www.bristol.ac.uk/cmpo/publications/papers/2012/wp281.pdf 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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