Within this section of Chapter One, a historical perspective of NHS will be provided. This discussion will identify problem areas that have emerged in relation to NHS with an attempt made to address the manner in which such problems have historically influenced reform efforts.
With the passage and associated provisions of the NHS Act of 1946, NHS was implemented in the UK in 1948. The NHS Act of 1946 served as the means by which a pattern of health service finance and provision was established in the UK following World War II (Baggot, 1998). According to Baggot, on the basis of the Act, the principle of collective responsibility by the state for the establishment of a comprehensive health service system was introduced, allowing for the planned use of services by the entire population at no cost. It was also intended that equality of access to services would be incorporated within NHS as a consequence of the availability of health services at no charge.
When implemented in 1948, the main characteristics of the NHS were:
Tripartite division: Central Government - Regional Authorities - Local
The Minister of Health was made personally responsible to Parliament for the provision of all hospitals and specialist services on a national basis.
All hospitals were nationalized under 15 Regional Boards for England and Wales, while Scotland and Northern Ireland formed separate NHS departments.
Local Authorities remained responsible for community services.
The British Medical Association (BMS) only agreed to take part only after two concessions were granted:
Family practitioners (GPs), dentists, pharmacists and opticians were left as independent contractors;
ii. Salaried hospital doctors were allowed to undertake private work outside their NHS contract.
The financing of the NHS was provided by the Government from funds raised by general taxation. Patients were not charged.
However, as noted by Le Grand, Mays and Mulligan (1998), within a short period of time, the operation costs associated with NHS very quickly became a financial problem to the Labour government. As identified by Le Grand et al., a number of spending demands for both capital investment and current expenditure emerged primarily for two main reasons:
1. The NHS represented the first national health service in the world. Therefore, it was difficult to accurately project the ever-increasing rise in demand under zero pricing.
2. The NHS inherited old and war-damaged hospital buildings and medical equipment.
Coupled with these problems, the public surged forth to receive medical services for problems that were not considered urgent. According to the European Observatory of Heath Care Systems (EOHCS) (1999), one of the assumptions behind the establishment of the NHS was that there was a "backlog" or "stock" of ill health that would decrease as health needs were met, with the demand for services then leveling off. However, this did not occur and demand on into the 1950s outstripped the funding that was available for the NHS (EOHCS, 1999). In 1951, as the costs associated with operating the NHS continued to escalate, the key principle of a free service was breached for the first time with the introduction of charges for eye glasses and dentures. During the next year, consumer charges for medicine were initiated with subsequent administrations beginning to strategize and develop plans for reform of the NHS.
As reported by EOHCS (1999), with the presence of an ongoing demand for healthcare services, extreme pressure was placed on an under-resourced hospital service. Recognition of this problem led to the development of the 1962 Hospital Plan
1962 Hospital Plan which proposed major new capital funding over the next ten years and introduced the concept of the district general hospital (DGH).
As explained by EOHCS, the DGH represented a planned approach to hospital provision whereby a unit of between 600 and 800 beds would cater for all the general medical needs of a population of between 100-000 and 150-000.
Other plans for reforms, however, were not implemented fully due to the estimated political costs and the frequent changes in governments (Le Grand et al., 1998). During 1974, as reported by Enthoven (1985), the first major administrative reorganization took place in the Labour government which, in efforts to decentralize the NHS, introduced a fourth level of management in the form of 90 area health authorities (AHAs) and district management teams (DMTs). But after a few years, it became clear that this reorganization increased the bureaucracy of the NHS without solving its problems. The next extensive reorganization was undertaken by the Conservative government which took office in 1990.
As reported by Ham (1985), when considering the increasing costs associated with the NHS, between 1949 and 1984 the real cost of the NHS increased threefold and the proportion of the gross national product spent on it increased from 3.9% to 6.2%. In the early 1980s it was estimated that a real increase in funding of 1.2% per annum was needed to meet the costs of care for an ageing population and to fund advances in medical technology. By 1987-88, the cumulative shortfall in the hospital and community health services since 1981-82 amounted to £1.8 billion, even after efforts had been directed at initiating improvement programmes (Ham, 1999). After widespread perceptions continued to grow suggesting that there was a financial crisis in the NHS as a result of the failure of various value for money strategies, the NHS Review was implemented (Klein, 1995).
In 1983, as a consequence of the attention directed towards the NHS Review, information was released on performance indicators about the NHS (Pollitt, 1985). Areas of performance covered included information regarding clinical services, finance, manpower and estate management. It was hoped that the information obtained could be used to aid health authorities in comparing NHS performance with what was being achieved elsewhere. However, as noted by Pollitt, criticisms emerged in relation to the performance findings and included:
They were dominated by data about activity and outputs (numbers of patients and operations) rather than about outcomes (impact of activities on health).
There was a considerable timelag between collection and presentation.
There were doubts about their accuracy.
They contained no measures of quality.
As a result of the NHS Review, changes were made that reflected the view that a central weakness of the pre-1989 NHS was that money did not follow the patient, but rather came in a fixed budget from the health authority. According to Klein (1995), there was little incentive under the earlier system to increase patient activity/service because this would increase costs without increasing income. The 1989 reforms which came to be known as "Working for Patients" that emerged were intended to increase efficiency through linking hospital income more directly to their activities and to give them freedom to behave entrepreneurially in responding to new opportunities. In addition, as explained by Ham (1999), efforts were also directed at strengthening management arrangements. In the new Department of Health, this was to be achieved by appointing a Policy Board and NHS Management Executive in place of the Supervisory Board and NHS Management
Board that had existed (Department of Health, 1989a). Changes also were initiated at the local level, with the composition of health authorities revised along business lines. Rather than having the previous representation of health authorities from professions working in the NHS and members nominated by local authorities, the new authorities were modeled after company/business boards and made up of health authority senior managers and a small number of non-executive directors who were appointed for their personal efforts and contributions, rather than being drawn from designated organizations or constituencies (Department of Health, 1989b). Similarly, Trusts were to be run by a board of directors (executive and non-executive) (Department of Health, 1989b).
New reforms initiated under the Working for Patients era also were directed at increasing accountability on the part of physicians in relation to their performance (Department of Health, 1989c). It was intended that this would be accomplished by the work of general managers as they assumed greater responsibility in the management of clinical activity. Where once consultant contracts had been managed at the regional level, local managers were now given the responsibility of developing and monitoring consultant job plans and contracts (Department of Health, 1989c).
In addition, other changes included in the following:
new disciplinary procedures were introduced for hospital doctors to enable disciplinary matters to be dealt with expeditiously;
emphasis was placed on involvement of doctors and nurses in management through an extension of the resource management initiative; and, medical audit was expected to become a routine part of doctors' clinical work (Department of Health, 1989d).
With the passage of the National Health Service and Community Care Act of 1990, new reforms were implemented that were the most radical since the inception of the NHS. As the government had increasingly found itself challenged by the continuing financial problems associated with the NHS, it was believed that the NHS would benefit from less government intervention and that the problems would be solved by subjecting the NHS to the disciplines of the market (Enthoven, 1985). It was…