Organisational Cultures and the NHS: PFI's Role Explained

Introduction: The PFI in the NHS

This paper analyses the United Kingdom's (UK's) National Health Service (NHS), revealing its origins and the key aspects of organisational culture in both the public and private sectors.

The Private Finance Initiative (PFI) in the UK is now one of the major ways in which public sector services have been created (Broadbent et al., 2002). However, it has been under public scrutiny regarding its operation within the NHS.

PFI calls upon the private sector to supply asset-based services to the public sector over a long period — up to 60 years — in exchange for monthly lease payments (Broadbent et al., 2002). PFI was officially created in 1992 under the Conservative Government but was furthered by the Labour Government when it came into power in 1997.

The Labour Government expanded the PFI into areas of the public sector that had historically been closed to private sector money, including the health services industry. Before 1997, despite many efforts to develop PFI in the health sector, nothing was approved or implemented. As soon as the Labour Party was sworn into office, it approved 14 proposals and started an additional 17. There are plans for another 29 over the next few years involving approximately £7 billion of private sector money (Broadbent et al., 2002).

The creation of PFI in the NHS has been criticised as being too expensive compared to the costs of similar services supplied by the public sector, and as detrimental to the quality of services provided. For example, one of the organisational changes associated with PFI implementation is a reduction in bed numbers. However, research reveals that this judgement cannot be supported without a more thorough evaluation of PFI and of all public-private partnerships (Broadbent et al., 2002).

The IPPR (2001) states that the "evidence on value for money is variable across sectors" but "seems to be offering significant gains in roads and prisons but not in hospitals and schools" (Broadbent et al., 2002, IPPR, 2001, p. 4). However, the IPPR (2001, p. 90) also states, "we will not know the actual outcomes for many years," making it difficult to settle the issue definitively at this point. The IPPR concludes that a "level playing field" is needed — one with a "transparent set of public finance rules that do not set up artificial barriers or incentives to benefit one type of provision over another" (IPPR, 2001, p. 95).

The Development of PFI in the NHS

The PFI enables private sector involvement in the public sector for what is known as "long-term asset-based services." In many ways, the PFI is a small part of the broader New Public Management (NPM) agenda (Broadbent et al., 2002; Hood, 1991, 1995) — a set of efforts to expand the efficiency of the public sector through the introduction of organisational change and private sector expertise.

Prior to the creation of PFI in the health services industry, the main focus of NPM concentrated on controlling current expenditure in the public sector rather than on infrastructure developments or finding new approaches to fund them (Broadbent et al., 2002).

Lack of capital expenditure does not present the immediate political and social impacts that result from failing to meet revenue commitments. However, the ultimate effect of under-investment in capital stock is bound to increase over the years. The accumulating effects of this under-investment had been an issue for the NHS estate for many years.

This pressure drew attention to the need for infrastructure investment and the need to keep public expenditure under control. These factors, combined with an ideological confidence in the efficiency of the private sector in delivering public services, led the Conservative Government to implement PFI in 1992.

Several years later, the New Labour Government furthered PFI initiatives, making several changes to the policies. This government supported PFI for several reasons: "First, the political imperative for partnership between the public and private sectors; second, that the quality of the public services can be improved by the private sector; and finally the possibility of investment in public services and infrastructure whilst maintaining a tight fiscal stance (Broadbent et al., 2002)."

Since the initial implementation of these new policies, the New Labour Government's justifications for PFI have become clearer to the public. However, many critics doubt the ability of PFI to yield value for money and benefit the public.

The Evolution and Emergence of PFI

Before PFI was initiated, the Ryrie Rules allowed private financing in the public sector. However, this system was developed to "create the possibility that government funding restrictions would not stop possible profitable schemes in the nationalised industries (Broadbent et al., 2002)."

For years, the Ryrie Rules were seen as relevant to the public sector as a whole. However, critics argued that they were too restrictive and that the Treasury was concerned that overly expensive schemes might be undertaken. The Ryrie Rules were abandoned in 1992 with the creation of the PFI.

PFI was initiated in 1992 by this statement by the Chancellor, Norman Lamont (Broadbent et al., 2002):

"Self-financing projects undertaken by the private sector would no longer need to be compared with the theoretical public sector alternatives; the Government would actively encourage the private sector to take the lead in joint ventures with the public sector; the public sector would have greater opportunity to use leasing where it involved significant transfer of risk to the private sector and offered good value for money (Private Finance Panel, 1995, para. 2.4, p. 7)."

The Development of PFI in Healthcare

As far as the NHS is concerned, the controversy over PFI is more intense than in other public sectors, as the general public's attachment to the NHS is significant (Broadbent et al., 2002). The general public feared that the involvement of the private sector in health care services might lead to privatisation. Therefore, PFI in healthcare was more difficult to develop, despite the government's attempts to assure the public that it was an ideal method of procurement.

Many investors feared that the legal status of NHS Trusts might not protect them in the event of financial failure, leading to intense suspicion of the PFI. As a result, the government had to pass two new acts to ensure that banks would lend. "Thus, the NHS Residual Liabilities Act was passed by the Conservative Government in 1996 and the NHS (Private Finance) Act 1997 followed. The latter Act, although conceived by the Conservatives, was passed virtually unchanged by the Labour Government shortly after they reached office, indicating the level of their commitment to PFI (Broadbent et al., 2002)."

Today, there are 63 large PFI projects in health in England and Wales totalling approximately £7.510 billion (Broadbent et al., 2002). The earliest fifteen of these projects were allowed to proceed in July and September 1997 and are just starting to open.

In order to implement these projects, some organisational changes had to take place. The Capital Prioritisation Advisory Group (CPAG) was assigned as the vehicle for approving PFI developments. While these projects were being developed, only six publicly funded hospitals were approved (Broadbent et al., 2002). Although the Comprehensive Spending Review approved more capital for public procurement in 1998, PFI investment was targeted to realise £310 million, £610 million, £740 million, and £690 million in the respective years from 1998–99 to 2001–02.

PFI was widely institutionalised through legislation and procedure, but this did not ensure widespread acceptance of PFI in the health services industry. The public continued to pressure the government with concerns regarding PFI in the NHS. These concerns prompted the New Labour Party to "promise that 'clinical services' were to be outside the responsibility of PFI (Broadbent et al., 2002, Commons Hansard, 14th July 1997, column 155)." Still, there remains a grey area in defining what constitutes "clinical services."

For example, according to the IPPR, the NHS already purchases elective surgery for publicly funded patients from the private sector (Broadbent et al., 2002, IPPR, 2001, p. 142). The IPPR recommends that the "broad categorisation of core and ancillary services should not be used to determine the boundary between private and public provision (IPPR, 2001, p. 127)."

The Creation of the NHS and the Enactment of UK Health Policy

In the UK, the fundamental principles behind the creation of the NHS have remained largely unchanged. However, since its creation in 1948, the organisation, management, and manner of service have undergone many changes. Many of these changes are not seen as ones that aimed to promote "health" as a social good, enabling individuals to function within society. Instead, many appear to have been made for economic reasons (Warne et al., 2002).

When market approaches were introduced in the 1990s, the PFI was implemented alongside them, involving the private ownership of public capital assets. The New Labour Party was then presented with the immediate and challenging task of dealing with an insolvent NHS, as PFI had changed the structure and organisation of the service.

In 1997, NHS Trusts and Health Authorities had a debt of approximately £1 billion. The internal market, created by the Conservative Government in the early 1990s, had failed to deliver the expected benefits — including more consumer-led services, lower costs, and improved quality of care (Warne et al., 2002; Baker, 2000).

In response to this crisis, The New NHS: Modern, Dependable (DoH, 1997) was published, analysing past failures and the possible future of the NHS, along with a number of organisational changes intended to address the situation. This publication was a "first step in translating the emerging 'Third Way' doctrine into practice and was largely concerned with setting in motion the modernisation of public services in general and healthcare services in particular (Warne et al., 2002)."

Because the New Labour Party was the government that had initially created the NHS, it felt qualified to develop a modernisation strategy that accounted for the demographic, social, and technological changes that had occurred in society. The party aimed to ensure that the founding principles of the NHS remained intact, while initiating a modern, patient-led system. According to the government, this system would enhance those founding principles by providing faster, fairer, and more effective health and social care services.

According to Warne et al. (2002), "the emphasis on service delivery is underpinned by an apparent governmental desire to develop the concept of active citizens empowered and emboldened to make informed decisions about lifestyle choices, social duty and responsibilities and expectations of a new or restructured welfare state."

Approximately three years later, these changes in policy aims were analysed in the publication of the NHS Plan (DoH, 2000), which illustrated the extent of the changes in values, resources, and culture achieved or planned.

The following comparison represents the organisational changes initiated by the new PFI-driven NHS model (Warne et al., 2002, DoH, 2002):

1948 NHS Model: Values: free at the point of service. Spending: annual lottery. National standards: none. Providers: monopoly. Staff: rigid professional demarcations. Patients: handed down treatment. System: top-down. Appointments: long waits.

New NHS Model: Values: free at the point of service. Spending: planned for 3–5 years. National standards: NICE, NSFs, and a single independent healthcare inspectorate/regulator. Providers: plurality — state, private, and voluntary. Staff: modernised, flexible professions benefiting patients. Patients: choice of where and when to receive treatment. System: led by frontline staff, devolved to primary care. Appointments: short waits, booked appointments.

The new NHS model stresses the importance of "community" in realising its organisational strategies (Warne et al., 2002). Future patients are urged to make more informed lifestyle choices and, in doing so, to take personal responsibility for their own well-being in order to protect the greater good of society. However, according to the plan, if an individual becomes ill or is involved in an accident, the state provides healthcare services that are "high quality, effective, economically efficient and equitable (Warne et al., 2002)."

The organisational culture of the new plan upholds the underlying principles of the NHS yet restates individual responsibilities. Barnett (2002), for example, notes that attempts to make individuals assume responsibility for themselves allow the government to "control at distance (Warne et al., 2002)."

Similarly, the organisational culture of healthcare professionals has changed drastically under the new NHS plan. The NHS is still one of the UK's largest employers, with most doctors and nurses employed in the public sector (Warne et al., 2002; DoH, 1998). "Over the past 50 years there has been a continuous countervailing process of boundary setting, which has resulted in changes to the autonomy of professionals, leading to a continued refinement of what is understood, sociologically, by the processes of professionalism (Warne et al., 2002)."

For instance, healthcare professionals have had an increasing range of national standards of service provision — in the form of National Service Frameworks (NSFs) — imposed upon them, with which they are expected to both develop and provide their services. The National Institute for Clinical Excellence (NICE) has been created to ensure that all healthcare interventions are research- and evidence-based and rely less on individual clinical judgement (Warne et al., 2002; Freidson, 1970).

In the past, there have been many situations in which one healthcare provider funds a range of particular treatments while another does not. The new NHS plan aims to reduce this practice, subsequently improving the equitability and equality of service provision. However, in many cases, physician power has decreased as health and social care organisations have concentrated on meeting the cost implications involved. This may lead to a fragmented rather than holistic approach to meeting the needs of patients.

According to medical research, the implementation of PFI in the NHS means that specialist approaches will ultimately succeed over the broader "body of knowledge" of existing professions (Warne et al., 2002). As a result, the idea of the "generic practitioner" is predicated on severing the hold that specialists have on practice — for example, the rise of Psycho-Social Interventions (PSI) in mental health nursing. "Specialism leads to implementation rather than genuinely responding to user need (Warne et al., 2002)." The point here is that specialism is created for its own sake, not to help patients, carers, and users (Warne et al., 2002; Illich, 1978).

Since the introduction of PFI to the NHS, research reveals that "the whole culture of nursing has shifted from a hands-on approach, where senior nurses knew their patients, to a notice-board approach, where nurses refer to written information to account for the progress of their patients. This is certainly evident in mental health where policy places the emphasis upon 'paper chase' approaches such as Care Programme Approach and KGV. Process, then, replaces caring (Warne et al., 2002)."

Conclusion

In order to integrate into the new organisations, public health professionals would do well to (Doyle, 2002):

— Reflect on and understand their own culture
— Continue to develop their interpersonal skills
— Know and understand the drivers in the primary care culture
— Emphasise similarities of purpose, not the differences
— Be sensitive about the complexities in the new primary care organisations
— Be proactive in supporting organisational learning
— Encourage joint learning with professionals and managers at various levels

Organisational learning would lead to a greater understanding between incoming medical staff from different organisational cultures. Learning organisations take individuals beyond individual learning to a reassessment of fundamental organisational goals (Doyle, 2002). Ultimately, the organisation as a whole will realise its united goals, and the challenge of cultural diversity in these organisations can be channelled into something constructive.

"One prominent feature of NHS culture, which still persists in parts of the NHS, lies in what one contributor to our Seminars referred to as the '... built-in traditional attitudes of some healthcare professionals...'. Such attitudes discourage patients from asking questions, and lead to their being given only limited access to information, thereby preventing patients from participating fully in their care (BRII, 2001)."

Sir Donald Irvine has spoken of what he calls "the cultural flaws in the medical profession [which] show up as excessive paternalism, lack of respect for patients and their right to make decisions about their care." The Bristol Royal Infirmary Inquiry heard that these flaws are evident in all parts of the NHS — they are not confined to one professional group but may be found at every level of the patient's encounter with the service. "Yet it hardly needs to be said that such attitudes are redolent of a time now past, where those with professional expertise were automatically deferred to as 'knowing best'. Today, patients increasingly want to have more information about, and to be involved in, their care. This does not mean that they do not respect or value professional expertise. Rather, it means that such expertise has to be used in a different, sharing and more open way (BRII, 2001)."

References

Baker, M. Making Sense of the NHS White Papers (2nd ed.). Radcliffe Medical Press, Oxon.

Bristol Royal Infirmary Inquiry (BRII). (July 2001). The Complexity of Culture. Crown Publishing.

Broadbent, J., Gill, J., & Laughlin, R. (January 2002). The Private Finance Initiative in the National Health Service in the UK: Value for Money? The Chartered Institute of Management Accountants.

Davies, H. T. O., & Nutley, S. M. (2000). Developing learning organisations in the new NHS. British Medical Journal, pp. 998–1001.

Davies, H. T. O., & Nutley, S. M. (2000). Organisational culture and quality of health care. Quality in Health Care, pp. 111–119.

Dawson, D. (2001). The Private Finance Initiative: A Public Finance Illusion in Health Economics.

Department of Health. (1997). The New NHS: Modern, Dependable. The Stationery Office, London.

Department of Health. (1998). Working Together: Securing a Quality Workforce for the NHS. The Stationery Office, London.

Department of Health. (1999). Clinical Governance: Quality in the New NHS. The Stationery Office, London.

Department of Health. (2000). The NHS Plan. The Stationery Office, London.

Department of Health. (2001). The Expert Patient: A New Approach to Chronic Disease Management in the 21st Century. The Stationery Office, London.

Doyle, Y. (2002). Organisational Culture and the Learning Organization.

Freidson, E. (1970). The Profession of Medicine: A Study of the Sociology of Applied Knowledge. Mead and Co., New York.

Gillam, S., Abbott, S., Banks, & Smith, J. (2001). Can primary care groups and trusts improve health? British Medical Journal, pp. 89–92.

Hood, C. (1991). A public management for all seasons? Public Administration, 69(Spring), pp. 3–19.

Hood, C. (1995). The new public management in the 1980s: Variations on a theme. Accounting, Organizations and Society, 20(2/3), pp. 93–109.

Illich, I. (1978). Deschooling Society. Pelican.

IPPR. (2001). Building Better Partnerships. Institute of Public Policy Research.

Warne, T., Skidmore, D., & McAndrew, S. (2002). The NHS Plan: A Healthy Rhetoric but so far, an Unhealthy Reality.