Comment / Integration crucial to survival agenda

We all know the NHS is facing at least a decade of unprecedented financial pressures. It is eliminating overheads, ‘sweating assets’ more effectively, rationalising and optimising service provision, increasing quality outcomes, and radically changing practices and processes that effect real service transformation. These are all necessary steps in achieving the medium-term financial stability within, and the longer-term financial sustainability of, the NHS. To me, this is a survival agenda. 

There are 145 foundation trusts and about 130 other NHS (-ish) organisations operating as providers in the NHS in England. I believe this is excessive and a hindrance to achieving the survival agenda. If the NHS is going to successfully deliver this mega-agenda, it must initiate quickly a major horizontal and vertical integration of its provider organisations – reducing the overall number by perhaps a third.

In terms of vertical integration, I believe it makes financial and operational sense to integrate hospital services with local community services to provide a seamless continuum of care by one organisation by merging the trusts/organisations involved. This should facilitate reducing conflict at the boundaries; maximise the opportunity to redesign service delivery; and bring big reductions in overheads and operational costs.

Many successful mergers were completed under Transforming community services but much more needs to be achieved. This requires positive intervention as many providers may not appreciate being taken over. Many trusts facing intense financial and operational problems are not attractive bedfellows for FTs with financial targets too. Monitor has a positive role here and must be willing to be flexible and not risk-averse.

Horizontal integration is a different issue as it would mean merging neighbouring ‘competing’ hospitals (and hopefully community services) and therefore potentially reduce or stop provider competition. I am not convinced the NHS market exists and believe positive commissioning with focused tariffs, coupled with proactive regulation and oversight, has much more effect on NHS provider costs and quality. Real markets also need spare capacity, which equates to costs being incurred wastefully.

These facilitated marriages of providers would allow the development of a sensible strategy on rationalising and concentrating services and optimise the use of a wider asset base. They would also reduce overheads and operational costs while increasing quality – something all providers need to achieve. Taken together, these horizontal and vertical mergers should produce organisations with a large critical mass and a broad geographical base, making them better able to tackle the survival agenda in a strategically sensible way. It would also create a sounder base on which to build innovative service transformation and cut costs and make the NHS more financially sustainable.

To counter-balance this provider rationalisation, we need stability on the commissioning side. So the new commissioning structures and processes should be allowed to mature over the next five years, providing a positive catalyst to provider rationalisation. 

Integration is not an easy option. Imaginative ways would need to be found to quickly engineer these horizontal and vertical integrations with sensitivity to the different approaches needed in the major cities. Many will contest, rightly, that mergers can sap energy and reduce short-term performance and these are known risks. Yet if innovative service transformation is seen as the way to financial sustainability, provider integration should make this easier to achieve. It would save overheads and generate a cadre of available senior officers to lead the transformation process and deliver real change while managing the known areas of risk.

I am sure there will be a long list of reasons why ‘facilitated integration’ is not possible or desirable, but a dramatic catalyst is key to achieving sustainable financial stability without a big influx of new funding.

Gordon Greenshields is visiting professor at University of Chester Business School, a former director of finance of the NHS Executive (1991-94) and chairman of the HFMA (1994/95)