Nej

The n e w e ng l a n d j o u r na l of m e dic i n e

he a lth p ol ic y r ep or t

English NHS Embarks on Controversial and Risky Market-Style
Reforms in Health Care
Martin Roland, D.M., and Rebecca Rosen, M.D.

Successive governments have sought to improve The reforms also introduced the concept of
the quality, cost-effectiveness, and equity of the fundholding by general practitioners (the equiv-
care provided by the English National Health alent of primary care physicians) who run small
Service (NHS). The health reforms recently pro- independent businesses that provided primary
posed by Britain’s coalition government in the care for registered lists of patients.4 Interested
policy paper “Equity and Excellence: Liberating general practitioners could choose to commis-
the NHS”1 are another step along this path. sion a selection of services for their patients, and
The proposals draw heavily on market-style a national pilot scheme for “total purchasing”
incentives to drive improvements in outcomes gave groups of practices a global capitated com-
and increase responsiveness to patients and the missioning budget.5 Evidence suggested that the
public. But they also include new arrangements effects of practitioner fundholding were gener-
for accountability, fundamental changes to the ally modest, although there were improvements
structure of the NHS, and a shift in the respon- in some dimensions of care, such as reduced
sibility for paying for health services to groups waiting times for specialist care.4,6-8 Opponents
of capitated physicians.2 argued that fundholding unfairly created two
The scale of change envisaged is immense, tiers of care in the NHS,9 one allowing partici-
creating major challenges in implementation, pating general practitioners to buy better care
with unpredictable implications as to how the for their patients.
reforms will eventually alter front-line services Tony Blair’s 1997 Labour government abol-
and what effect they will have on quality and ished general practitioner fundholding and put
cost. The challenge is compounded by a virtual new organizations in place (first, primary care
freeze in NHS funding after several years of groups, then primary care trusts) to assume payer
budget increases of 6% per annum3 and by the responsibilities. However, given the persistence
need for £20 billion (approximately $32 billion in of long waiting lists and increasing public con-
U.S. dollars) in real-term savings over the next cern about the quality of NHS care, a second
5 years to accommodate inflation in the costs of wave of Labour policies sought to increase cen-
medical products and services. tral control of the NHS while preserving local
incentives and accountability. National perfor-
T wo Dec ade s of P olic y mance measures and targets were introduced, in-
De velopment spection and regulation were strengthened, hos-
pitals were offered additional freedoms (in the
Market-style reforms in health care were first form of foundation trusts), private-sector organi-
introduced by Margaret Thatcher’s Conservative zations were invited to supply NHS services, and
government in 1991 as an alternative to central patient choice was extended.10 Subsequently, the
control of the NHS. The division separated mo- Labour government reintroduced some market
nopoly payers responsible for defined popula- mechanisms and again tried to involve general
tions (known in the NHS as commissioners) practitioners in NHS commissioning, but with
from providers — NHS hospitals that had pre- limited buy-in by practitioners and little effect on
viously been funded through an annual block the quality of care.11,12
grant and were now required to compete for Writing in the Journal in 2006, Klein13 de-
business. scribed Labour’s later policies as an attempt to

1360 n engl j med 364;14 nejm.org april 7, 2011

The New England Journal of Medicine
Downloaded from nejm.org on April 28, 2011. For personal use only. No other uses without permission.
Copyright © 2011 Massachusetts Medical Society. All rights reserved.

health policy report

decentralize and depoliticize the NHS by estab- strengthened, more information on outcomes
lishing a fixed-price health care market and us- will be available to support patient choice, and
ing payment reform, patient choice, and compe- tighter regulation will support both choice and
tition to improve quality and efficiency. A 2010 competition. There will also be significant dis-
review of the effects of these reforms document- ruption. Budgets for commissioning the majority
ed many improvements, including reduced wait- of services outside of primary care will now be
ing times; increased access to general practition- transferred in their entirety to general practi-
ers, better outcomes for cancer and heart disease, tioner commissioning groups, and the control of
and improved patient satisfaction with the NHS14; many public health services will be moved to
many analysts, however, believe these improve- local government. The existing commissioners
ments owed more to the introduction of perfor- (primary care trusts) and their overseeing orga-
mance targets, improved public reporting, and nizations (strategic health authorities) will be
strong performance management than to en- abolished in order to save 45% of NHS manage-
hanced operation of the market. Indeed, there ment costs within 3 years.
is little conclusive evidence on the effects that The three key areas of the proposed reforms
choice and competition in the NHS market have that will shape the move away from central con-
on the quality, equity, or efficiency of health care trol and the emergence of a system that relies
delivery.15 Payers are generally seen as too weak more on market mechanisms are payment re-
to influence the actions of hospitals,16,17 and form (in which general practitioners assume
despite some well-documented improvements, budgetary responsibilities), provider reform and
there remain significant variations in treatment, the push for improvements in the quality of care,
gaps in the provision of evidence-based best and the move to give patients and the public a
practice, and much avoidable ill health causing greater voice in the nature and provision of NHS
costly and avoidable hospital admissions.18 services.

The 2 010 Reforms Payment Reform
The most dramatic change is the transfer of ap-
The reforms proposed by the coalition govern- proximately 70% (£80 billion, $129 billion in
ment (summarized in Table 1) offer some conti- U.S. dollars) of the NHS budget to the control of
nuity with the policies described above. However, groups of general practitioners. Despite the lim-
markets and competition will be considerably ited effect of previous efforts to engage general

Table 1. Key Features of the 2010 English National Health Service (NHS) Reforms.*

Constant features
Care is free at point of delivery, coverage is universal, GPs are responsible for defined lists of registered patients, access
to specialists occurs largely through referral by GPs, separation of purchaser and provider is maintained
New features
Groups of GPs oversee real budgets from which they buy specialist care for patients; up to 70% of NHS budget
( £80 billion, $129 billion U.S.) is transferred to GP commissioning groups
GP commissioning groups, now the main payers in the NHS, become accountable to a national commissioning board
Patient choice in selection of both primary and specialist care providers is expanded
Autonomy of NHS hospitals is increased, private providers able to supply specialist services to an agreed standard will be
encouraged to compete for NHS patients
Most national performance targets (e.g., for patient waiting times) are abandoned; NHS market to be driven by improved
information on outcomes
A 45% reduction in NHS management costs is expected within 3 years; the two tiers of NHS bureaucracy will be abolished
Public health responsibilities will be transferred to local authorities; closer links between health care and social care will
be established
Scrutiny by local patient groups (Healthwatch) is increased

* GP denotes general practitioner, which is similar to a primary care physician in the United States.

n engl j med 364;14 nejm.org april 7, 2011 1361


practitioners as payers, the new secretary of which central control of the NHS is exerted in
state is adamant that since they have responsi- the future.
bility for defined populations and largely act as Government’s determination to move control
gatekeepers to specialist care, general practi- of the NHS from managers to doctors is evi-
tioners should take responsibility for the finan- denced by the 45% in savings to be achieved by
cial consequences of their clinical decisions and axing both primary care trusts, which currently
are in the best position to make decisions on the run NHS commissioning, and strategic health
use of financial resources. All general practition- authorities, which currently manage primary care
ers will be required to form consortia of primary trusts and other NHS service providers. Manage-
care practices — similar to the capitated medi- ment support for general practitioner commis-
cal groups and independent practice associations sioning groups will come either from the for-
in the United States, but without any specialist mer staff of primary care trusts or from a range
physician members — and each consortium will of private-sector organizations. The risks of this
manage a budget for its registered population scheme are clear: general practitioners don’t
for most services that cannot be provided in pri- necessarily want to hold budgets, they may not
mary care. These commissioning groups are ex- have the skills to manage budgets, and they will
pected to self-organize, and general practition- need extensive management support. In addition,
ers who do not (or cannot) find a consortium to 170 consortia have already been formed, and
join will be assigned to one. about 100 more are emerging; it is not clear
It remains unclear how much control consor- whether the consortia will be the right size to
tia leaders will have over their general practi- have sufficient influence on the strategic devel-
tioner members whose contracts will be held by a opment of services in their local areas.20
national commissioning board. Leaders will have
to rely on “soft governance”19 for much of their Provider Reform
influence, although it remains unclear what op- A second strand of the new policy aims to de-
tions they will have in dealing with general prac- volve control of hospitals to local communities
titioners who are clinically competent and popu- and strengthen the market in health care provi-
lar with patients but who are reluctant to comply sion. All hospitals will become foundation trusts
with government expectations and overspend their — freestanding legal entities that are not cen-
budget. It is likely that an element of general prac- trally managed and have the freedom to raise
titioner income will come from bonuses distrib- public and private capital (about half of all hos-
uted by commissioning groups that have stayed pitals are now foundation trusts). Hospitals will
within budget. This will create a clear incentive also have governance arrangements that include
to comply with group standards and processes, local residents and employees as members and
but the details of these arrangements have not governors. Hospitals that are too weak to meet
yet been announced and the nature of any sanc- the required standards for becoming a founda-
tions to be implemented remains unclear. tion trust are likely to be linked with those that
The consortia will be accountable to a new do meet the standards through mergers, take-
NHS commissioning board. In conjunction with overs, or other arrangements.
the National Institute for Health and Clinical Although hospitals will have greater freedom
Excellence (NICE), the board will set standards in their strategic development plans in their role
for the consortia concerning what constitutes as foundation trusts, they will not in themselves
high-quality service and how to commission create a market in health care, since many com-
services of high quality. The board will also di- munities are served by a single hospital. A sepa-
rectly commission some services, including high- rate development will allow “any willing provider”
ly specialized services, and will hold contracts to deliver services to NHS patients — provided
with general practitioners for the provision of the services are offered at the national tariff
primary care. Although this arrangement will rate and meet required standards of quality. At
distance government ministers from the day-to- present, it is uncertain whether providers who
day work of the NHS, the NHS commissioning meet these standards will be able to compete
board will be accountable to the secretary of on the basis of price. Private companies will be
state for health and will be the vehicle through able to offer services that are competitive with




those of existing providers, and general practi- in the planning and development of local ser-
tioners with the necessary experience may be able vices, a new organization called HealthWatch is
to offer patients services that are outside the usu- being developed to play both national and local
al domain of the primary care practitioner. Backed roles. Elected local government officials will also
up by the constitutional commitment of the NHS run statutory health and well-being boards whose
to offer patients a choice of health care provider, job it will be to scrutinize general practitioner
this move increases the likelihood that there will commissioning decisions and refer those deci-
be a competitive challenge to established pro- sions to the secretary of state as needed. The
viders. With general practitioner commissioners public’s new ability to scrutinize commissioning
directly accountable for their commissioning bud- decisions may bring a fresh element of local de-
gets, incentives are at least theoretically in place mocracy to health services, but it could also stifle
to avoid overuse of services. innovation in situations in which payers want to
Details of the regulatory framework for the develop services in a way that involves the loss of
new provider landscape are under development. existing local facilities.
The role of the former hospital regulator, called Choice will be strengthened, too, and the pa-
Monitor, will be expanded, such that it becomes tient’s right to choose will be extended beyond
an economic regulator for the health system, the current ability to choose between different
regulating prices — probably through maximum hospitals to include choice of treatment options,
pricing — promoting competition between pro- when clinically appropriate, and choice of the
viders, and ensuring continuity in cases of pro- specialist-led team that will provide treatment.
vider failure. A revamped Care Quality Commis- Patients will also have increased choices in their
sion will regulate and inspect provider quality, selection of a primary care practice — they will,
granting licenses to providers and investigating for example, be able to register with a practice
selected breaches of quality standards. The aim located near their workplace rather than near
is to have a more open market governed by the their home, as is now required. In theory, pa-
rules of procurement and competition. There is tients will be empowered by the health informa-
an ongoing debate on the ways in which to pre- tion technology that provides them with detailed
vent anticompetitive behavior, stimulate innova- information on quality of care and by a national
tion, and manage market failure. set of quality standards, although there is little
Finally, the culture of managing by setting evidence that patients in the United Kingdom
national targets is to be dropped, or at least currently use information on quality of care or
watered down. Although public satisfaction with that choice has driven an effective NHS market.23
the NHS has increased in the period during The information provided to patients will in-
which targets have been used,14 targets have also creasingly be focused on outcomes rather than
had perverse effects, such as subordinating clin- processes of care. However, there is real doubt
ical need to the administrative requirements of as to whether outcomes data can produce useful
targets.21,22 Targets are therefore now to be re- information quickly enough to form a basis for
placed with a system of open reporting of data patient choice, provider accountability, or regu-
on performance and clinical outcomes. The hope lation.
of the new government is that providing infor-
mation on quality will ensure that market forces Le ssons fr om acr oss the P ond
drive up quality in the absence of centrally de-
fined targets or price signals. Given the strong emphasis now being placed on
market forces to drive improvement in the NHS,
Patient and Public Influence what can be learned from the United States —
A third key area of reform relates to patient in- the health care marketplace par excellence — to
fluence on NHS services. Patient voice is to be help support the implementation of the latest
strengthened at every stage of care. The catch- NHS reforms?
phrase “no decision about me without me” is to First, there are lessons from U.S. capitated
set the tone for future interactions between pa- medical groups and independent practice asso-
tients, doctors, and the wider health service com- ciations that are relevant to the emerging general
munity. To ensure that patients’ voices are heard practitioner commissioning groups. The mixed



fortunes of the U.S. groups have been well in NHS management spending and pressure to
charted.24,25 Many of the groups formed during deliver rapid change, a strong management infra-
the managed-care era of the 1990s failed, but a structure and effective leadership will be very
cluster have survived and developed effective care hard to achieve in England in the short term.
coordination and care management systems, and Second, the new commissioning groups could
they are well placed to become the accountable be seen as a new type of accountable care orga-
care organizations of the future.26 In a recent nization. Accountability in U.K. health care will
comparison of these groups with the English gen- now lie firmly with primary care physicians —
eral practitioner commissioning groups, Casalino albeit in a hybrid model, since physicians will be
highlighted excellent leadership, investment in accountable directly as providers of primary care
management infrastructure, and a focus on both and through the general practitioner commis-
the quality and the cost of care as some of the sioning groups as payers for specialist care. In
key ingredients of success.27 With the 45% cuts Table 2, we extend the analysis from the Brook-

Table 2. Comparison of Reformed Primary Care in the United Kingdom with Accountable Care Organizations and Primary Care Medical
Homes in England.*

U.S. Accountable U.S. Primary Care Reformed Primary Care
Characteristic Care Organization† Medical Home† (England)
General strengths and Makes providers accountable Supports new efforts by primary Holds GPs accountable for total
weaknesses for total per capita costs and care physicians to coordi- per capita costs; gives primary
does not require patient nate care, but does not pro- care physicians incentive to re-
“lock-in”; is reinforced by vide accountability for total duce costs of specialist care
other reforms that promote per capita costs
coordinated, lower-cost care
Strengthens primary care Yes — gives physicians incen- Yes — changes care delivery Yes — shifts a great deal of power
directly or indirectly tive to focus on disease model for primary care phy- to GPs; is likely to cause some
management within primary sicians, allowing for better care to be transferred from
care; can be strengthened care coordination and dis- hospitals to outpatient settings
with use of medical home or ease management
partial capitation to primary
care physicians
Fosters coordination among Yes — provides significant in- No — does not provide special- No — includes rules to promote a
all participating providers centive to coordinate among ists, hospitals, and other pro- market in health care that may
participating providers viders with incentives to par- discourage collaboration be-
ticipate in care coordination tween GPs and specialists
Removes payment incentives Yes — adds incentive based on No — does not provide medical Yes — because of fixed budgets,
to increase volume of value, not volume homes with incentives to provides strong incentives to
patient visits decrease volume reduce volume of hospital care
or to offer care in different (e.g.,
community) settings
Fosters accountability for Yes — offers shared savings No — does not align account- Yes — fosters accountability, al-
total per capita costs when total per capita costs ability incentives across pro- though mechanisms remain to
are reduced vider, so there is no global be determined, including how
accountability to handle GPs who fail in their
provider or payer roles
Requires providers to bear No — may expose providers to No — does not expose providers Risk-management arrangements
risk for excess costs risk sharing in some models, to risk for increasing volume have not yet been determined
but model does not have to and intensity of practice
include provider risk sharing
Requires “lock-in” of patients No — allows patients to be as- Yes — requires patient assign- Yes — holds GP practices responsi-
to specific providers signed on basis of previous ment to give providers a per- ble for lists of registered patients,
patterns of care but includes member, per-month pay- but increases patient choice of
incentives to provide services ment structure GP, allowing patients to regis-
within realm of participating ter with a GP distant from their
providers home (e.g., commuters)

* GP denotes general practitioner, which is similar to a primary care physician in the United States.
† The information in this column is from the Engelberg Center for Health Care Reform at the Brookings Institution.28




ings Institution28 to show how the reformed cians to align their goals. Indeed, there is con-
NHS compares with two contemporary elements cern that the regulations being established to
of U.S. health care reform: accountable care promote competition will actively prevent gen-
organizations and the primary care medical eral practitioner commissioning groups from de-
home, both key elements of U.S. health system veloping close alliances with local specialists.
reform29 that have parallels with the reformed There are a few experiments with bundled tar-
English NHS. iffs that price packages of care (e.g., the cost of
A third area for comparison with the United a year of care for a patient with diabetes), but
States relates to the nature of the emerging there remains a significant risk that the new
health care market in England and the balance English reforms will fragment rather than inte-
between patient choice and patient voice. In gen- grate care.
eral, providing patients with information and
choice has a greater effect on providers than on Conclusions
patients,30 and a study of the management of
chronic disease in the United States identified The initiatives proposed for the English health
the ability of patients (through their employers) system herald an immense change in the orga-
to change health plans as a key stimulus for nization of the NHS, particularly the role of the
providers to innovate and improve the care of general practitioner and the promotion of a
patients with a chronic disease.31 Although U.K. competitive market in health care. Like all major
health policy has sought to extend patient choice policy initiatives before it, the success of the ini-
over the past decade, patients in the United tiative proposed in “Equity and Excellence” will
Kingdom do not always exercise choice when it depend on its implementation. Perhaps the great-
is available, and it is far from clear that they can est concern is that the government may not have
be relied on to drive an effective market by exer- the patience to see the implementation of change
cising choice. Indeed, increasing patient voice through before it decides to change the system
— which includes providing patients with the again. Major health service reforms cause years
means to challenge commissioning decisions — of disruption,33 and English health care will go
could delay change for months or years, espe- through a process of disorganization (a process
cially in those instances for which service rede- that has also been termed re-disorganization34,35)
sign involves the closure of trusted existing for 3 or 4 years before benefits can be expected
facilities. The U.K. government is faced with the from this new round of changes. Experience sug-
paradox of wanting the health care market to be gests that governments do not have the patience
driven by a public that has not been particularly to see major changes through, especially when
interested in health care choice and using insti- general elections loom; considerable political
tutional structures that in the past have proved nerve will be required if politicians are to resist
ineffective in promoting markets. the urge to change the system again just as
Finally, the interest on both sides of the At- things may be starting to improve.
lantic in providing more integrated care is strik- Disclosure forms provided by the authors are available with
ingly absent from the latest reforms in England. the full text of this article at NEJM.org.
Integration is seen as one of the keys to success From the Cambridge Centre for Health Services Research, Uni-
of high-performing U.S. health care organiza- versity of Cambridge, Institute of Public Health, Cambridge,
United Kingdom (M.R.); and the Nuffield Trust, London (R.R.).
tions32 and is a central theme in proposed ac-
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