Department of Health Skip to content

Please note that this website has a UK government access keys system.

You are here:

Monitor and UCL Partners Conference
'Maximising Quality, Minimising Cost'
24 January 2011

  • Last modified date:
    4 March 2011

The title of this conference, 'Maximising Quality, Minimising Cost', can be interpreted in different ways by different people. 

Some may wish to place the emphasis on one part over another.  To say that what really matters, given the state of the public finances, is to cut costs, and as long as we can keep quality above a minimum standard, then that should be enough.

Others may insist that it is quality alone that matters; that any attempt to reduce costs will inevitably lead to poorer care.  That while we should pay lip service to greater efficiency the only real way to improve care is to spend more money on it. 

Still others may take a more “steady as she goes” view; that things aren’t so bad, that there isn’t a great deal that can be improved anyway and so we should be content with the status quo. 

They are all wrong.

Our plans to modernise the NHS are not primarily about cutting costs.  They are about increasing productivity, improving efficiency and enhancing value for money through competition.  They are about achieving far more with what we have.  Introducing the dynamism of competition and contestability to drive up standards and to drive out cost.  But most of all, they are about achieving health outcomes that are among the best in the world.

Money alone is not the answer

Since 2001, improvements in the NHS have been principally driven by massive annual increases in the budget.  In the beginning this was justified as we could all see that the NHS was underfunded.  We now have new hospitals and GP surgeries and with more, better paid staff. 

But over time, for politicians at least and others joined in, throwing ever increasing amounts of money at the NHS somehow became the only way to improve quality.  Only it didn’t as productivity fell, we closed the gap in spending with other European health systems, but not the gap in terms of results.  A policy statement was seen as meaningless if it did not come with a large additional budget attached. 

This was always going to be unsustainable, and we’ve now reached the end of that particular road.

While we will continue to increase the NHS budget year on year, and by £10.7bn over the life of the Parliament, the scale of those increases will be far smaller than in recent times. 

If doing things in the same way as we have done before is not possible, now must be the time for change. 

For if we do not, if we do not adopt a resolute focus on productivity and efficiency, if we do not do everything we can to herald a new era of innovation and creativity, the future is one of poor standards and relatively poor outcomes.  And I for one will not allow that to happen.


In the short term, there are many things we can do that will save serious amounts of money within the Health Service.  Most obviously, by abolishing the excessive layers of bureaucracy, saving £5 billion in total by the time of the next election, even allowing for the running costs of the service to be taken back to the 2004 level.

QIPP - Quality Innovation Prevention and Productivity

But beyond the obvious, there are even greater gains to be had from directly improving the quality of care.  As I said, many assume that better care costs more.  But as the work on the ongoing QIPP programme has already demonstrated time and again across the Health Service, this is not the case. 

More accurate diagnoses, fewer treatment errors, fewer complications, faster recovery and less invasive treatments.  All things you would list under a heading of “better care” and all things that can dramatically reduce the cost of that care.

And most cost effective of all is to keep people healthy and out of hospital in the first place.  So our modernisation of healthcare will include:

• Putting as much effort into preventing disease as we do to cure it. 
• Treating people in the right place, at the right time, first time.
• Treating people wherever possible in their homes and in their communities rather than in hospital. 
• And safely reducing the length of a patient’s stay in hospital while ensuring that they are only discharged when they are ready to move on and do not come back a few weeks later.

This is not rocket science.  People have been talking about it and working on it for years, such as the Modernisation Agency, NHS Institute for Innovation and Improvement and now the QIPP programme.  So why has it not happened at pace and at scale when the benefits both to patients and to the NHS budget are so plain? 

The answer?  Because there was no incentive to do so. 
• Why should GPs engage in the reform of local care pathways if they have no real power to change things? 
• Why should a hospital help to treat more patients in the community if it means receiving less money in the future? 
• How can PCTs intervene on public health when so much of what can have an impact lies beyond their area of responsibility?

The Health Service is full of talented, highly skilled people dedicated to the welfare of their patients.  People who are full of ideas and passion.  The people are not the problem.  The system is the problem. 

The system that tells people what to do, that restricts their room to manoeuvre, to create, to innovate.  If we are to see the gains we all want, if we are to see dramatic improvements in quality combined with greater efficiency, then we need an NHS that can unleash that creativity for the benefit of patients. 

An NHS where providers of healthcare compete based on the value of the service and the care they provide.

Value-based competition

So what do I mean by this?  What is “value”?  Well here I would like to draw on the work of another of our speakers, Professor Michael Porter, who set out the idea of value-based competition in his excellent book, Redefining Health Care. 

I am sure he will explain far better than I can.

But put simply, value is about results.  It’s the results that a particular provider delivers at a medical condition level. 

So how good is one hospital’s diabetes care compared to another’s?  How good is their COPD care or their hip replacement surgery?  When providers of NHS care compete on the outcomes they achieve for patients, everybody benefits. 

For this to work, these outcomes must be measurable and transparent.  And where this happens, the results we know can be dramatic.

According to a recent study by the European Association for Cardiothoracic Surgery, patients undergoing heart surgery in England have a greater chance of survival than in almost any other European country. 
In the past 5 years, death rates have halved and are now 25% lower than the European average. 

This stunning improvement was not down to a government target.  It was the direct result of the collection, analysis and publication of outcome data by cardiac care professionals.  I remember first talking to Sam Nashef at Papworth 15 years ago about the audit and transparency they were leading in cardiac care. 

It was their idea and their professional pride that drove competition between – and cooperation among – them and forced up standards so dramatically, firstly through audit and then through publishing data.  They should be lauded for the results and I want to see similar results across every facet of the NHS. 

Under our plans to modernise the Health Service, providers that deliver excellence will benefit from more referrals and more patients choosing their service.  Those that don’t will have a strong incentive to change and improve.

Providers will benefit when and precisely because patients benefit. 

Liberating clinicians

That is why we will empower doctors, nurses and all other health professionals to lead the NHS from the front-line. 

We’ll change the default in Health Service decision-making, so that it’s GP-led commissioning – the people who see patients every day – and their clinical colleagues across the NHS, social care and local government, who decide what and how services are provided.  Not detached and bureaucratic tiers of NHS or Department of Health management. 

We’ll give patients choice at every possible point along the way and we’ll give them the information and support they need to exercise that choice. 

The money will follow the patient and it will flow to the very best providers.  The public aren’t fools.  If they or their GPs can see for themselves how one hospital will give them a far better standard of care than another, even if it’s further away, most people will go for the best care.  To pretend otherwise is just patronising.

And we’ll invite Any Willing Provider to deliver care, competing with others based on the value of the care they can deliver.

They will be free to experiment, to take risks, to innovate, even to fail.  Free to use their professional judgement and experience to provide the best possible care for their patients.

We will allow staff to ‘spin out’ of the NHS and set up independent social enterprises if they want to.  Giving patients and commissioners real choice.

For example, from April, over 60 new Social Enterprises and up to 16 new aspiring Community Foundation Trusts will start to provide commity based health services.  Many acute and mental health Founation Trusts will also take on responsbility for providing local community services. 

And we’ll finally deliver on Tony Blair’s promise to make every NHS Trust a Foundation Trust – a real Foundation Trust with real independence.  Free to organise themselves and to compete with others to provide the very best patient outcomes.

This is a genuine opportunity for all providers to deliver clinical excellence and to be rewarded for it.  As the money flows to the best providers, they will be able to develop and grow their services.  The State will no longer stand in the way of spreading excellence.  Instead we will do everything we can to encourage it.

The challenge for Chief Executives, freed from central control, will be to lead their organisations in a spirit of openness and collaboration. 

The challenge for senior healthcare professionals will be to stand up and be counted, to put their heads above the parapet and take decisions jointly with management to improve the services they offer.

The reward for meeting these challenges will be a more vibrant, dynamic and entrepreneurial NHS.

Our reforms are finally bringing the power of competition and cooperation to healthcare.  Not a free-for-all race to the bottom, but striving  for quality, for excellence and for efficiency.

Some raise concerns that this will lead to variation and divergence across the country.  But despite the best efforts of a top-down system, variation exists already.  You will have seen from the Atlas of Variation that we published last year, that there is wide and unacceptable variation in care across the NHS.  The presence of variation is not wrong in itself where it is as a result of the needs of local people.  The difference will be that future variation will be because local communities have chosen that variation.  It will be the very opposite of the postcode lottery.

Of course, because of the nature of competition, some providers will perform better than others.  Some patients will gain more than others.  But does that mean that those others lose out?  Will they receive worse care than they do now?  I believe not.

The evidence is that where there is effective competition, all producers are driven to raise their game, so that even those providers that are less successful also improve, and that those served by them also receive a better service.  As the saying goes, “competition is a tide which lifts every boat.”

And this is far from some sort of laissez-faire approach.  Every effective market requires strong and independent regulation.  And a social market even more so.  This will be the role of our co-hosts today, Monitor.  They will have the vital job of ensuring effective competition and a level playing field, acting in the interests of patients and the tax payer. 

And the Care Quality Commission will ensure that the high standards of safety and quality that we expect from the NHS are consistently delivered.


And there will be other incentives to improve.  One will be through the tariff.  In 2011-12, the overall National Efficiency Requirement will be 4%.  2% of which will be embedded within the tariff, through things like:

• The setting of all tariffs below the average of reported costs; and
• better targeting of long stay payments;

There will be an increasing number of best practice tariffs to
promote excellent care:

• To help reduce unexplained and unwarranted clinical variation,
• To increase day case rates where appropriate, and
• To reduce lengths of stay in hospital.

And there will be changes to the rules to reduce unplanned emergency readmissions. 

But from 2013/14, prices will no longer be set by the Department, but by Monitor and the NHS Commissioning Board working together.  In certain circumstances, when the system is ready, where patient choice is not the driver of output-based competition, and where Monitor and the NHS Board are confident that it will not harm service quality, they will be able to set a maximum rather than a fixed price for services as the Operating Framework last year and this year allowed, encouraging price competition where it is deemed appropriate.

Some people’s instant reaction to the very mention of competition on price is to recoil in horror.  To talk of quality inevitably going out of the window as commissioners put saving money over improving quality. 

But think for a moment who those commissioners are.  They are GPs, they are nurses, they are clinicians of all types.  People who all share a professional and, when the Health and Social Care Bill becomes law, a legal duty to ensure the highest levels of care for their patients.  There will not only be a professional incentive but also a quality incentive through the quality premium, where clinical leaders will be incentivised to deliver the best outcomes for their patients.

If I were to trust anyone to make the right decisions, these are the people I would trust.

And more than that, Monitor, in its new role as economic regulator, will be watching closely to make sure that price competition is working to improve quality as well as efficiency.


So let me conclude, I don’t want anyone to be misled about our plans to modernise the National Health Service – as some are trying to do so.  The focus of everything we do will be on improving health outcomes. 

We will do this:

• by liberating clinicians and their colleagues to re-design the Health Service from the bottom up;
• by making them responsible for the budgets they spend; and
• by creating a dynamic social market based on choice, competition and transparency. 

The inevitable results of this approach will be two-fold: firstly, increases in productivity over the coming decade, contrasting with the loss in productivity of the last decade and outcomes that are consistently among the very best in the world.  And that is our vision.

Thank you.

Access keys