Newton Emerson: Why not let the ‘money follow the patient’ to help our failing NHS?

The obvious difference between the health systems across the UK and Ireland is that all four parts of the UK have public systems, while the Republic mixes public and private.

But there is another increasingly important distinction. England and the Republic have ‘money-follows-the-patient’ systems, while Scotland, Wales and Northern Ireland do not.

Hospitals in Northern Ireland, as in Scotland and Wales, are essentially funded by block grants, determined by the size of the populations they serve.

Under the money-follows-the-patient model, hospitals are paid for each patient they treat.

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This in known in England as the National Tariff and in the Republic as Activity Based Funding.

It requires working out an average cost for each treatment and allocating it to every patient as they move through the system.

For example, the latest National Tariff rate for surgery to replace one heart valve with no complications is £9,252.

The more valves surgeons replace, the more money their hospital gets. The idea is that this motivates people to work smarter rather than harder, with clinicians and managers finding new ways to be more efficient.

Few of them will be paid extra for theses efforts, certainly compared to earnings in private practice, so why bother?

The answer boils down to professional pride. Managers like to build empires and clinicians want to pioneer medical advancements and win kudos among their peers. The motivation is already there; success just needs to be rewarded enough to keep the ball rolling.

Research in England and Italy, the only other country with NHS-type healthcare, has confirmed this model encourages positive competition among professionals.

By contrast, the block grant approach can feel as if success is being punished.

Managers and clinicians in Northern Ireland who innovate to treat more patients may find they have merely raised the number they are expected to treat for the same total funding.

Woe betide anyone who boasts of making efficiency savings: they risk having their budgets cut. Stories are told of clueless civil servants even asking where the savings have gone.

England and the Republic took separate paths towards their similar models.

In England, it began with a New Labour reform in 2003 that aimed to introduce patient choice as well as reward efficiency.

The notion of patients shopping around for their preferred hospital survived in Tory reforms the following decade, creating understandable suspicion that price mechanisms are being established to facilitate privatisation.

In reality, governments have been experimenting with market mechanisms inside the NHS as an alternative to privatisation. They want to bring some of the advantages of competition to an enormous state bureaucracy.

Conversely, the Republic’s first step was about more use of private providers.

In 2002, it created a fund to buy surgery for public patients at private hospitals. This has since evolved into a National Tariff-type price list for the whole system, public and private, as it merges under Sláintecare.

Dublin seriously considered following Northern Ireland’s approach instead. Waiting lists were slashed here between 2005 and 2007 by a taskforce under a specialist troubleshooter, Dr Martin Connor. Predictably, this was during direct rule.

The Republic hired Dr Connor in 2011 to repeat his success, with Ireland’s health minister saying it showed a money-follows-the-patient system was unnecessary.

But sentiment quickly changed as rebounding waiting lists in Northern Ireland suggested one-off initiatives were temporary fixes. England’s approach looked more sustainable and adopting it became Irish government policy from 2012.

The money-follows-the-patient model is no silver bullet, as continuing problems in England and the Republic attest.

Anyone who has worked in an organisation with an internal pricing system will be familiar with the absurdities of having to ‘pay’ to use in-house facilities. Imagine that multiplied across the NHS.

The British Medical Association has criticised the National Tariff for encouraging cherry-picking of patients and treatments while discouraging wider healthcare coordination.

Nevertheless, it could be a short-cut to health reform in Northern Ireland.

We have wasted decades failing to transform general hospitals into regional specialist centres. Politicians know it must be done but will not stand up to local outrage when any service is moved.

Health minister Mike Nesbitt had a point last week when he said administrative reforms, such as merging health trusts, can be a distraction from simply getting on with the job.

Introducing a money-follows-the-patient system would be a major administrative task. But it could bypass politicians by freeing doctors and managers to do their jobs better.

Introducing a money-follows-the-patient system would be a major administrative task. But it could bypass politicians by freeing doctors and managers to do their jobs better

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