Jump to ContentJump to Main Navigation
The health debatePolicy & Politics in the Twenty-First Century$

David J. Hunter

Print publication date: 2008

Print ISBN-13: 9781861349293

Published to Policy Press Scholarship Online: March 2012

DOI: 10.1332/policypress/9781861349293.001.0001

Show Summary Details
Page of

PRINTED FROM POLICY PRESS SCHOLARSHIP ONLINE (www.policypress.universitypressscholarship.com). (c) Copyright Policy Press, 2022. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in PPSO for personal use. Subscriber: null; date: 24 May 2022

Meeting the health system challenges

Meeting the health system challenges

(p.23) 2 Meeting the health system challenges
The health debate

David J. Hunter

Policy Press

Abstract and Keywords

This chapter provides a broad overview of how health systems in a variety of contexts are responding to the broadly similar challenges they face through a combination of managerialism and markets. It examines why changes that are heralded as pioneering and path-breaking often fail to live up to expectations and are then criticised for having been ‘oversold’. It discusses the predominant approach of NHS reform which focuses on centralised targets, together with a growing commercialisation of health services.

Keywords:   health systems, managerialism, markets, NHS, centralised markets, commercialisation


In Chapter One, mention was made of the value of a comparative approach in describing and understanding health systems while bearing in mind the limitations of such an approach and the tendency to overlook key cultural and historical differences between countries and their health systems. These cultural and historical factors often play a major role in the way those systems function regardless of the details of their funding and organisation. Through making comparisons it is possible to identify both commonalities and differences. The notion of convergence in an increasingly globalised world was also considered in the previous chapter. Whatever the value, and reality, of the convergence thesis, a variety of health systems exists and important differences remain. This chapter describes the principal features of health systems and explores the powerful appeal of managerialism to provide an overall context against which to consider the various policy cleavages that occupy the rest of the book.

Types of health system

In this section, we describe the various types and key features of health systems. The principal types are set out in Box 2.1. (p.24)

The US ‘non-system’ of health comes closest to the free market system while, at least until recently, the UK's NHS comes closest to a system representing a government monopoly at the other extreme. Box 2.2 shows the principal types of funding.

The UK's NHS is an example of a health system funded principally by direct taxation although there are user charges for some groups of patients in the form of prescription charges. However, these charges only apply to England and, since devolution, no longer apply in Wales and are being phased out in Scotland. Most Western European health systems are funded through a method of social insurance combined with opt-outs so that people can take out private insurance. Following an extensive review of social insurance schemes as part of his review of NHS financing, Derek Wanless, in his capacity as government adviser, recommended that for the NHS there should be no change in the principle of funding health care through general taxation. However, critics of the NHS and its centralised and heavily politicised structure favour a social insurance system on the grounds that this would allow the NHS to free itself of political interference and an overbearing form of central control. There is no certainty that such an outcome (p.25) would occur and that what may work in one system can simply be exported to another, regardless of its particular context and features. It is important to appreciate the historical, economic, social and political influences that combine to determine the precise design and operation of a country's health system. In the absence of such an appreciation the result may be unforeseen and unintended consequences.

The types of political culture within which different types of health system are located are listed in Box 2.3.

Few countries fit neatly into one or other column but an attempt has been made to locate them where their predominant characteristics are evident. For example, although the UK is regarded as egalitarian as a result of its post-World War II welfare state, the country has some of the most pronounced health inequalities between social groups, with the health gap widening (Dowler and Spencer, 2007a; Dunnell, 2008; Office for National Statistics, 2008).

Finally, in describing health systems, the mix of public–private funding and provision is of interest and this is depicted in Box 2.4. In seeking to reform their systems, countries are faced with few options when it comes to funding health care. Indeed, in order to control cost inflation in health care, countries have generally favoured increased public control of funding. Most reform initiatives tend to focus on the mix of provision, with a growing emphasis on private provision (including for-profit and not-for-profit) to stimulate competition in the belief that this improves efficiency and raises the quality of care. As Box 2.4 shows, the UK is high in respect of both public funding and public provision although in respect of the latter, the mix is changing (p.26) in favour of greater pluralism and diversity with active encouragement being given to for-profit and not-for-profit providers. In respect of the latter, much attention has been given to the third sector as a major service provider and to nurturing new types of social enterprise. The policy has also been pursued as a means of strengthening social capital and unleashing latent talent in communities.

Health systems having been established, the politics of health then revolve around the competing goals of health care. These are:

  • equity/access

  • quality

  • cost containment (efficiency).

No country has established a perfect balance between this so-called three-legged stool; the endless, and often restless, search for one dominates the health debate. It also demonstrates the essentially political nature of the discourse in health systems even if this is often (p.27) disguised and becomes obfuscated by reducing issues and policy puzzles to seemingly technocratic ones and resorting to a particular form of managerialism to achieve results.

In the UK, with the advent of political devolution, there is – at least at one level – evidence of growing divergence between the four countries with Wales and Scotland in particular developing their own distinctive health systems. When it comes to financing, there is virtually no difference across the UK, apart from prescription charges, which, as mentioned earlier, still apply in England but have been abolished in Wales and are being phased out in Scotland. In terms of structure and approaches to market-style changes there are marked differences, with England favouring moves towards a mixed economy of care and displaying a constant preoccupation with structural changes that have not been replicated elsewhere.

When it comes to targets to reduce waiting lists and times and improve access to care, the approach adopted in England has been much tougher and unrelenting than elsewhere. Some observers claim that such an approach has worked to England's advantage because waiting lists are lower and care more efficient (Bevan and Hood, 2006). But others argue that even if there is evidence that targets work in improving performance, merely reducing waiting lists says nothing about the quality of care received or outcomes (Propper et al, 2007). Such arguments, however, ignore the acknowledgement of widespread cheating, or ‘gaming’, to meet nationally imposed targets, which suggests that perhaps not all is as it seems (Seddon, 2003). After all, if a chief executive's career is on the line for failing to meet a target, then whatever it takes to meet the target will be sanctioned. Failure is not an option.

Returning to the evidence of intra-UK differences, policy makers in Wales and Scotland would argue that they have established different priorities that are relevant to, and directed towards, their respective health systems. In both countries, there has been a greater emphasis on public health and on tackling health inequality. However, it remains to be seen whether such differences in emphasis are substantive or merely rhetorical. It is also important to appreciate, too, that Wales and (p.28) Scotland do not exist in sealed compartments. They remain intimately bound up with the UK and there is much movement of personnel between the four health systems within the UK, who bring with them their particular experience acquired in another setting, just as there is movement of individuals for personal and family reasons. Pressures for convergence rather than divergence within the UK therefore remain powerful despite devolution and the opportunities it presents to do things differently.

International league tables and international comparisons of health systems make for interesting conversations in pubs and at dinner tables. But it is questionable how valuable they really are; often the sources of such comparisons need to be viewed with caution and a fair degree of scepticism. The Commonwealth Fund survey has been criticised for its methodology, which, it is claimed, distorts its conclusions concerning the performance of the British NHS. For instance, a study by the think tank, Civitas, calls the survey a ‘caricature’ of health system performance that ‘distorts proper analysis by ranking entire health systems on what are, quite frankly, inadequate measures’ (Gubb, 2007: 25). However, it is important to put the Commonwealth Fund's survey of the international comparative performance of health care in perspective. First, it is principally aimed at showing how performance has improved or deteriorated over time in the US (Davis et al, 2007). Second, the Fund also acknowledges that any attempt to assess the relative performance of countries has inherent limitations. Among these are the fact that assessments of health system performance are likely to be affected by the experiences and expectations of patients and physicians and that these may well differ by country and culture.

The Fund looked at the comparative performance of the health systems in six countries representing a range of health system types as described above. The countries, in alphabetical order, are:

  • Australia

  • Canada

  • Germany

  • New Zealand

  • (p.29) United Kingdom

  • United States.

In each country, an assessment of performance was made covering six categories. The categories are:
  • quality of care

  • access to care

  • efficiency of health system

  • equity of health system

  • ability to ensure long, healthy and productive lives

  • views of the health care system: clinicians and patients.

In terms of the key findings reported, the US ranks last of the six nations – as it did in the 2006 and 2004 surveys – failing to achieve better health outcomes than the other countries in the survey and coming last on dimensions of access, patient safety, efficiency and equity. Australia, New Zealand and the UK continue to demonstrate superior performance, with Germany joining their ranks of top performers. The most notable way in which the US differs from other countries is the absence of universal health insurance coverage. It is not surprising, therefore, that the US performs significantly worse than other countries on measures of access to care and equity in health care between populations with above-average and below-average incomes. The area where the US health care system performs best is preventive care, an area that has been monitored closely for over a decade by managed care plans whose success comes from keeping people out of expensive hospital care. Despite this, the survey notes that the US scores particularly poorly on its ability to promote healthy lives. This may not be so surprising as the US is a world leader in rapidly rising rates of obesity among adults and children, principally the result of its fast-food culture and lack of exercise (Kawachi, 2007).

The survey concludes that its results show that in all countries there is room for improvement. But it also notes that all the countries spend considerably less than the US on health care per person and as (p.30) a percentage of gross domestic product (US per capita spending on health is more than double the average among OECD industrialised nations). The US could therefore ‘do much better in achieving better value for the nation's substantial investment in health’ (Davis et al, 2007: viii).

Seasoned observers of international health systems will not be surprised at these findings. But what may surprise readers is that despite the generally poor performance of the US health system (or ‘non-system’ since there is no single system as such), it continues to attract considerable interest from health system reformers in other countries, who regard the US as a repository of innovation and successful initiatives demonstrating the important, and largely benign, influence of markets in health care. Such a contradictory response to the US health ‘system’ and its generally poor performance may seem somewhat mystifying. Seeking to explain it would take us far beyond the purposes and limits of this book. However, the authors of the Commonwealth Fund survey suggest that the US could learn from innovations in other countries, not something that comes naturally to those running health care in the US. As the report states: ‘Like the queen in the "Snow White" fairy tale, Americans often look only at their own reflection in the mirror – failing to include international experience in assessments of the health care system’ (Davis et al, 2007: 1). This lacuna is an example of the power of values and culture over how not just health policy but all policy gets conceived and shaped and why there are strict limits on how far international comparisons are useful.

The Commonwealth Fund comparison noted the following features of the UK's NHS:

  • we make more use of nurses in routine care management of sicker adults;

  • we make more use of multidisciplinary teams in primary care;

  • we score relatively poorly in measures concerning patient centred care;

  • we are more likely to set targets for clinical performance;

  • (p.31) we can get speedier access to a doctor than people living in the US;

  • we have better out of hours access than the US;

  • if you have above-average income then you are much more likely to have your blood pressure checked than someone with below- average income – the reverse is true in the US.

What can sensibly be said about this mix of features is not obvious; they probably have their roots in history and custom and practice for which there may be no rational explanation. However, the picture that does emerge is that for all the criticism levelled at it within the UK, the NHS is by no means bankrupt as a system. Nor, at 60 years of age, has it had its day, as some of its critics and sections of the media would like to believe. Even the Civitas report (Gubb, 2007) concedes that avoidable mortality from the biggest killers – circulatory disease and cancer – has improved quite markedly between 1999 and 2005 in England and Wales. It concludes that NHS performance since 1999 ‘looks fairly impressive in the international context’ with above-average improvements in the biggest killers ‘compared with other European countries of comparable development’ (Gubb, 2007: 24). Nevertheless, despite the improvements, it expresses concern that avoidable mortality rates remain comparatively very high. However, establishing the causes of these is complex and it may be that the NHS – or indeed any health care system – on its own can do little if it is unhealthy lifestyles that are largely responsible for much of the problem together with widening health inequalities. As already mentioned, the obesity ‘epidemic’ may be a major cause of the increase in certain diseases. In any event, given that there is no such thing as a perfect health system anywhere in the world, the UK's NHS would still appear to have much to commend it. In common with other systems it wrestles with some deep-seated and persistent dilemmas and challenges that together constitute what might be termed the health debate and in doing so there is evidence of both failures and achievements.

(p.32) Health profile of England 2007

Taking England on its own, the Department of Health's Health profile of England 2007 shows a general improvement in health outcomes in respect of declining mortality rates in the major killers of cancers, all circulatory diseases and suicides; increasing life expectancy (at its highest level ever); and reducing infant mortality (at its lowest level ever). In some areas, particular challenges remain (DH, 2007a). The rising rate of diabetes is singled out for special mention and this is related to the sharp increase in obesity levels. Similarly, although improvements are being made in the determinants of health – especially in respect of the number of people who smoke and in the quality of the housing stock, which has a major impact on health status – there are areas of concern, notably, as just mentioned, increasing levels of obesity in adults and children. There are also various geographical inequalities evident across the UK, demonstrating that health inequalities also remain a major cause of concern.

When compared with the other countries making up the European Union (EU), the following findings are noted in the profile:

  • premature mortality rates from the two biggest killers, cancers and circulatory diseases, are reducing faster in England than the average for the EU;

  • death rates from motor vehicle accidents in the UK are among the lowest in the EU;

  • the prevalence of obesity in England is the highest in the EU;

  • death rates for chronic liver disease and cirrhosis have risen markedly, particularly since the mid-1990s, and for females the latest data show that England has risen above the EU-15 (that is, the 15 countries that were members of the EU prior to its enlargement in 2004);

  • the percentage of all live births to mothers under the age of 20 in the UK remains the highest when compared with other EU-15 countries.

(p.33) Like the Civitas review of trends in avoidable mortality mentioned above, what these data show is that the principal challenges facing the health system in England, and indeed throughout the UK – since the principal trends are little different elsewhere or may in some cases even be worse – are ones of lifestyle and have their roots in public health. For example, the rise in liver disease is a direct result of the growing consumption of alcohol, which has become considerably cheaper and more readily available in recent years alongside other developments including the pattern of drinking among young people and the extension of drinking hours in pubs.

In meeting the various challenges that comprise the health debate, and which were briefly described in Chapter One, modern health systems have pursued a number of reform strategies over the past 40 years or so with the pace quickening since the 1980s. Most of the various reforms can be analysed and best understood by reference to Alford's framework of dominant (medical profession), challenging (management and managers), and repressed (the public) structural interests introduced in the previous chapter. The playing out of these structural interests has occurred against another struggle, also noted by Alford, namely, that between market-style reformers on the one hand and bureaucratic reformers on the other.

Despite the preoccupation among policy makers with health system reform, radical change is rarely a serious option – at least not in practice regardless of the promises policy makers may make in their rhetoric. When the Conservative government began toying with market-style reforms of the British NHS in the early 1990s, their efforts proved to be less far-reaching than many wished or initially intended, and the government pulled back from giving free rein to the market, much to the regret of some observers who were keen to test the role of markets in health care and believed they had a place in incentivising providers to perform differently (Le Grand, 2007). The reason was entirely political. Since the NHS is widely regarded as a cherished institution by the public, akin perhaps to the BBC, no government dare risk its own existence by tampering with the NHS in a way that might put its very survival at stake.

(p.34) For reasons that are not entirely clear, and which certainly contradict much of its own reform rhetoric, the New Labour government that succeeded the Conservatives in 1997 has gone much further in introducing market-style mechanisms into the NHS. Indeed, the journey along this path is continuing. However, regardless of the prevailing political situation in any particular country, it seems generally to be the case that major path-breaking change is infrequent and very much the exception. Path dependence would appear to be the norm, which contends that policy options are limited by facts and vested interests on the ground – institutional structures and the consequences of past decisions all conspire to constrain the ability of policy makers to strike out in wholly new directions (Oliver and Mossialos, 2005). While this is generally true, there are also occasions when the notion of ‘punctured equilibrium’ may apply, that is, a change that has profound and far-reaching impacts and implications (Gould, 1990). A good example of this phenomenon is the introduction of the NHS itself in 1948, while a more recent example might be political devolution within the UK in the late 1990s, ushering in elected assemblies in Wales and Northern Ireland, and a parliament in Scotland. In Scotland, Labour was narrowly defeated by the Scottish National Party in the May 2007 election with the result that policy divergence, already a feature, is likely to grow. But of course, as noted earlier, there are constraints operating that can limit the degree of radical change possible and make path dependence a more likely driver of what happens.

Not all changes result in a sharp departure from the past, despite a desire on the part of the reformer to bring about such an outcome or at least to present it as such. An example is the then prime minister Tony Blair's attempt to reform the NHS, especially in the later years of his premiership from around 2002. The results have been far less significant or impressive than the rhetoric accompanying them would suggest (Healthcare Commission and Audit Commission, 2008). As any change management text will state, the chances of ensuring that successful implementation occurs are seriously impaired if those working on the front line are not signed up to the changes and seek to contest, or undermine, them. The Blair government ignored this (p.35) wise counsel to its cost. A feature of the most recent changes in the NHS in England is that the key professions in the NHS have been disengaged from the reform process. Yet, as the work of Lipsky (1980) on street-level bureaucrats suggests, the discretion and power exercised by those on the front line may prove instrumental in determining the success or failure of a policy or set of structural changes.

Blair thought he could bypass the medical profession, regarding them as the major source of the problem rather than at least part of the solution. And for a time he was able to do so. Indeed, one reason for resorting to the private health care sector and encouraging private companies to provide services in direct competition with the NHS, primarily in the form of independent sector treatment centres (see Chapter Three), was to avoid dependence on – and being held to ransom by – the monopoly position enjoyed by the NHS. In so doing, the aim was to encourage the NHS to raise its game when confronted with competition on its local patch. But the experiment cannot be said to have been a resounding success; one of its consequences has been a serious lowering of morale among the workforce and a widespread perception among staff and the public that despite unprecedented levels of investment in the NHS between 2002 and 2008, averaging an annual growth rate of 7.4% over the five years with spending rising by nearly 50%, the service remains a poor performer in terms of overall productivity (Wanless et al, 2007). Part of the reason for this has been placed on the degree and extent of organisational change, which ‘has been costly, not just financially but in terms of disruption, loss of experienced staff and changes in working relationships both within the NHS and with external organisations’ (Wanless et al, 2007: xxvii).

Other reasons lie in the government's obsession with centrally imposed targets as a means of achieving change (Seddon, 2003). To meet its targets, the government sought to increase capacity and did so by investing significant new resources. The expectation was that by investing more, the system would produce more and do more work. But this rather assumes that the system was already functioning optimally and without waste or inefficiencies. Otherwise, adding resources to a wasteful system simply compounds the inefficiency – a case of throwing (p.36) good money after bad. Seddon's argument is that the targets imposed by government ‘are themselves a major cause of waste, consuming people's time in artificial activity and, worse, deflecting their attention from what they ought to be doing’ (Seddon, 2003: 208). For Seddon and other proponents of lean thinking, the critical thing is for managers to manage the overall flow of work rather than functions within it. A target-based approach tends to focus on functions while ignoring the whole system and the flow of work within it.

If there is a consistent theme running through health system reform of an absence of major, path-breaking change, with policy options limited by what is feasible on the ground with the accretion over decades of professional practices and standard operating procedures, then does that suggest that health system reform supports the convergence thesis? Evans (2005) suggests that ‘parallel evolution’ might be a better way of explaining the evolution of health systems. He is particularly at pains to highlight the importance of the prevalent social values and power structures in a country since these determine the compromises among conflicting interests. He describes a common theme unfolding in each country, moving through two distinct phases. In the first phase, countries put in place some form of universal and comprehensive system of collective payment for health care, financed either through general taxation or compulsory social insurance. In the second phase, these same countries find themselves confronting the relentless pressure for cost escalation evident in all health care systems regardless of their method of financing. Trying to balance cost control while ensuring that the goals of access and public satisfaction, equity, effectiveness and efficiency are both protected and advanced is a tall order. It has proved an increasingly difficult task and in an effort to achieve it, governments have resorted to a range of supply-side reforms designed to manage rising demand on health care services. Rather than simply injecting more money into health services, governments have demanded that the way resources are spent be subject to closer scrutiny and reform.

While governments may be reluctant to alter the source of funding for health care, they are less protective of the way in which it is provided. (p.37) In the case of the UK, or England to be more precise, the government has decided – in the absence, it must be said, of proper public debate – that as long as the funding of the NHS remains public and is allocated to each according to their needs, then it does not matter who provides the services. What matters, according to the mantra, is what works. Therefore, to allow the private sector to provide services, either in place of, or in competition with, the NHS, is regarded as perfectly legitimate and a way of ensuring best value for money. The fact that there is no convincing or unequivocal evidence to substantiate such a policy has not deterred policy makers eager, if not doggedly determined, to prove the rightness of their (and especially perhaps their trusted advisers') policies. Indeed, what limited evidence there is suggests that reforms based on markets or market-like institutions and relying on competitive incentives to change provider behaviour have a particular tendency to generate inequities in access or regressive patterns of payment. In a market system, need is irrelevant. What counts is what pays best and maximises profit. For governments to be able to regulate such a market once established with the vigour and determination required flies in the face of all we know about market behaviour and the inability of governments to regulate effectively. Evans graphically captures the dilemma: ‘Defeating this inherent tendency requires a strong and sophisticated regulatory environment, and structuring such an environment is like riding north on a southbound horse. There are powerful incentives for participants to erode or circumvent regulatory controls and move in the natural direction’ (2005: 285–6).

The ‘cult of managerialism’

If there has been a single prevailing feature characterising health system reforms in recent decades both in the UK and elsewhere it is the ‘cult of managerialism’. This has taken different forms and has, at various times, emphasised bureaucratic aspects and, at others, market-type features in keeping with the global health system reform agenda and the centrality to this of market forces. But they have in common a firm conviction that health systems require better management and (p.38) that the weakness or absence of management accounts for avoidable inefficiencies and poor performance, and a tendency for professional monopolists exercising unbridled power to determine what happens in practice in respect of resource allocation and priority setting.

The commitment to stronger management has tended to follow ‘Fordist’ and/or ‘post-Fordist’ thinking as derived from Henry Ford (Harrison et al, 1992). In turn, many of the principles underpinning this thinking have more than a passing resemblance to FW Taylor's school of ‘scientific management’ (Taylor, 1911). At the core of these constructs is the notion that management needs to control the workforce by specifying in some detail what has to be done, how it is to be done, and in what quantity it is to be done. It is a mass production approach, oriented to efficiency and predictability and has been applied to health systems such as the British NHS. While retaining many of the Fordist features, post-Fordism seeks to fragment the organisation into its constituent parts, is more focused on results than with conforming to rules and procedures and seeks to be more consumer responsive. It shares much in common with new public management, which has had a major impact on the NHS and is considered below.

Over the years, UK governments of all hues have experimented with various management fads and fashions ranging from consensus management, in vogue during the 1970s, to general management introduced in the 1980s. At times, a strong central pull has been evident; at other times, there have been moves to decentralise managerial authority and locate it with those providing frontline services. Over the past decade, both these countervailing forces have been in evidence, sometimes even simultaneously, but in the overall context of a government that is arguably the most managerial and technocratic of any in recent times. Not only do ministers speak the language of management and delivery but they also act as the top management team steering the NHS despite the lack of any management experience. The problem is that new governments (as New Labour was in 1997), especially those that have been out of power for a long period and impatient to put their imprint on public services, believe that power resides with them and that they simply have to pull the levers to change (p.39) direction without relying on, or trusting, others to do so. While there is some truth in this analysis of what has happened and why, it is far from being the whole picture, as Lipsky's (1980) study of street-level bureaucrats shows.

In time, all governments come to realise that the real world is considerably more messy and complex and that, far from being in control, ministers and their advisers and officials are invariably the captives of the services they oversee (Mackenzie, 1979). While they would probably protest that this is grossly unfair and point to the many improvements in the NHS since the investment of new resources, combined with the introduction and implementation of a tough target regime designed to reduce waiting times and improve access to care, these successes have to be put in context and viewed with some caution. It may be true that there have indeed been real improvements, but holding targets largely responsible may be crediting them with more influence than is justified when the evidence is examined more closely. Conceivably, the improvements might have occurred anyway in large part as a result of the injection of significant new funds following the Wanless review of challenges facing the NHS over the 20-year period up to 2022. Moreover, while aggressively imposed targets may have had some effect initially, it has come at the price of clinical detachment and falling staff morale and, as noted earlier, evidence of widespread ‘gaming’. A terror-by-target culture hardly seems conducive to winning the hearts and minds of those managing and providing services or to encouraging them to raise their game. Hence the government's change of tack with the change of prime minister in mid-2007 has meant paying closer attention to how best to bring clinicians back into the fold, since they are seen as critical to the successful implementation of the reform agenda. We return to this issue in the next chapter.

The managerial revolution in most health systems began in earnest in the 1980s and 1990s although the British NHS was an early pioneer of management reforms. In 1974, the NHS underwent its first significant upheaval based on the work and concepts developed by a combination of international management consultants McKinsey and Brunel University under Elliott Jacques and Ralph Rowbottom. (p.40) The Brunel team invented a form of organisational analysis known as social analysis and it provided the theoretical and conceptual basis for the so-called official ‘grey book’ that described in some detail the architecture for the structure of the NHS as it emerged in the mid-1970s (Department of Health and Social Security, 1972). For its part, McKinsey's work heralded the start of a long relationship with the NHS that continues to this day. Indeed, McKinsey have been at the forefront of the market-style changes more recently introduced into the NHS. Its influence runs through these at every level but especially in its penetration of the central government department leading the changes, the Department of Health.

New public management

The early managerial reforms were further developed in the 1980s and 1990s under the banner of ‘new public management’ (NPM). Some countries, including the UK and New Zealand, were regarded as the trailblazers of NPM although its architect, Hood (1991), saw it as a striking international trend in public administration observable from the mid-1970s onwards. NPM has therefore become something of a global movement comprising a set of beliefs or an ideology as well as a set of doctrines governing public sector reform in services such as health systems, including the UK NHS (Dawson and Dargie, 2002). Hood describes NPM as comprising seven doctrines, which he articulates as follows:

  • a focus on hands-on and entrepreneurial management, as opposed to the traditional bureaucratic focus of the public administrator;

  • explicit standards and measures of performance;

  • an emphasis on output controls;

  • the importance of disaggregation and decentralisation of public services;

  • a shift to the promotion of competition in the provision of public services;

  • (p.41) a stress on private-sector styles of management and their superiority;

  • the promotion of discipline and parsimony in resource allocation.

Power has summarised the central ideas comprising NPM, suggesting that they were largely borrowed from private sector management thinking (Power, 1997). Other critics have similarly seen NPM as a market-based ideology invading public sector organisations previously imbued with different values (Laughlin, 1991; Rhodes, 1996; Stewart, 1998). Rhodes notes that NPM and entrepreneurial government ‘share a concern with competition, markets, customers and outcomes’ (1996: 655). Stewart believes that notwithstanding its slipperiness as a concept and its different emphasis in different countries, NPM is intent upon emulating in the public domain ‘what is believed to be the practice of management in the private sector’ (1998: 16). He continues:

A rhetoric of an entrepreneurial approach has developed. There is the development of market mechanisms in place of hierarchy and an emphasis on the public as customer. Generally there is a tendency to simplify management tasks in the belief that clear targets and separation of roles can clarify responsibility and release management initiative. Simplification has been achieved by the separation of policy from implementation, the development of contracts, quasi-contracts or targets governing relationships, and their enforcement by performance management. This is believed to replicate an assumed clarity of tasks in the private sector. (Stewart, 1998: 16)

Stewart offers a critique of these practices, believing that they ‘are not adequate as a basis for management in the public domain because they are not based on the purposes, conditions and tasks of that domain’ (1998: 16). Moreover, NPM assumes that there is a model of private sector management and that it can be applied to the public domain. (p.42) Stewart draws attention to the danger of an assumed private sector model on the grounds that ‘the distinctive features of the public domain are neglected’ (1998: 16).

Despite attempts to draw parallels between public and private sector management, Whitley (1988) considers that the construction of a general management science is as far away as ever. But Stewart's criticism that NPM developed a rhetoric that identifies perceived weaknesses in what may be termed traditional public administration is important. As he suggests, charges of being ‘over-bureaucratic’, ‘producer-dominated’ and ‘unresponsive’ have been levelled at public services such as the NHS in a way that caricatures a complex reality in which there is a place for bureaucratic rules and procedures, and where being unresponsive may have a place if the aim is to be impartial. Finally, producer dominance may be a danger, but professional knowledge or experience cannot be ignored altogether.

Some commentators have suggested that a formulation of NPM based on mimicking the private sector in the public sector is in any case too narrow and that the initial focus on the marketisation of public services was broadened from 1997, under New Labour, towards an emphasis on community governance (Osborne and McLaughlin, 2002). Other commentators view NPM as a management hybrid, fusing private and public sector management ideas, that still carries an emphasis on core public service values (see, for example, discussion in Chapter 1 of Ferlie et al, 1996). While this may be so, the initial focus on NPM and the marketisation of public services remains valid since a central feature of NPM is its assumption that public management is little different from private sector management and that it may have suffered from a perception that it is different, thereby failing to take full advantage of what are perceived to be the superior strengths of private management practices. This is another cleavage that remains unresolved and finds itself the source of constant attention in successive reform moves. However, as Hood and others, such as Ferlie et al (1996), agree, NPM is of much greater significance than the usual management fad or fashion.

(p.43) What is also remarkable and not in dispute is, as Marmor (2004) notes, how widely and rapidly these ideas spread throughout governments and public services such as the NHS. This is why the notion of NPM as a movement has a particular resonance. At its core is the idea that public services were inefficient, unresponsive to user preferences and often ineffective. They were run, it was alleged, more for the convenience of providers, principally clinicians, than for those who depended on them. High cost went hand in hand with poor performance. As a result of this critique, the ground was prepared for major reform that sought to mimic in the public sector the best of business or private sector management practices. The NHS was subjected to more of this type of thinking than any other public service. It was, as Ferlie et al observe, ‘an early and rapid mover in this field’ (1996: 27), adopting general management in the early 1980s and quasi-market principles in the late 1980s/early 1990s. In fact, as noted above, elements of NPM thinking in the NHS can be traced back to its first major reorganisation in 1974. Of course, there were strict limits on how far market-style thinking could be applied to a public service such as health care, so the term ‘quasi-market’ was used. In particular, the NHS had a capped budget determined annually by government. And, second, a true market with winners and losers was not seen to be viable or politically acceptable in the NHS.

The UK NHS was not the only health system active in reforming its health care structures. Another pioneer was New Zealand, where market reforms proved even more radical and went further than anything evident elsewhere. In fact, such zeal for market reforms, which waned during the mid- to late 1990s, did not become evident again until around 2003 in the UK with the government's latest set of changes. This is despite the perception in New Zealand that its reforms had gone too far, and achieved only negligible success.

In response to criticisms that NPM reforms resulted in fragmentation and inappropriate competition, a new generation of reforms appeared with labels such as ‘joined-up government’ (JUG) and ‘whole of government’ (Christensen and Laegreid, 2007). These concepts sought to apply a more holistic strategy using insights from the other social (p.44) sciences in place of an almost exclusive reliance on economics and the narrow, reductionist, efficiency focus of NPM to which an economics perspective gave credence (Hunter, 2006a). But they were hardly new: the issue of coordination has been of long-standing concern in government and in the context of ’wicked issues’ that straddle the boundaries of public sector organisations, administrative levels and policy areas. In contrast to first-generation NPM reforms, JUG was presented as an antidote to ‘departmentalism’ and ‘vertical silos’. NPM reforms from the 1980s and 1990s focused on performance management, meeting targets aimed at single-purpose organisations, and on vertical coordination. The result may have been too much fragmentation and an absence of cooperation and coordination, deficits for which Rhodes (1996) holds NPM responsible because of an absence of the trust necessary to manage inter-organisational networks and to reach what Strauss et al (1964) term ‘a negotiated order’.

Reflecting on the period of health system reform commencing in the mid-1970s gives rise to a number of questions. Two in particular stand out. First, what fuelled the health system reform movement at this time and subsequently as it gathered pace through successive decades? And, second, why the focus on management and on seeing managers as effectively a means of wresting power from doctors in order better to align health system goals with those of policy makers and patients? The answers may lie in the repositioning of New Labour's health system reform strategy starting in the late 1990s and continuing to the present day.

Simon Stevens, who, together with his successors Paul Corrigan and Julian Le Grand respectively, became one of the most influential advisers in the Blair government in Britain in his capacity as the prime minister's health adviser, has suggested that the reform strategies adopted by New Labour had their origins in a perception that the NHS could not survive without an injection of significant resources. Otherwise, the gap between the NHS's performance and growing public expectations would widen and those who could afford to would exit from the NHS, resulting in it becoming a residualist safety net (Stevens, 2004). But, crucially, it was also accepted that the extra investment would need (p.45) to deliver more consumer-responsive health care and that serious management weaknesses remained despite several earlier reforms and restructuring. It was believed that the history of NHS reform since the mid-1970s had been marked by a continuing failure to manage clinical work effectively (Harrison et al, 1992). As a result, in the words of a former Conservative health minister, Patrick Jenkin, the NHS was ‘overadministered and undermanaged’. So, without the combination of additional investment and reform, taxpayers would come to regard the NHS model as the problem rather than underfunding or poor political stewardship. Consequently, having committed themselves to several years of significant growth in NHS spending that, as intended, would bring the NHS closer to the European average in terms of spending on health, policy makers’ attention switched to supply-side changes in order to secure a better return on their investment. The focus shifted to expanding output, improving quality and increasing responsiveness while avoiding cost inflation.

Grappling with such issues gave rise to three waves of health reform soon after New Labour's arrival in office in May 1997, which in various ways sought to address the ‘management problem’ in the NHS. These are the subject of the next chapter, concerned with models of health system reform. Looking back at the various waves of health system reform in the UK over the past 25 years or so, it is possible to pick out a number of recurring, and often overlapping, themes and issues that have been the subject of endless debate, among them the following:

  • public versus private approaches to the provision of health care;

  • the changing relationship between clinicians and managers;

  • the oscillation from centralisation to decentralisation;

  • command and control versus markets;

  • attempts to strengthen the public and patient voice;

  • the tension between a focus on downstream acute health care and upstream public health and health prevention.

Virtually all health care reforms have wrestled in various ways with all, or some combination of, these issues in order to arrive at a different (p.46) set of dynamics and incentives. But, for the most part, none of them is resolved in any final or lasting sense; they remain in constant tension with the dialectic between them being played out, or replayed, in each successive wave of reform. The next chapter provides some illustrations of this dilemma. But we are nevertheless left with the problem of management and whether the expectations of it are too high and unrealistic. Marmor suggests that managerial fads give the lie to believing ‘that there is some one right way, some panacea, for rationalising the delivery of decent, affordable medical care’ (2004: 22). In fact, he contends, ‘management is not a solution to seemingly intractable stresses. Rather, it is a means of coping with and sometimes improving only marginally tractable situations’ (Marmor, 2004: 23). Despite the history of the NHS being littered with the debris of failed managerial fads that offer oversimplified answers to complex problems, it is a lesson that policy makers have yet to learn. Humility has never been uppermost in their framework of competencies; nor has any appreciation of history.

Back to the future?

The use of history in health policy making in the UK has been explored by Virginia Berridge (2007). Drawing on her own policy experience and interviews she conducted with key informants involved in the policy process, she found that historical analysis has no formal role in policy although it was nonetheless being used in an ad hoc way particularly in justifying the adoption of a political line that might appear controversial such as equating NHS foundation trusts (hospitals that remained part of the NHS family and accountable to the secretary of state for health but were granted a degree of freedom from central control, having earned their autonomy through improvements in the quality of care provided) with the mutual tradition (Berridge, 2007). The use of history, like other disciplines such as political science or organisation behaviour, is linked to a more general issue about the sources of advice and evidence available within government. It seems that of the various sources of information used by policy makers, (p.47) special advisers come top of the list followed by ‘experts’, think tanks, lobbyists, pressure groups, professional associations, the media and finally constituents and users. Academics are not ‘on the radar’ although it is possible to identify a few who have been influential such as Julian Le Grand, mentioned earlier. However, none has been a historian. Therefore, where history has been invoked, historians have rarely been involved in the process. And yet, a failure to learn from past experience is possibly one of the main reasons for organisational failure in health. Certainly, the history of NHS reorganisations would counsel caution in respect of the government's fixation on organisational restructuring as an instrument of bringing about real and lasting change.

The various NHS reforms, especially those occurring from the late 1980s onwards, are often regarded as examples of novelty, progressive thinking and modernity. But when analysed more closely there is very little that is actually new about them. Hence Metcalfe and Richards’ comment that NPM succeeded only in dragging Britain ‘kicking and screaming back into the 1950s’ (quoted in Rhodes, 1996: 663). As far as the NHS reforms are concerned, for the most part there are strong parallels with the pre-1948 arrangements for the organisation and delivery of health care. As Mohan (2002) observes, public–private partnerships are heralded as new delivery vehicles but in the case of hospital provision they represent a reversion to the 1930s and 1940s. More recently, the enthusiasm for social enterprises in the running of health and social care has strong echoes of the voluntary hospital system that preceded the NHS (Mohan, 2003). Then, there was a diverse, plural mixed economy of care with a strong emphasis on local ownership and variation, and on being attentive to individual preferences. In the end, the degree of variation that ensued was regarded as intolerable and the birth of the NHS was the response. Some 60 years later, the government is putting in place changes that surely threaten to create a similar set of pressures. As Mohan puts it:

Like the Ministry of Health in the 1930s, the government seems willing to accept a degree of localism and variability in order to continue to secure continual support for the NHS. (p.48) If the implication of the current trajectory of policy is that the NHS will become a much more diverse collection of services than in its history to date, the issue then will become the degree of inequity that is tolerable. (Mohan, 2002: 223)

Had the lessons from history been learned, then it is conceivable that developments such as foundation hospital trusts and their governance structures, and the much-heralded return to mutualism, might have taken a different turn or at least been undertaken with greater awareness of the historical record (Gorsky, 2006).

As Gauld (2001) observes in regard to market-style reforms in New Zealand, it is doubtful that these reflect the real world of public policy since they have been pursued in response to flawed supporting assumptions. Echoing Stewart's analysis of the limitations of NPM thinking noted earlier, he draws attention to the ‘fundamental differences’ between private sector markets and the so-called ‘market’ for public goods that makes the marketisation of public services problematic. The solution to imperfect markets in areas such as health and health care is usually some form of government involvement, usually in one of three forms, or a mix of these: regulating private markets; monitoring and controlling the flow of resources to ensure that people receive appropriate care and do so equitably; or providing the services in their entirety. In practice, policy makers in different health systems pursue a mix of these options since none on its own has proved entirely satisfactory. Indeed, as is often said, there is no such thing as a perfect health system, merely less imperfection; therefore governments are always negotiating and renegotiating the optimum mix of policy instruments to achieve their desired ends. Health system reform resembles a swinging pendulum that oscillates between extremes. For example, sometimes the swing is towards centralisation, and at other times towards decentralisation. And sometimes it is towards markets and competition, while at other times it is towards direct provision and collaboration. As we have seen, often fashion dictates the swing of the pendulum in a particular direction. But it can also be affected by policy makers being persuaded by a particular ideological direction (p.49) that may itself have been exported from, or have its origins in, another country and context.

The question to be asked, surely, is at what point in the future will something not so dissimilar to the NHS, that in its present form is, in the view of some observers, being ‘hollowed out’ while retaining the brand, be given a makeover and regarded as modern and progressive? It seems that public sector reform has become more like the fashion industry than may be desirable or comfortable to contemplate. However, history rarely repeats itself exactly and it may be that the health system in England (health services elsewhere in the UK so far seem less inclined to follow the English lead) begins to resemble something more akin to a European system in respect of its complexity, plurality and diversity. The NHS brand may then be up for sale.


The predominant approach to NHS reform in the UK has been twofold: a focus on centralised targets, together with a growing commercialisation of health care services. The fact that these two approaches are in potential conflict with each other has only served to create what Lawson calls ‘a cocktail of fears about health inequalities as well as a host of unintended consequences and inefficiencies. It has led to the alienation of staff and widespread uncertainty among the public’ (2007: 4).

The honeymoon enjoyed by the New Labour government in Britain when first elected in 1997, and the enormous goodwill shown towards it, was well and truly over by 2002. Few observers have dissented from the government's diagnosis of the problems or challenges facing the NHS. But it is elements of the prescription for change, notably a belief that the only way to bring about lasting change is to open up health services to market-style competition and choice, and the manner in which the government has chosen to prosecute the change agenda, that have given rise to growing concerns among NHS staff and sections of the public. Few of these changes have been actively discussed with, or informed by, key stakeholders within the NHS and (p.50) none has been publicly debated. The government has proceeded on the basis that it knows best and that to allow clinicians and others to influence the reform agenda would risk diluting or distorting it and losing its radical edge. Hence, regardless of what ministers may say to the contrary, their determination to micromanage the changes from the centre and to keep close control of their progress and impact so far remains undiminished. In contrast to the management rhetoric at the time, where it was suggested by writers such as Osborne and Gaebler (1992) that governments should steer more and row less, the government not only sees its role as one of steering but of rowing vigorously, too.

Underlying the government's approach is a deep-seated lack of trust that managers can achieve its reforms despite the fact that managers have been among its chief beneficiaries. The entire thrust of NPM appears to be based on mistrust rather than trust. Rather, it is central government that will decide when to grant autonomy (as captured in the idea of ‘earned autonomy’) and when to withhold it. The effect has been to politicise yet further the management of the NHS, with managers ever more inclined to look upwards to ministers rather than downwards into their organisations, and outwards to their local communities. Such an orientation has arguably bred a dependency culture and what can best be described as a type of managerial infantilism that can only lead to weak management of the very kind the government ostensibly wishes to remove. It is another paradox and a further example of the government's actions intended to achieve one outcome actually resulting in a quite different one. The government's abiding faith in a particular type of crude and largely discredited managerialism, which has accompanied its three phases of reform, is explored further in the next chapter.