Letter To Edward Leigh MP Chairman Of The Public Accounts Committee
14
December, 2003
Edward
Leigh MP
Chairman
Public Accounts Committee
23
Queen Street
Market
Rasen
Lincolnshire
LN8
3EN
Dear Mr Leigh,
Public
Accounts Committe 8th December 2003
I
am writing to you in your capacity as Chairman of the Public Accounts Committee
and in particular matters that were raised during the questioning of Sir Nigel
Crisp during your meeting held on the 8th December 2003.
The issue that I particularly wanted to bring to your attention relates
to an exchange between Mr Alan Williams MP and Sir Nigel:-
Mr Williams:
Can we switch to page 28 and the cost of hip operations and the incredibly wide
range of that. For primary hip operations we are given figures of £2,266 to £7,456.
The dearest is three times dearer than the cheapest. We recognise that there
must be variations in the nature of the operation, but how is it that the range
is as wide as it is?
Sir Nigel Crisp:
The point that the NAO make is the one that you have just made, but the second
point is that when we have looked at what we believe is the hospital which is
recording the lowest figure, £2,266, we think they are calculating their costs
wrongly because the prosthesis, in other words the hip itself, is a very
significant part of that cost, so I think the range is smaller but, even so,
there is a range. What again I am sure you know is that we are moving towards a
national tariff for all common procedures in the first place which would include
primary hip replacement and each year, as we move towards that tariff, we are
seeing the range of costs reported by trusts reducing.
The
reason for my taking a such a particular interest in his answer, is because in
July 2002 I was suspended and subsequently dismissed from my post as Director of
Finance at St George’s Healthcare NHS Trust (one largest Trust’s in the NHS),
because when the proposals for using a national tariff were first discussed
within the service I spoke out on Wednesday 17th July 2002 at a
presentation given by Richard Douglas the Finance Director of the NHS at Church
House Westminster, where at a closed meeting of NHS Finance Directors he
explained the proposed changes for funding NHS Hospitals in general and in
particular Foundation Hospitals.
The
meeting was not a public one and was attended only by NHS Finance Directors.
In essence what Richard Douglas said was that in future hospitals would be
funded on the basis of establishing the a national tariff for all common
procedures and diagnosis and then funding each hospital on basis of giving them
funding based on the number of specific procedures/diagnosis they carried out,
multiplied by the national average cost of those procedures. The idea
behind the system was that if hospitals were funded for their clinical activity
on the basis of average national average costs, it would encourage the less
efficient hospitals to reduce their costs and become more efficient, because it
they didn't they would find that they were not receiving enough income to cover
their higher than average costs. Equally there would be an incentive for
hospitals with average or below average costs to drive efficiency still further, because
they would be able to use the surplus funds generated by costs lower than the
national average costs they were being funded at. In theory this seems a
neat and sensible way of funding the NHS, but unfortunately there are least
three major flaws in the proposed system of funding and after Richard Douglas
had finished his presentation and asked for questions, I pointed out to him two
of the three major flaws inherent in the proposal.
The
two major flaws (the third is how you deal with the impact of the Special
Increment For Teaching Hospitals) in the system and which still remain relevant
to the present, are not that the basic funding concept is wrong, but there is
currently no accurate system for establishing national average costs. When
Richard Douglas spoke at the conference he said it was the government's
intention to use the an existing system called Health Care Resource Groups (HRG's)
to establish the National Average Costs that will form the basis of funding
hospitals in the future. As I pointed out to Richard Douglas at the
conference, the first major flaw with this is that HRG's work on the basis of
taking all the costs associated with a particular procedure or diagnosis and
then establishing an average cost by dividing the total costs by what are called
Finished Patient Episodes. Finished Patient Episodes actually relate to
the number of Consultants (senior doctors) who have taken responsibility for a
patients care while they have been in hospital. Therefore if a patient
goes into hospital X and is there for eight days, the hospital spending £16,000
and the patient during the stay is treated by two Consultants’, the average
cost is calculated by dividing £16,000 by two, which gives a figure of £8,000.
Now suppose a patient with exactly the same clinical condition goes to hospital
Y. Here the patient is only in hospital for six days and the hospital only
spends £10,000 in obtaining the same clinical result and the patient is only
seen by one consultant. The average cost in this hospital is £10,000 as
the total costs incurred of £10,000 are this time only divided by one.
Therefore under the system outlined by Richard Douglas, although in reality
hospital Y is much more efficient in treating the patient than Hospital X it
would receive less funding because it's average costs appear to be higher.
As I pointed out to Richard Douglas the obvious solution to this problem would
be to measure activity not in terms of how many doctors see you when you are in
hospital, but instead to measure it by what are called, "Patient
Spells" i.e. the number of days that patients are actually in hospital
rather than the number of doctors that they see. It is in my opinion
that this change needs to be brought in as quickly as possible, there is never
going to be a perfectly fair system for funding individual hospitals, but the
Government's current proposals could see the system having the exact opposite
effect to that intended with inefficient hospitals being rewarded and efficient
hospitals being penalised.
The
other major flaw, which I pointed out to Richard Douglas, was that in
calculating HRG's a market forces factor is applied once the cost of procedures
and diagnosis are arrived at. This market forces factor is calculated from
statistics provided by the Department of Employment and is related to the labour
costs of executives in particular local employment areas. It is not
calculated directly from the cost of employing those types of staff that
hospitals need such as Doctor's, Nurses and Physiotherapists and it is this that
causes the problem. A Hospital in a run down inner city area may
well be situated in a local employment are where the index of executive labour
is cheap, but the local cheap labour costs will have no bearing at all on what
that hospital has to pay to attract nurses to work for them particularly in big
city conurbations where there will be a number of hospitals competing for the
scarce clinical skills not readily in the local job market. In fact a
Hospital in a run down inner city area may well have to pay more to attract
specialist healthcare staff to an unattractive economically run down area, yet
under the current Government proposals for funding hospitals these inner city
hospitals could be at a serious disadvantage as the costs of hospitals in the
better parts of the same city are artificially lowered to put them in a more
advantageous financial position. Again it is an issue that needs seriously
addressing if the inequities in the proposed funding system are to be eliminated
before it is imposed on the whole NHS with the disastrous consequences that this
would have.
Following
my raising of these issues at the 17th July, I went on leave for a
few days. On my return to work on
the 29th July, I was summoned to a meeting with the Chief Executive
and Director of Finance of my Trust and asked to resign my post.
When I asked whey they wanted me to do this I was told that it was
because I was no longer considered to be an NHS team player.
When I asked why that was, the main reason I was given was that I had
involved myself in a high profile condemnation of a senior NHS figure, when I
had spoken out against the proposed national average funding system.
I refused to resign and was subsequently dismissed from my employment
without any prior warning having been given, with the right of appeal against
that decision being denied me and all this after thirty-three years continuous
employment in the public sector, the last sixteen years being with St George’s
and not a single previous complaint ever having been made against me.
In response to this I wrote to Government Ministers, Sir Nigel Crisp,
Richard Douglas and John Bacon all of whom have declined to do anything to help
me.
I
therefore took St George’s Healthcare to the Employment Tribunal for wrongful
dismissal and I am currently waiting for the judgement, which I have been told
by the Employment Court extends to one hundred pages in length.
I
hope that you will consider the flaws in the system that I have highlighted to
you in Sir Nigel Crisps proposed national tariffs proposal and if you have any
concern about how the NHS has treated one individual who has simply spoken out
in good faith, to try and improve a service, which I believed properly managed
could become the best health care system in the world.
Then I invite you to look at my website www.nshexpose.co.uk
where I have posted, actual relevant documents which demonstrated the unfair way
I have been treated and also expose other wrong doing which the service needs to
deal with.
Yours
faithfully
Ian Perkin CPFA FRSA
cc.Sir Nigel Crisp Chief Executive NHS & All members of the PAC