Richard Douglas NHS Director of Finance & Investment
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I was suspended from my employment with St George's Healthcare NHS Trust on 8th August 2002 following an Investigatory Meeting that I had to attend with the Trust's Chief Executive Ian Hamilton and the Director of Human Resources Colin Watts. At this meeting I was told that one of the reasons why I had to be dismissed from my post was because on Wednesday July 17th I had involved myself in a high profile condemnation of one of Alan Milburn's senior advisors on Finance Richard Douglas. I had of course done nothing of the sort. What had actually happened was that on that day, the last day incidentally that I worked for the NHS before I was asked to resign, I had attended at Church House Westminster the London Director's of Finance Meeting, where Richard Douglas spoke and explained the proposed changes for funding NHS Hospitals in general and in particular Foundation Hospitals the keystone to Tony Blair's proposals for developing a modern NHS well into the 21st Century.
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 average costs of 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. Richard Douglas then explained that the idea behind the system was that if hospitals were funded for their clinical activity on the basis of the 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, it was my pointing out two of those major flaws to him which seems to have put a further nail into my coffin as far as continuing to work for the NHS was concerned, particularly as Jim McAuliffe the Director of Finance of the South West London Strategic Health Authority was there to report back to Ian Hamilton and Simon Sharp to say that I was not following the accepted NHS party line.
The two major flaws which I pointed out to Richard Douglas and which still remain relevant to this today 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 Consultant's, the average cost is calculated by dividing £16,000 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. In my opinion 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 of London may well be situated in a local employment are where the cost 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 who have a range of hospitals to choose from in London at which they could work. 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 part of London, 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 London 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.
As a result of the accusations that were made against me concerning my questioning of Richard Douglas I wrote to him on the 20th August asking him if he had been embarrassed by my questioning and he wrote back on the 2nd September to confirm that I had not been caused any embarrassment at all. I think that this is another example of the way the "Silent Pressure" works within the NHS in that you are never told specifically that you have done anything wrong, but as Simon Sharp said in the conversation that I tape recorded with him,
IP: Was it you who said to me yesterday that when I got up at the conference and explained to Richard Douglas that HRG’s are flawed, that actually locally that is being perceived as a mistake?
SS: Yeah. I said that someone had mentioned it to me that they had been at the conference and that you stood up and said that, yes.
IP: And that wasn’t the right thing to do?
SS: Oh, no I don’t think that was their perception. I think that their perception was that yeah, probably it isn’t as being seen as very good by the powers that be, but I don’t think actually they thought it was a bad thing but they wouldn’t have done it personally
I did write to Richard Douglas again on the 23rd December 2002 and again on the 27th January 2003, pointing out to him that I had been dismissed quite against the NHS code of conduct and St George's internal disciplinary procedures, but as with all the other senior officials I raised my case with he simply wrote back and said there was nothing he could do about it. In fact a reply I received from him dated 24th January 2003, was exactly word for word the same as a similar reply I received from John Bacon dated 8th January 2003. Far from helping a "Whistle-blower" the NHS were clearly coordinating their efforts to try and ensure that I received no assistance whatsoever from them.
The issue of using HRG's to fund Foundation Hospitals and NHS Trusts recently came up at the Public Accounts Committee on Wednesday 26th March 2003, when Sir Nigel Crisp gave evidence. Click here to read Sir Nigel's evidence and my comments on it. It is interesting to note that when Richard Douglas wrote to me in September 2002 he stated that while he was not embarrassed by my questioning he did not fully agree with my views. The passage of time seems to have changed that as in January 2004 I received an e-mail from James Robertson of the National Audit Office which confirms of the two issues I raised in July 2004, one is now becoming official NHS policy from 2005/06 and the other is currently being investigated by the NHS.
A further concern that I have about Richard Douglas is his response to an issue that David Sissling has agreed to investigate as part of his inquiry into NHS wrongdoing. I have previously written to Sir Nigel Crisp about the issues which are outlined on the Health & Social Services Directorate Page of this website and relate to what the BBC Panorama said looked like a clear misuse of public funds when he saw the e-mail that I had been sent by Trudi Simmonds, which was a clear instruction to the three NHS organisations as to how their accounts could be manipulated in order to pretend that financial targets had been hit when in fact they had not. I wrote to the Chartered Institute of Public Finance & Accountancy and they in turn wrote to Richard Douglas. Douglas replied to them but they were not satisfied with his answer and their technical director Vernon Sore wrote to me on the 12th March the concluding paragraph of his letter stating that he has suggested to Richard Douglas that he may like to ask the Audit Commission to investigate the issue. However, the Director of Finance of the "Open & Accountable NHS???? " Richard Douglas has decided not to ask the Audit Commission to investigate the clear documentary evidence of wrong doing that I have provided, as his letter to me dated 26th March 2004 makes clear. This is an incredible decision for him to take given that that the Chartered Institute of Public Finance & Accountancy has already suggested this is action he might like to take and that David Sissling has already accepted that this is a matter that will be investigated by him and point 4 of his terms of reference state, "Alleged instructions from the London Regional Office to falsely and inappropriately alter the accounts of two NHS Trusts and one Health Authority to enable the achievement of a financial target". It is quite clear that this issue can only be considered by appropriately qualified accountants. Who does Richard Douglas think it should be investigated by if not the Audit Commission or is the reality that he is simply too frightened to allow this matter to be properly investigated. I leave you to draw your own conclusions, I not what mine are.