The Government sets out its vision for the NHS

The Government sets out its plans for the NHS in this White Paper (61 pages, PDF). It outlines the proposed changes to the provision and regulation of NHS services.

Primary care trusts are to be abolished, with GP led consortia made up of GP practices taking responsibility for commissioning the majority of NHS services supplied to patients. A statutory NHS Commissioning Board will be set up. This body will be responsible for commissioning other services like dentistry, community pharmacy and primary ophthalmic services. It will also calculate practice-level budgets and these will be allocated directly to the consortia. These changes will take place over a transitional period, with full financial responsibility for GP consortia envisaged in April 2013.

Providers will also be undergoing reform. Those wishing to provide NHS services will be required to obtain a joint licence from Monitor, now the economic regulator, and from the Care Quality Commission. Within three years, all NHS trusts are to become foundation trusts, with plans to increase the freedom of foundation trusts in the future.

Consortia budgets will be set in view of the new quality monitoring regime, with bonuses for high quality and penalties for failures in the quality of care. There will also be a new health premium with the aim to reduce health inequalities. It will be set within a ring-fenced public health budget determined by relative population health outcomes, although it is not yet clear exactly what this entails.

In its role as economic regulator, Monitor will take on three main duties:

Monitor will be tasked with the duty to set prices at the "efficient level" where price regulation is necessary, although the paper does not say when this will be, with a view to promoting fair competition and driving productivity. By not setting prices at the average cost level, as currently done when computing the national tariffs, it is claimed that this will allow significant efficiency improvements. The implication for the average NHS service provider being that efficiency savings will be required if the efficient level is below the current average cost. These powers of price regulation will only extend to publicly-funded health services. Monitor will also be granted the powers to apply competition law with the Office of Fair Trading, similar to the arrangements for some other regulators like Ofgem and Ofcom. These competition powers will apply to private and publicly funded healthcare.

The White Paper reaffirms the intention to increase the NHS budget in real terms for each year of this Parliament. However, this does not mean the NHS will not be required to make significant productivity improvements. The White Paper states that over the next four years, management costs are to be cut by 45 per cent, to be achieved through the cutting of quangos and various other measures, such as cutting the number of data requests by the Department of Health, although there are no details as to what proportion of the 45 per cent will come from where.

Changes will also be made to the payments made to drug companies for NHS medicines, with a new value-based pricing scheme being introduced. This was recommended by an OFT report (html) into the Pharmaceutical Price Regulation Scheme. Few details are provided on the nature of this scheme, other than its intention to encourage value for money and to improve patient access to drugs. Setting prices in line with their value could provide incentives for companies to produce more of the most beneficiary products, due to the increase in price. The new system will not be introduced until the current scheme ends (html).

For further information or advice please contact Richard May.

Filed under Department of Health, Healthcare.

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