NHS reform to cost £1.2 billion

Health secretary Andrew Lansley has put the cost of the latest reorganisation of the NHS at £1.2 billion over three years.

In a ‘combined impact assessment’ issued alongside the Health Bill at lunchtime today, Lansley says the ‘low’ cost of shifting responsibility for commissioning from strategic health authorities and primary care trusts to GP commissioning consortia will be £949m and the ‘high’ cost £1.456m.

A detailed breakdown of the costs per PCT includes an estimate of the cost of transferring IT systems to consortia. This puts the IT spend of an average PCT at £1.89m.

It then argues that “setting up a new IT system and transferring the old one will be the equivalent of six months’ work” – putting the cost of setting up a system for a consortium at just under £1m (£950,000).

Other costs included in the estimate include ‘double running’ during the transition from one type of organisation to the other, redundancy from the organisations being abolished, and accommodation and start-up costs for consortia.

To keep the IT costs of consortia down, the document suggests using “shared resources” that will deliver “economies of scale.”

On redundancy, the document gives only outline figures, saying the cost is likely to be around £600m if 70% of PCT staff transfer to the new organisations and £1.1 billion if only 50% do.

The impact assessment says it is impossible to say how many staff will find jobs in the new set-up, but 60% “is take as the best estimate at this stage”. If this happens, the cost of redundancies to the NHS is likely to be £852m.

Despite the costs, the impact assessment insists that the reforms will save money; not least because it assumes that very large cuts will be made in commissioning budgets. The administration budgets of PCT commissioning arms will be cut by a third by 2014-15, saving £1.3 billion a year.

The Health Bill and its accompanying documentation also insists that the primary aim of the reforms is not to make cuts but to improve care.

In the clearest statement yet about the purpose of the reforms, the impact analysis says that the problem the government is trying to address is that “decision making is too far removed from patients.”

It says the proposals are the best way to address this problem because “GPs are best placed to make decisions with patients about the pathway of care they should follow, but do not currently have responsibility for decisions about service design” or responsibility for budgets.

Therefore, the reforms are designed to “enable service design to be sensitive to patient needs and preferences” to “align clinical and financial responsibility in decision making” to “improve patient experience and quality of care” and to “ensure efficient prescribing and referral patterns, improving value for money.”

The bill itself has more than 100 detailed clauses intended to make the alterations to previous health legislation necessary to bring in the latest reforms.

It has been greeted with fury by unions worried about the direction and speed of the changes; although they are increasingly focused on the government’s plans to open NHS providers to more competition and to make it easier for them to compete on price.

TUC general secretary Brendan Barber said: “[This] giant top-down reorganisation that will cost billions to carry out [and] open the door to widespread privatisation comes on top of eye-watering efficiency savings.

“The pace and scale of change will alter the NHS out of all recognition, and will mean large parts of the health service are opened up to private contractors, despite there being little, if any, evidence to suggest the private sector does things better."

BMA chair Dr Hamish Meldrum said: "The benefits that clinician-led commissioning can bring are threatened by other parts of the bill.

“Forcing commissioners to tender contracts to any willing provider could destabilise local health economies and fragment care for patients.

"Adding price competition into the mix could allow large commercial companies to enter the NHS market and chase the most profitable contracts, using their size to undercut on price, which could ultimately damage local services."

Find the bill: The DH has set up dedicated pages on its website to publish the bill and allow people to track its progress through Parliament.