James Gubb: Calling time on the old ways in the NHS

Whatever the coalition Government's rhetoric, the state of public finances means that there will be very little real terms

increase in funding for the NHS over the next parliament. In the face of inflation and the ever-increasing demand for health care, the estimates are clear: the NHS will have to get in the region of four to five per cent more bang for its buck year-on-year over the next five years. And this is just to maintain existing standards of care.

As the CEO of any corporation will tell you, this is a mammoth ask: average productivity across private sector industry increased by 2.3 per cent per year over the past decade. The NHS must do significantly better than this; and do it in a (largely) public sector service industry, where productivity improvement is inherently harder.

The starting point, too, is not promising. NHS funding has increased by 95 per cent in real terms over the past 10 years. Meeting demand has been achieved largely by spending more and hiring more people, rather than working smarter: between 2001 and 2008 NHS productivity declined by three per cent (or 0.4 per cent a year on average), according to the Office for National Statistics.

The silver lining is that there is, therefore, considerable scope for improvement. Even if all services (in terms of buildings and equipment) stayed exactly the same, the NHS could save considerable sums of money by simply pulling poor performers up to the level of the best.

It is estimated that there is some 3bn to be saved in the acute sector on its "Better Care, Better Value" indicators alone, which include such things as length of stay; did-not-attends, etc.

However, such measures – even if followed through to maximum effect (which is unlikely) – will only meet the NHS's productivity imperative for one or two years. The real meat lies in radically changing service models in the NHS to fit patients and the diseases they have (largely chronic conditions), rather than historic patterns of provision and real estate.

Focused centres for operating on heart and vascular conditions, for example, such as the Texas Heart Institute in the US, typically provide higher quality care at far less cost (30 per cent less in the case of THI) than established district general hospitals that try to provide everything for everyone. The same logic goes for disease-specific networks that treat and help people manage chronic diseases, rather than people being sent from hospital department to general practice and back again.

The question is where is the impetus for such change to come from?

Not the coalition Government, it appears. Instead of setting out a credible plan to pull the NHS through tight times, the coalition's Programme for Government describes the usual structural tinkering, shopping list of pledges and contradictions in focus.

"'We will stop the centrally dictated closure of A&E and maternity wards, so that people have better access to local services", is the headline. Yet most weren't centrally dictated and many have clinical support: your chances of survival from stroke improve if you are driven past your local hospital to an expert centre that sees stroke patients all the time.

Ministers, instead, need to grasp the urgency of the situation and understand that the status quo in the NHS will not do. With this on the table, we can then really think about where the best impetus for change lies. It could lie with government direction. It also could lie with existing NHS organisations using the weight of the financial crisis as an impetus for action. But there are problems with both. Government has never had, and never will have, enough information to make appropriate decisions about the provision of health care across the country where needs differ hugely. And both government and NHS organisations suffer from "provider capture" – a powerful political and professional inertia that tends towards variants of doing what we've always done.

The fact is that when we look at the evidence on where

radical, "disruptive", innovation has come from – such as the Texas

Heart Institute – more often than not it is from new entrants that

don't carry institutional baggage and can look at problems anew.

BT didn't revolutionise the telecommunications industry, Vodafone and Orange did. Microsoft didn't realise the potential of the internet, Google and Facebook did. In the same way, new providers such as Healthcare at Home are harnessing the power of telemedicine to enable people to better manage chronic conditions and receive care in their home, rather than in hospital.

Going forward, then, the focus of the coalition Government should be on one thing: ensuring the door to such entrants in the NHS is as open as possible. Only then, as taxpaying citizens, will we have the maximum possible chance of access to all the latest and greatest ideas that not only cut costs, but improve quality.

Put it this way: if a new provider could offer a better service for 30 per cent of cost than another, would you ignore it?

James Gubb is director of the health unit at Civitas, an independent social policy think tank, and author of a forthcoming report on the market in the NHS.