Public Services Management: Trusting hospitals to look after themselves: 'The revolution is unstoppable. It will run its course,' says one expert. Liza Donaldson reports on the progress of the most radical changes since the NHS was created

TWO YEARS into the most radical reforms since the creation of the National Health Service in 1948, it looks as if history is repeating itself.

The lesson William Henry Beveridge, father of the welfare state, learned was that reforms never turn out quite how you think they will. He expected that free basic health care would eventually require less money, as diseases such as polio, measles and smallpox were eradicated. But as history shows, medical and technological breakthroughs meant that demand proved limitless against finite resources.

This time round the reforms, enshrined in the White Paper 'Working for Patients', started out as a radical move to restructure the health service, devolving power away from the centre to hospital trusts and GP fundholders. The market forces let loose in the health service by splitting it into those who provided services and those who bought or 'purchased' them would mean 'the money will flow to where the patients are going'. Hospitals which proved more popular with GPs and patients would 'attract more resources'. Unpopular ones, presumably, would go to the wall. The then Prime Minister Margaret Thatcher gave the document her seal of approval with a foreword that promised 'even better health care for the millions and millions of people who rely on the NHS'.

So how have things turned out for the largest scale innovation of the reforms - the health trusts? Trusts, according to Virginia Bottomley, Secretary of State for Health, are on course to account for 95 per cent of hospital and community services in England by next year. The first wave of 57 trusts was launched from April 1991. The second wave took the total to 156 trusts, followed by a third wave of 129 to start in April and a fourth of 121 expressing interest, planned to start from April 1994.

Chris Ham, Professor of Health Policy at Birmingham University, says: 'There has been some progress, but it is early days. A lot of the hype early on was misplaced because trusts were never going to have the radical freedoms that some people predicted.' He adds it is now clear that trusts are seen to be firmly part of the NHS.

The most important new 'freedom' trusts were given, Professor Ham says, was to manage their affairs. This has led to examples like East Gloucestershire Trust becoming a 'vibrant organisation, clear about where it is going, with short waiting times for most elective procedures - much better than the Citizen's Charter'. At Kingston Hospital Trust a 16-bed hotel, staffed by stewards and stewardesses to ease long-stay acute patients back into the community, has been created. At Guy's and Lewisham Trust a customer care initiative has resulted in an overhaul of front-line staff, with plans to organise wards around patients' needs rather than consultants' wishes.

A report by the NHS Management Executive on the 'NHS trusts - the first 12 months' found the pioneering 57 had been more productive in terms of overall activity rate by 8.2 per cent, against the old-style NHS-managed hospitals which reached 6.9 per cent, and reduced the proportion of their budgets spent on staff.

Mrs Bottomley gave trusts her blessing as 'the management model of the future'. In September, at the first NHS Trust Federation conference, she promised: 'The precious freedoms should not and will not be diluted. We have not got this far in introducing and upholding the rights and freedoms of trusts, only to watch excessive bureaucracy eat them away.'

However, there are signs that this honeymoon period is over. The reforms had also promised a review of 14 regional health authorities - the tier above district health authorities - pledging to keep them only 'if it is cost- effective to do so'. The trusts have argued it plainly is not, taking encouragement from Mrs Bottomley's promise in June to 'sweep away old ways of monolithic, oppressive, over-planning'.

Trusts argue that regions employ thousands, and cost pounds 12,500 per second of every working day, supplying services like estates departments and personnel services no longer needed by self-managing trusts. They would like to see that money put into patient care. Trusts were quite happy with six 'zonal outposts' employing a total of 38 people set up to help them with financial affairs - the only tier apart from the NHS Management Executive between them and ministers.

But behind the scenes a furious and bitter political battle by the regions to save their skins has been going on. And it looks as if they have won a reprieve, as slimmer versions of their old selves, to be announced very shortly by Mrs Bottomley. The reason the Secretary of State supports the regions is that she does not want to be exposed to some 450 trusts directly, desiring a buffer and powerful trusted regional hand - her 'inner cabinet' according to a DoH press officer - to bring trusts to heel and make sure corporate guidance is followed. The victory will be a severe blow to the more entrepreneurial trust leaders, but demonstrates that the old-handers - the regions - have a thing or two to teach the new boys - the trusts, politically.

Nevertheless, other freedoms of the trusts may well help them in the long run. Although the freedom on budgets which included the power to borrow capital from the private sector has turned out to be largely illusory, since the Government can always lend at below market rates, there are signs that rules on borrowing are changing. The Chancellor's Autumn Statement gave the first hint, and a series of questions to health and treasury ministers last month by David Blunkett, Labour's health spokesman, appear to show rules are being loosened.

The most radical freedom for a health service bound for years by prescriptive personnel practices was for trusts to employ 'whatever and however many staff they consider necessary' (except for junior doctors), with power to opt out of national pay and conditions arrangements and make local deals.

Although in practice few have taken the opportunity to seize control over pay, which typically accounts for 75 per cent or more of health budgets, signs are that others are considering the move. Only 15 trusts according to research by the health union Cohse have opted out of complex national bargaining arrangements. Among them was Homewood Trust, Surrey, which with around 950 staff provides services for mentally ill and handicapped people. It is also, Cohse says, one of only four taking nurses out of the pay review body. It introduced a pounds 12 supplement for the low paid, a Japanese style no-strike deal and pendulum arbitration.

Homewood's chairman, Roy Lilley, is typical of the new blood that trusts brought in, as a former engineering company boss and Tory councillor. He believes the White Paper was 'one of the most exciting things ever written'.

Mr Lilley is disappointed that more trusts have not seized the opportunity to do more local deals. Most, however, recognise that the Government's 1.5 per cent pay freeze is presenting real problems for trust personnel chiefs trying to buy new changes from staff. According to Nalgo's Paul Marks, secretary of the general Whitley Council which sets NHS conditions: 'They can only do it by shedding staff or employing different mixes.' He says 'sacking angels' would be viewed very differently by the public from making car workers redundant. It would be 'very bad news'. However, Dr Martin McNicol, chairman of the Trust Federation, believes the freeze will only slow things down for a while.

Industrial relations experts are divided. Some think the industrial relations reforms have stalled, with the trusts waiting for the centre to abolish central mechanisms and the centre waiting for trusts to make the first move. Others are convinced more trusts will become more radical in time. Sue Corby, senior lecturer in industrial relations at Manchester Metropolitan University, supports the radical argument. She says: 'The internal market will increasingly bite.' She cites the significant fact that more than half of first wave trusts have single table bargaining systems in place to consider single pay spines, using them to help instil staff loyalty to the trust rather than the profession. In a study she also found greater use of skill mixes, better productivity and flexibility. She adds: 'In time Whitley and the pay review body will become unimportant. The revolution is unstoppable. It has been unleashed and it will run its course.'

Dr McNicol, who also chairs the Central Middlesex Trust, believes there has been 'a fairly radical shift in the last two years', mainly in attitudes, away from an ossified bureaucratic health machine and that 'trusts are emphatically successful'. He adds: 'There is about them almost that feeling of Chairman Mao's statement about the revolution and letting a thousand flowers blossom.' Trusts are 'businesslike, social businesses' - not businesses. Above all health staff are learning to live with change, not to feel threatened by it, and to seize the considerable opportunities it offers. It is a view shared by even those most disheartened - that the reforms have not achieved more. Things in the NHS, they agree, will never be the same again.

(Photograph omitted)