Leading Article: Under doctors' orders - where the NHS belongs

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Labour was elected to power on a promise to cut National Health Service red tape and end the inequity introduced by the Tory health service reforms. The internal market - condemned by the British Medical Association as an "infernal bazaar"- had set trust against trust, created a bonanza for managers and administrators and consumed forests of trees to produce the thousands of contracts daily exchanged between hospitals, GPs and health authorities.

Seven months on, the new Government has devised a plan that is radical in intent but which seeks to improve on the old order, not to overthrow it. Ministers recognise that a major shake-up would not be welcomed by the white coats in the front line. Evolution, not revolution, is the word.

The internal market is effectively abolished although something close to it remains in the form of the "service agreements" between the GP collectives and the hospitals with whom they choose to work. It is the end of GP fundholding but opposition from disgruntled fundholders is likely to be minimised by the vast new powers that are being handed to family doctors.

This is the kernel of the new plans and they go further than anything that has so far been hinted at. The logic is impeccable. Putting GPs who are in daily contact with patients in the driving seat of the NHS ensures that the commissioning of services is anchored in a grassroots understanding of patient needs.

But will the GPs have either the interest or the managerial capacity to run the commissioning process? Most GPs want to treat patients, not sit on committees and shuffle bits of paper. Concern about the expansion of GP fundholding, which currently covers more than half the population, centres on whether the remaining non-fundholders have the managerial nous to handle their own budgets.

The GP collectives proposed in the White Paper will need extensive managerial support. They will function as mini health authorities, and since there will be more of them - perhaps 500-600 compared with the existing 190 health authorities - it is hard to see how this will contribute to the oft-promised reduction in grey suits.

There are questions too about incentives to efficiency and improved performance. Under the existing market system, competition provides the lever. GP fundholders can shop around for the best deal from their local NHS trusts (or even distant ones) and get to keep any savings they make on their annual budgets for reinvestment in their practices - a powerful individual incentive which will be lost in the new system.

Nor will the abolition of fundholding end inequity. The charge is that GP fundholders with their superior bargaining power have been able to negotiate advantageous deals for their patients which have led to queue jumping of hospital waiting lists and the introduction of a two-tier service. Critics point out, however, that switching budgets from fundholders to GP collectives will simply shift inequity from the local practice level to the level of the collective.

The most radical aspect of the plan is the decision to merge hospital and GP budgets so that the GP collectives can decide how care is to be provided. Budgets for drugs, health visitors, community nursing and hospital services can then be balanced against one another to provide person-centred rather than institution-centred care.

The scheme has something in common with American health maintenance organisations which have a fixed budget to provide all necessary care to their members. By ensuring members remain healthy, costs are reduced and when care is needed there is an incentive to provide it as close to people's homes as possible, where it is cheapest. In the same way the aim of the GP collectives will be to provide services in the most cost-efficient way with an emphasis on out-patient and day-case care.

In the long term, budgets might be created for specific services such as cancer or paediatrics which would cross the boundaries between GP, hospital and community provision.

An important feature of the White Paper is that it lays down no time- scale for introduction of the plan. Labour believe they will be around for some time and can afford to be leisurely. The recent document inviting bids under the health action zone initiative to raise health-care standards in deprived inner cities does not envisage evaluation until after the next election.

Under the market system, the NHS has lacked strategic direction. It has grown by accretion, with extra services bolted on in response to demand. The benefit has been to turn the health service from a monolithic, inward looking institution into a responsive, outward looking organisation. The test for the Government's new proposals will be whether they preserve that responsiveness while adding new purpose.

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