Reorganisation of the Nhs

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THE REORGANISATION OF THE
NATIONAL HEALTH SERVICE

This paper is concerned with the major changes, which have taken place in the National Health Service (NHS) following the NHS and Community Care Act 1990.
Any UK government is faced with a long list of health issues, this list would include macro questions such as the relationship of the National Health Service (NHS) to broader policies which might affect the health of the population and how to finance and staff health services. The NHS has gone through many stages of development in the last century, however the 1990 act introduced the most radical accounting control system since the birth of the NHS. Much accounting research has been developed on this topic and this paper will bring together some of their findings.

By the late 1980’s general management in the NHS was in full force, and expectations of ‘management discipline’ were high, however there were a series of recurrent crisis. These crises were particularly evident in the hospital services and were caused by a combination of scarcity of compatible resources and an infinite demand for health care. Through a fundamental view of operations in 1989, two reviews were drawn up by the department of health, ‘working for patients’ and ‘caring for people’ (DoH, 1989a, 1989b), and these formed the basis of the NHS and Community Care Act 1990.

The main focus of the impact was the concept of the internal market. This essentially involved the separation of two of the main functions of the NHS, purchasing and providing. Purchasing is defined as the buying of health services to satisfy local needs and providing, is defined as the day to day business of delivering that care. The purchasing agencies are provided with a budget which reflects their defined population, from which they must identify health needs, plan ways to satisfy them while ensuring the quality of the service. When the purchaser identifies their requirements, they produce a contract with the providers, who in turn invoice the purchaser for the materials and services provided. This illustrates the ‘Quasi-market’ in operation, a Quasi-market being a market which seems to exist but doesn’t really. Flynn (1993) described the internal markets in the NHS as a mechanism to match supply with demand, and allow hospitals to compete on price and quality to attract patients.

This new ideology of governance of the NHS has changed dramatically, especially through the Thatcher administration. Harrison (1997) describes how there are three ways of co-ordinating the activities of a multiplicity organisation, through markets, clans and hierarchies. Clans and hierarchies are based on using the process of co-operation to produce an ordered system of outcomes. The historic NHS was built very much around them; a combination of bureaucracy and professional culture; labelled as ‘professional bureaucracy’ by Pugh and Hichson (1976). The new NHS is now reflected as having a market orientated organisation.

The reformed NHS was established on 1st April 1991. On that day the internal market became operational, it’s main features were, that there is a fixed level of ‘demand’ whose total is determined by NHS funding, trading takes place among a large number of buyers and sellers, and there is competition among suppliers. In this market it should be expected that managers respond with price, quality and branding as weapons of competitive behaviour (Flynn 1993).

Llewellyn (1993) described the introduction of an ‘internal’ or ‘Quasi-market’ in health and social care, as a reaction to and was practically enabled, by an expanding population. Her research that looked at two factors, which forced reform in the NHS, demographic trends and technological advancement. The first factor focused on the growing problem facing nation states in the...
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