24.09.15
NHS mergers cost billions, but don’t solve issues they were created to address – think tank
A total of £2bn has been spent on 12 hospital mergers over the past five years despite “growing evidence” that NHS mergers do not fix the issues they are created to address, according to the a report by the King’s Fund published today (24 September).
The think tank’s report, which looked at 20 mergers of NHS trusts and foundation trusts since 2010, found that there was “no clear rationale” for the merger in many of the cases. There were serious weaknesses in the assessment of alternative options and in the actual case of merging.
The vast majority of these mergers were instigated by national regulators or special administrators to help rescue deficit-ridden trusts.
But the think tank noted that there is increasing evidence against the notion that mergers can deliver financial benefits. These mergers are then created with “little recognition” of the disadvantages linked to creating larger and more complex organisations which can often act as a barrier to service delivery.
The process to merge hospitals is also time-consuming and expensive and often involves up to 10 separate bodies. Some organisations take four to five years to complete the whole process.
Brian Collins, project director at the King’s Fund and author of the report, said: “NHS leaders are betting the farm on time-consuming, costly and risky mergers, despite a lack of evidence that they lead to more sustainable organisations.
“Recent NHS history is scattered with the remains of failed, or at least profoundly troubled, mergers.”
The report also found that most of the allocated funding was spent paying off debt, covering deficits and capital investment instead of delivering necessary service changes to make these mergers sustainable.
It concluded that mergers are “unlikely” to address the causes of difficulties and are created as a way of securing financing that would not be available otherwise.
Collins added that the £2bn injected into the mergers compares to just £200m freed to support new models of care being introduced across the country under NHS Five Year Forward View plans.
He said: “Instead of promoting mergers, NHS leaders should focus on developing alternative solutions to address the underlying causes of the problems facing struggling hospitals.”
The think tank will soon publish another report outlining suggestions for these alternative solutions.
In a blog post commenting on the report’s findings, Collins said that a host of “cognitive biases” stand in the way of delivering cost-effective solutions and analysing project risks.
“Senior leaders are typically over-confident about their ability to lea major projects, while systematically overestimating the benefits and underestimating the risks. Groups of people in organisations tend to reinforce these biases rather than countering them, with unrealistic assessments becoming the consensus view and scepticism interpreted as disloyalty.
“Add to this our tendency to get locked into risky gambles. Senior leaders typically make a series of investments when pursuing a merger: carrying out an initial appraisal of options, developing the full business case, bringing in an accountancy firm to carry out due diligence and so on. As the investments mount up, it becomes increasingly difficult for leaders to walk away from the deal with their credibility intact.”
He acknowledged that there is a strong strategic rationale behind mergers, but that leaders “grossly underestimate” the challenges that arise after hospitals are integrated.
Instead, national bodies should take on the role of “sceptical shareholders” instead of promoting hospital integration. This could be made possible by more robust corporate governance, with chairs and non-executives in providers challenging merger plans.
“Mergers may seem a superficially attractive solution for struggling hospitals, but in the vast majority of cases there are other strategies that better tackle the root causes of providers’ difficulties.
“One alternative, which we set out in a future paper, is for groups of providers to develop place-based systems of care, with the emphasis on collaboration across organisational and service boundaries to meet the needs of a defined population,” Collins added.
Despite this, the report recognised that, in most cases, mergers were only pursued after several other strategies had failed, with many organisations reaching a state of “severe crisis”.
Almost all of them were “horizontal mergers” joining up neighbouring providers with traditional healthcare models. Only a few seemed to pitch “radically different” systems of care.