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NHS mergers cost billions and don’t solve problems they set out to fix

Based on shaky evidence and little understanding of consequences, says King’s Fund

Caroline White

Thursday, 24 September 2015

£2 billion has been spent on 12 hospital mergers over the past five years despite growing evidence that these mergers do not resolve the difficulties they are intended to address, concludes a new report* published today by health think tank The King’s Fund.

The report reviewed 20 mergers of NHS trusts and foundation trusts between 2010 and 2015, drawing on publicly available data on the financing packages, the parties' business cases where available, and reports from regulators, special administrators and the competition authorities. It also drew on interviews with a small number of senior system leaders from NHS England, the Department of Health, Monitor and the NHS Trust Development Authority.

Most of these mergers were initiated by national regulators or special administrators, with the aim of helping NHS trusts to become foundation trusts or rescuing them from financial problems.

In most cases, mergers were pursued after a range of other strategies had been tried unsuccessfully. In many cases, organisations had reached a state of severe crisis by the time of the merger.

But the report found that in many cases, there was no clear rationale for the merger, and that there were serious weaknesses in the assessment of alternative options and the arguments in favour of the move.

Almost all of the mergers were horizontal — between neighbouring providers that perpetuate traditional hospital models. Few of them appeared to provide the basis for radically different systems of care, the report found.

The analysis contends that mergers are pursued despite growing evidence that they do not deliver the intended benefits, with little recognition of the disadvantages of creating larger, more complex organisations, and despite evidence that they often obstruct the ability to deliver service changes.

The widespread belief in the benefits of achieving ‘critical mass’ is not supported by the available evidence, it says.

The merger process is complex, time-consuming and costly, with as many as 10 separate bodies involved, and some organisations taking four or five years to complete the process, says the report, which questions whether the current system provides enough checks and balances.

Furthermore, the report found that the bulk of allocated funding was spent on writing down historic debts, covering deficits, and capital investment, rather than on delivering the service changes needed to make the merged organisations sustainable.

This suggests that mergers are unlikely to address the causes of the original difficulties and are pursued as a way of securing funds that would otherwise not be available, it suggests.

The report foresees a continuing role for mergers in the NHS, but calls on NHS leaders to rule out mergers as a route for NHS trusts to gain foundation trust status or as a response to financial failure. 

Instead, it says, alternative strategies should be developed that address the underlying problems faced by struggling hospital trusts, based on organisations working together in local systems of care.  

Project Director at The King’s Fund, Ben Collins, and report author, commented: “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.”  

He added: “The £2 billion spent on 12 hospital mergers over the past five years contrasts with just £200 million so far made available to support the new models of care being rolled out across the country under the plans in the NHS five year forward view.

“Instead of promoting mergers, NHS leaders should focus on developing alternative solutions that address the underlying causes of the problems facing struggling hospitals. A forthcoming report from The King’s Fund will outline what these alternative solutions might be.” 

But Paul Healy, senior economic advisor at the NHS Confederation, said that NHS leaders were increasingly opting for other alternatives, but that mergers still had a place.

“NHS leaders now rarely select mergers as their preferred choice because our members are becoming increasingly aware of the challenges they present. It would be short-sighted, though, to rule out mergers altogether because the decision on how best to deliver care needs to be made locally. It should be based on the needs of the local population using an informed analysis of the benefits and risks,” he said.

“Our report Healthcare Groups an alternative to merger mania goes through the options others have chosen that stop short of a full merger and focuses on other forms of organisational change. This was reinforced by Sir David Dalton in his review of providers last year, which made clear that one size would not fit all,” he added.

* Ben Collins. Foundation trust and NHS trust mergers - 2010 to 2015. The King’s Fund, September 2015

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