National Health Service had been created in 1948 and for the last decades it has been facing numerous reforms and structural changes in attempt to raise its effectiveness and competitiveness and to reduce costs.
This report focuses on STEP analysis of major external factors and trends that might influence future activity of NHS and shape its structure.
Findings of the report are:
Population of England has increased by 7% in last 4 decades and with average age of 38.8 years (from 34.1 years in 1971)  . Overweight/obesity, ethnic differences in health care approach and high treatment costs for immigrants present main social challenges for the NHS. Citizen participation, social inclusion and partnership programs are seen as possible answer to these challenges.
Coalitional government ended National Programme for IT in England and is preparing new ‘Information Revolution’.
Recent reforms that include abolition of primary-care trusts and establishment of GP commission require new IT solutions.
Increasing community and home based health care are based on efficient telehealth and telecare services and require further development of IT technologies.
Additional investment in research and development of IT technologies is necessary in order to cope with development of modern health care services.
NHS will receive significantly lower annual budget increase, compared to previous years and it is expected to present £20bn (GBP) in savings by 2013-14.
With the abolition of PCT budget of roughly £80bn (GBP) will be transferred to management by GP commission.
Coalitional government presented new reforms that focus on implementing administrative and structural changes in NHS. Emphasis of the reforms is on giving more power and choice to the consumers, decentralising management and significantly reducing administrative costs.
This management report is a STEP analysis of the NHS in England. The report sets out the key issues within each STEP for the organisation and can be used as the basis for further analysis. A conclusion identifies the key issues arising from the STEP analysis for the NHS in England and also sets out the strengths and weaknesses of the STEP approach and the challenges encountered when undertaking the analysis.
STEP 1: Social
The majority of the population in England and Wales use the services of the NHS (about 8% of the population use private health care). The NHS needs to be aware of demographics changes as this will have a significant impact on demand for NHS services as a whole and on demand for particular products and services. The key social issues that the NHS in England needs to consider are:
Population growth rate and age profile
Health of the general population
Issues related to ethnicity
Issues related to immigration
Governance patterns, social inclusion and partnerships building.
Population growth rate and age profile
The UK population reached 59.8 million in 2004; its highest ever level. It has increased in size by 7 per cent in the three decades since 1971, when the figure was 55.9 million. But this population growth has not occurred at all ages. In fact, some age groups have shrunk and so have become a smaller proportion of the whole population. The ageing of the population will affect the types of services required and the way in which they are provided.
About 46% of men in England and 32% of women are overweight (a body mass index of 25-30 kg/m2), and an additional 17% of men and 21% of women are obese (a body mass index of more than 30 kg/m2 ). Overweight and obesity increase with age. About 28% of men and 27% of women aged 16-24 are overweight or obese but 76% of men and 68% of women aged 55-64 are overweight or obese. Overweight and obesity are increasing. The percentage of adults who are obese has roughly doubled since the mid-1980’s. The effect of these trends is increasing requirements for different types of equipment (eg. stronger beds).
Pakistani and Bangladeshi men and women in England and Wales reported the highest rates of ‘not good’ health in 2001. Pakistanis had age-standardised rates of ‘not good’ health of 13 per cent (men) and 17 per cent (women). The age-standardised rates for Bangladeshis were 14 per cent (men) and 15 per cent (women). These rates, which take account of the difference in age structures between the ethnic groups, were around twice that of their White British counterparts. Chinese men and women were the least likely to report their health as ‘not good’. Women were more likely than men to rate their health as ‘not good’ across all groups, apart from the White Irish and those from Other ethnic groups. Reporting poor health has been shown to be strongly associated with use of health services and mortality. White Irish and Pakistani women in England had higher GP contact rates than women in the general population. Bangladeshi men were three times as likely to visit their GP than men in the general population after standardising for age.
Since 2004, a record 1.8 million foreign workers have come to Britain, including an estimated 700,000 from Eastern Europe. And yes there have been problems. Migrants have put pressure on the NHS by using casualty departments as GP surgeries. TB rates are also up and the cost of translators in hospitals to deal with foreign patients can be crippling for health authorities.
Governance patterns, social inclusion and partnerships building
Citizens participation becomes more and more important to fill the gaps of government’s failure. Many initiatives related to public health issues, for example reducing the incidence of drug misuse, can never be achieved without involving citizens. The UK is a pioneer in deliberative democracy, which is an ideal vehicle for the promotion of health based voluntary / statutory sector partnerships.
STEP 2: Technological
The increasing efficiency and effectiveness of the NHS in England is dependent upon the appropriate use of technology, and affects both the acute and primary care sectors. The key technological issues currently facing the NHS in England are:
The IT impact of the abolition of Primary Care Trusts (PCTs) and the move to GP Commissioning
How to address the results of the UK Government’s changing national health IT policy
Continuing the development of teleheath and telecare to shift the balance of care from the acute to the community sector
In general, continuing to fund and integrate technological developments in service provision that offer improvements in economy, effectiveness and efficiency.
The abolition of Primary Care Trusts
The abolition of PCTs and the move to GP Commissioning means there is a need to ensure effective IT structures are in place to support the move. PCTs will need support to ensure the data they hold is dealt with appropriately – be it destruction or move to other organisations. There may be a need to consider national guidance.
GPs and service providers will also need support to ensure their IT systems are able to communicate with each other effectively and have the capacity to deal with increased records. There may be a need to consider national guidance.
National health IT policy
The new coalition government ended the National Programme for IT in England and has just finished consultation on its new ‘Information Revolution’.  3The previous programme aimed at providing a number of national IT services, such as Choose and Book (the national electronic referral system); PACS (central picture archiving service for eg x-rays); and the national electronic subscriptions service. Some of these programmes were completed under the previous government, however, many are still in development. The coalition government has expressed their desire for local IT solutions, however, many of the programmes are tied to national contracts with the private sector. The NHS in England needs to examine the cost of termination (and the costs of providing alternative local solutions) vs continuing with the existing contracts, contrary to government policy. There is a need for further clarification from the government and continued engagements from the NHS with the coalition.
The development of telehealth and telecare
Moving care into the community and supporting people to live in their own homes for longer requires increasing use of telehealth and telecare technology. There are numerous benefits for the NHS in England and its users, for example those in rural communities able to access consultant appointments via computer rather than travelling large distances, and more people living longer in their own homes.
These developments need continuing support from the centre if health bodies are to continue to develop these. Central funding may also be required to continue research into this area and technological development.
Continuing technological developments
The NHS in England needs to continue promoting the benefits of new technologies to health bodies and providing support (small scale funding, guidance) to help trusts implement these. The 2009 NHS IM&T Investment Survey indicated that capital investment at local level has remained static over the past 5 years, it is only the injection of central funding that has led to increases in this area. Emphasis needs placed on health trusts to continue to fund developments. 
STEP 3: Economic
The key economic issues facing the NHS are:
The outlook for public sector finances
The effect of GP commissioning
The impact of staff pay and conditions (cost of labour)
The cost of capital/diminishing capital resource and investment
Public sector finances
As a result of the coalition government’s desire to address the effects of the global economic crisis and its attempt to quickly reduce the budget deficit, resources available from central government are projected to increase less quickly than in recent years. The rise for 2011 of just 0.1% represents a significant decrease in funding compared to increases in recent years. This is further compounded by cuts in the levels of cash received by hospitals for treating patients. Commentators suggest that the effect of the cuts will require the identification of £20bn (GBP) in savings by 2013-14. The NHS in England needs to quickly identify how it will continue to provide care with reduced levels of funding. This may include actions such as reducing staffing levels and increasing out-sourcing of services.
Effect of GP Commissioning
The abolition of Primary Care Trusts and the move to GP commissioning brings both opportunities and risks associated with the handover of almost £80bn (GBP) from central to local control. While previous experience would suggest that GP commissioning improves efficient use of resources (efficiency fell by 1.6% after the abolition of internal markets in 1997) (see reference 1) it is possible that individual hospitals, patients and the GPs themselves may lose out. GPs may spend more time involved in administrative tasks and less time with patients; patients may be affected by the level of engagement with commissioning on the part of their GP and some hospitals will fare better than others under the revised arrangements. Retaining control of NHS spending is a significant challenge when accountability for the use of public funds essentially lies in the hands of private contractors. Effective financial controls will be necessary to ensure demand management is not simply ‘left on the shelf’ and that resources are used both effectively and efficiently.
Pay and conditions
Staff costs as a proportion of total costs are high within the NHS. The effects of minimum wage and, more recently, the implementation of the European Working Time Directive continue to drive costs up, even as staffing levels remain static or fall. Efforts to ensure trusts comply with the Working Time Directive have backfired by ensuring staff record hours worked more accurately leading to increased overtime payments and identification of additional need. In addition, the effect of cuts in staffing both through voluntary and compulsory redundancies will place additional (albeit relatively short-term) pressure on finances in the form of pay-offs and pensions.
Capital assets and investments
Many PCTs acknowledge that the current period imposes reductions in capital investment. Short term savings accrued by delaying investment may lead to increased costs in the future. In addition, numerous trusts have sold off capital assets to remain competitive in recent years, thereby reducing asset value now and for the future. The use of PFI/PPP/DBO may offer short-term benefits (by reducing direct capital expenditure) but risks remain with regard to the long-term commitment and associated cost of such contracts.
STEP 4: Political
The change in government from Labour to Conservative/Liberal Democrat in 2010 resulted in a significant shift in political attitudes towards the NHS in England. The drive to reduce centralised control and increase local responsibility has resulted in a number of key policy initiatives.
The coalition programme for healthcare included the following subjects: 
Greater financial autonomy for local bodies
Involvement of GPs in tackling health care problems
Improved access to preventive healthcare for disadvantaged areas
Reduction of long-term costs.
The specific programme for the NHS included the following: 
Real term budget increase for next 5 years.
Reduction of quasi-non-government-organizations (quangos).
Cut administrative costs by 30% and use these resources to support doctors and nurses.
Discontinue closure of A&E units and of maternity wards.
Restructure health system giving more power and freedom of choice to patients and transferring commissioning powers from PCTs to GPs.
Development of monitoring system to oversee aspects of access, competition and price-setting in NHS.
Establishment external and independent board to allocate resources and provide commissioning guidelines.
Introduction of rating system for health care providers that will allow patients’ contributions and will be accessible online.
Reform NICE into value-based pricing, to allow broader access to drugs and treatments for those who need them.
Introduction of per-patient funding for hospices and providers of palliative care, and allocation of additional 10 million pounds a year from the budget to support these children’s hospices.
Improvement of service quality through involvement of independent and voluntary providers and through giving patients ability to choose provider that suits them most.
Andrew Lansley, the health secretary, introduced plans for NHS reform in August 2010 (White Paper of announced reforms is available here).
The main topics were:  8
Delivering commissioning power to purchase health care for the patients to GPs who are to join consortia by 2013.
Abolishment of 10 strategic health authorities and of approximately 150 primary-care trusts and transfer some of their services to external non-for-profit outfits.
NHS hospitals are to become foundation trusts and to enjoy greater autonomy in revenues and funding.
Patients will be available to choose GPs regardless to their geographical areas, to make shared decisions on their health treatments and to enjoy published data on hospitals and doctors (results, waiting times, rates, etc.).
NHS funding will increase in real terms for the following 5 years but it will have to do more for its money: reduction of managerial costs by 45%; efficiency savings of 20 billion pounds, which are to be reinvested to support quality and outcomes.
Establishment of an independent NHS Commissioning Board, which will allocate and account for NHS resources and will audit on implementation of quality improvement and patient involvement and choice.
The NHS in England is currently facing a period of change that will affect all aspects of its operation. Delivering the required political reforms within the constraints of the current financial climate will be challenging. Coupling this with increasing demand for services caused by an ageing population and the associated technological developments that need to be put in place for this to be managed means the NHS in England must be clear on its purpose, its direction and its strategy for achieving these.
Re-examine the purpose, direction and over-arching strategy of the NHS in England to ensure they remain fit-for-purpose
Develop appropriate national strategies for each element of the organisation (eg IM&T) to ensure there is clarity about what is required of trusts.
Emphasise citizen involvement and partnership programs.
Develop appropriate IT and technological infrastructures to support new reforms.
Strengths and weaknesses of the STEP approach
STEP analysis has strengths and weaknesses. The key issues identified by the group are:
The analysis can help focus an organisation on the key factors in each environment ensuring they think about each ‘step’. It is quite a simple process that allows consideration of many variables.
It enables the organisation/unit to look outwith their immediate environment to consider important external factors
The approach can be linked with other models (typically SWOT) to increase its usefulness
It encourages strategic thinking and planning and allows the organisation to anticipate future issues.
Assessing the importance of issues can be challenging if appropriate and robust data is not available. Accessing useful data can be time consuming and therefore has a cost attached.
The use of the four ‘steps’ can mean a pigeon-holing of some issues that span across other themes (such as the impact of government policy)
It is a task perhaps best done with a group in person rather than in isolation so that ideas can immediately be discussed/challenged and priorities for the issues included are agreed by consensus
Considering the factors in isolation makes it difficult to identify linkages between the various elements
It may be useful to keep the focus of the analysis specific as then the outputs may be more useful rather than general statements
Forecasting leads to multiple possible futures; there is a danger of assuming hypotheses are ‘truth’
The exercise needs to be repeated to remain useful to account for pace of change/changing realities.
Challenges encountered by the group in conducting the analysis
The group encountered the following challenges:
considering the factors in isolation made it difficult to identify linkages between the various elements. It may have been useful to circulate our ‘lists’ in advance to encourage cross-fertilisation and consistency across the 4 factors (Delphi approach)
undertaking an analysis of an institution with which some members of the group had little familiarity led to increasing reliance on assumptions
we ended up with quite a broad ‘target’ topic, if we had narrowed our focus the results may have been more useful
accessing relevant data was difficult in some areas and hence time-consuming.
References for STEP:
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