Feature / All Systems Go

From simple spreadsheets to powerful, all singing and dancing financial systems, it is hard to imagine a modern finance department without financial software. But with many systems on the market, which do NHS organisations use, what do they use it for and how well do they connect? A new HFMA survey answers these questions and more.

The survey, with responses from 136 organisations across the UK, shows Oracle is the predominant core financial system in use in the NHS. Around 42% of respondents used Oracle, either hosted by NHS Shared Business Services (20%) or in their own implementation (22%), as their core finance/accounting or general ledger system. While 23.5% has installed e-Financials (COA Solutions), 25% used Integra. Agresso was used by 8.8% of respondents.

There has been a period of change in core financial systems in recent years as organisations have upgraded. But this will be followed by some stability. The survey found a majority of organisations (almost 55%) had replaced or significantly upgraded these systems in the past two years, almost 25% having done so in the past 12 months. About 15% had had the same system for five years or more.

Almost eight out of 10 (78%) had systems less than three years old and a similar proportion (81%) were not considering changing their financial systems. Only 6% will be looking to do so in the next year, while twice that number will do so in the next three.

Most respondents were positive about the value of their finance system. More than 60% said their system facilitated added value reporting and analysis, which in turn improved their organisation’s decision making. However, there was some disquiet about systems’ performance, with 23.5% reporting their system did not help achieve this.

Unsurprisingly, given the interest in service-line management/reporting (SLM/SLR) and patient-level costing, NHS organisations were most likely to be looking to replace or buy new software to collect and manipulate information at patient and service level. Almost 40% said they were looking for a new patient-level costing system. Some 5% were already carrying out patient-level costing through their core financial system, while 55% had dedicated software.

A similar number (37%) said they were looking for a SLM/SLR system – 7% performed this using their core finance system, though 58% used a separate system.

Monitor policy director Professor Robert Harris, said the figures reflected his understanding of the evolution of the market.

‘Having worked intensively with more than 20 NHS foundation trusts over the past 18 months, I am aware that a number of them have procured new systems,’ he said. 

‘That is not to say that new systems are necessary in every instance. Many trusts are able to use a combination of legacy systems and fresh approaches to dealing with data to produce proft and loss accounts (P&Ls) at business unit level. I have worked with FTs to achieve this goal. However, breaking this data down further to get to patient level numbers does usually require a new look at system support.’

Professor Harris was pleased with the progress being made with regard to SLM.  ‘I am aware that many non-FTs are now using the methodologies behind SLR and SLM to run their businesses more effectively. The absolute improvements achievable in terms of financial performance, operational efficacy and most importantly clinical outcomes, are clearly not just restricted to FTs. Most trusts that now reach us for assessment talk about the P&Ls of service lines rather than the aggregated trust level P&L of old,’ he added.

E-procurement gaps
Much has been made of the potential savings that could be made from e-procurement but the survey suggests there is room for improvement. More than a third of NHS organisations (37%) in the survey did not have an e-procurement system. Of those without an e-procurement system, around half were undecided over whether to adopt e-procurement. Around 28% said they intended to implement e-procurement this year and a further 18% were planning to do so next year.

E-procurement can also ensure greater accuracy in supplies spending – each time an order is made a purchase order is raised, which can then be matched to supplier invoices. But only 30% of respondents said more than half of supplier invoices could be matched electronically to a purchase order. More than 27% said this happened in less than a quarter of invoices.

The Department of Health has shown concern about this area. Last December, Peter Coates, its director of NHS finance and investment, told the Commons public accounts committee that the Department was trying to increase the number of invoices backed by purchase orders. Introducing electronic invoicing would reduce the number of purchase orders raised retrospectively, he said. The PAC heard that only 30% of invoices issued by NHS organisations were backed by a purchase order; evidence of poor management, according to Mr Coates.

‘The use of payable orders that are matching to orders at the time they are placed is relatively low in the NHS, but I think the way forward for that is trying to move to electronic invoicing as much as we can as quickly as we can,’ he told the committee. The PAC concluded that the Department should work with all NHS organisations to ensure they achieve a ‘dramatic improvement’ in the proportion of invoices that match to purchase orders. This would improve productivity and timeliness.

The survey also suggested NHS organisations did not achieve the target of paying all invoices within 30 days under the Better Payment Practice code.

Less than a third of the sample paid more than 95% of NHS and non-NHS invoices by value in 2007/08. In its Review of the NHS financial management and accounting regime in 2006, the Audit Commission said a deterioration in Better Payment Practice Code performance help identifying those on the brink of financial distress.

NHS organisations’ supplies expenditure is most likely to be via contracts, framework agreements or purchasing agreements. Around 21% of organisations have 50% to 75% of supplies spending through such agreements, while 7.5% spend more than three-quarters of their supplies budgets via these routes.

The health service has been encouraged to procure goods and services collaboratively and shared procurement services were popular with NHS organisations – almost 55% have a formal agreement with an NHS procurement confederation or hub, while 19% have an informal agreement with neighbouring trusts. However, 31% have not entered into such an agreement, whether formal or informal.

Half of those in shared procurement were happy with the performance of the service, though a quarter of organisations were not. A further 25% were unsure.

Resistance to collaboration
Most organisations not already involved in a procurement hub were not expecting to join one – 76%  – suggesting a hardcore of NHS bodies were not interested in the collaboratives. However, the remainder said they expected to join one within three years.

Many organisations have set high targets for procurement savings. Around 23% have set a target of more than 3% this year, while a third were targeting savings of 2% to 3%. Around 30% have targeted between 1% and 2%, while in 13% of respondents’ organisations the target was between 0% and 1%. Two-thirds of respondents were confident they would meet their e-procurement savings targets. One in 10 said they would not, while 22% were unsure.

While 92% were satisfied or very satisfied with their finance system, 84% say the same about their procurement system. However, only half said they were satisfied or very satisfied with their electronic staff record/ human resources system, perhaps reflecting the feeling that locally-chosen IT systems are better than those rolled out from the centre.


Othe highlights 
- 30% chose in-house IT departments for the provision, support and upgrade of finance systems, closely followed by third party support (29%) and local shared services (22%). Only 18% said IT support was provided by NHS SBS.
- 65% produced management reports using their core financial system.
- 60% use core finance system for charitable funds and 40% use separate system.
- The vast majority of core finance systems include accounts payable/ creditors and accounts receivable/ debtors.
- More than 75% use a separate system for their asset register, though 22% use their core finance system. Around 6% are looking to replace or buy a new asset register system.
- Budgeting was part of core financials in 71% of organisations, though 7% said they were looking for a new system. Costing was performed by a separate system in almost 89% of organisations.  Around 9% were in the market for a new costing system.
- Half said they encouraged suppliers to use electronic invoicing, though more than a third (36%) said they did not.