Comment / Are we ready?

The NHS must use the next two years to get in the best shape to meet widely anticipated lower growth allocations

Attending last month’s West Midlands HFMA Branch conference, I was struck by the number of senior finance professionals talking to me about how difficult the planning round for 2009/10 is proving. My own experience in the South West backs this up. While it concluded on time, it has certainly proved much more challenging than in recent years.

Some may see this as an inevitable consequence of rising demand and heightened public expectation. But we must ask: if things are proving so difficult for 2009/10 when average growth is 5.5%, how will we cope in 2011/12 when growth will be far lower?

Very few of those now in senior finance posts in the NHS can recall times as difficult as those we are likely to face at the end of the current spending review period. And this time, we will not be able to allow waiting times to increase or engage in discussions of rationing high cost and specialist treatments. Instead, we must look at all the spending we are responsible for and determine how we might improve productivity and efficiency.

This brings me to the forthcoming Budget. While no one can know the outlook for the public finances with any certainty, we can safely predict a very tight settlement. Across the developed world, we are already witnessing reductions in public expenditure as governments look to tackle the burden of public debt accruing as a result of failings in the bank sector.

And while we have the relative luxury of a two-year settlement providing minimum growth of 10.6% over 2009/10 and 2010/11, the recession will lead to increased pressure on healthcare spend. For one thing, this will be because lower settlements in other government departments and local government will create a tendency to look at cost shifting at the interface between health, social care and educational spend. For another, there will be the impact of unemployment on general health and well-being with a likely increase in mental illness, for example.

We need to use the next two years to start to make the changes now that will put us in the best possible position to tackle lower growth allocations.

If we assume the NHS needs its current allocation of 5.5% to feel comfortable and that the natural surplus level is around £800m, then we will need to find significant productivity savings across the NHS. These will likely come from: improving the interface between our own provider functions in tertiary, secondary and primary care; improvements to the health and social care interface; and optimisation of provider performance through improvements in lengths of stay, day case ratios and delayed transfers of care to at least current upper quartile level.

This may sound like a difficult, if not impossible, task. But we should think about what the NHS has achieved in the past 10 years: 98% of patients being treated within four hours in accident and emergency; 90% of admitted patients being treated within 18 weeks of referral. Both developments required us to move the ‘bell curve’ to a new level of performance that had not been achieved anywhere in the NHS. By comparison, operating at the level of the current best-performing 25% of organisations is, if not easily achieved, certainly difficult to argue against.

We are in a fortunate position in the NHS today. We have two years’ advance notice of the likely

future – a luxury not afforded to the financial, services and manufacturing industries. If we do not use this period productively, we will only have ourselves to blame.