News / Concerns and call for realism as efficiency challenge begins

Fears have again been raised about the government’s plans to reorganise the structure of the NHS in England while at the same time asking the service to find £20bn in efficiency gains.

In an analysis of the reforms published on 27 April, the Commons public accounts committee (PAC) raised concerns about commissioning consortia’s running costs and said the Department of Health’s estimate of the one-off costs of transition could prove too low.

The report, NHS landscape review, said pathfinder consortia covered populations of between 14,000 and 672,000. But giving consortia a flat-rate £35 a head allocation could undermine the efficiency of smaller consortia, while it could be too generous for some larger consortia. Some consortia could try to ‘game’ the flat rate system.

‘The Department should take steps to ensure that the level of administrative funding for consortia of different sizes is adequate but not generous, and does not introduce perverse incentives,’ it added.

The Department believes the initial cost of the reforms will be £1.4bn, mainly in redundancy costs, which will be offset by an estimated 33% (£1.7bn) reduction in administrative spending by 2014/15. However, the PAC said the King’s Fund estimated the costs could be between £2bn and £3bn.

There was scope for these cost and savings estimates to change – for example, if GP consortia are reluctant to employ staff from primary care trusts.

Since the Department had no control over these decisions, the committee recommended it regularly review the costs of the transition and have contingency arrangements in case costs exceeded its estimates. The PAC intends to monitor the progress and costs of the reforms.

PAC chair Margaret Hodge said the Department acknowledged the risks associated with the radical shake-up of the NHS.

‘While the reforms could complement the imperative of achieving £20bn efficiency gains by 2014/15, the reorganisation might also distract those responsible for making the savings while safeguarding standards of patient care,’ she said.

‘And if the Department’s estimate of the one-off costs associated with reorganisation turns out to have been too low, it will make the challenge of achieving savings for reinvestment even tougher.’

The PAC’s warning came as finance directors called on the government to be more realistic about the challenge involved in finding the £20bn of savings required within the next four years.

The first of the King’s Fund’s quarterly monitoring reports, which questioned a panel of 26 finance directors, found that new productivity targets for the current year were ambitious – mostly over 4% – and that many directors were uncertain about meeting such stretching targets. How is the NHS performing? said there had been a steady increase in waiting times for hospital treatment since the targets were relaxed last June. ?

NHS deputy chief executive David Flory said the service had performed well and waiting times remained ‘low and broadly stable’.

He added: ‘Despite continued good performance, the NHS is still facing pressure from growing demand and will do so for many years to come. This particular snapshot shows that the NHS must maintain its focus on waiting times and improving patient outcomes while dealing with the extra demands on the service.’

The Commons health committee warned that the requirement on PCTs and emerging consortia to eliminate structural deficits over the next two years had added to the list of ‘daunting tasks’ they faced, just as administration spending is being reduced.

In its second report on commissioning, the Commons health committee added that it was concerned about the apparent lack of robust data on the extent of structural deficits.

It also called on the government to publish a timetable for the implementation of the new resource allocation formula, based on practice-level allocations.

Other clinicians and a local authority nominee should be involved in the commissioning bodies, which should be renamed ‘NHS commissioning authorities’ and be allowed to commission both secondary and primary care.

The committee’s chairman, former health secretary Stephen Dorrell, said: ‘We believe it is crucial to get the reform of NHS commissioning right if the service is to confront the massive financial challenge it now faces.’