Feature / Efficiency list

Cash-releasing efficiency savings schemes are widely used in the NHS. Steve Brown reports on an HFMA attempt to compile the most frequently used initiatives

Cash-releasing efficiency savings (CRES) schemes are a fact of life in the NHS. Using a variety of pseudonyms, they have existed since the service’s inception. Many of the most popular schemes appear blindingly obvious, although there may still be organisations that, for one reason or another, have not implemented a formal programme in this area.

The past few years have seen an even greater focus given to efficiency and savings schemes. The national deficit in 2005/06 led to a formal turnaround programme involving a large number of trusts and primary care trusts in England. While many of these programmes looked for long-term sustainable cost reductions (for instance, using Lean thinking principles to eliminate waste, improving patient services and cutting costs), they also involved more traditional, short-term non-recurrent savings. Turnaround consultants often referred to gathering the ‘low-hanging fruit’, referring to the easier-to-achieve savings. This often provided a savings programme with some early, morale-boosting wins as well as making a contribution, even if only on a non-recurring basis, to the savings target.

Despite the improvement in the overall finances of the NHS in England, efficiency has not fallen down the list of priorities. Workforce modernisation, in its various guises of new contracts for GPs and consultants along with the Agenda for Change pay system, has been slow to deliver the much-anticipated improvement in efficiency. And it would appear that the Treasury and Department of Health have decided to up the ante. After years of requiring CRES at a national rate of 2.5%, the Department has set a tariff in 2008/09 requiring efficiency savings at the higher rate of 3%. It has indicated that this rate will be applied in each of the three years covered by the comprehensive spending review cycle.

So efficiency, and CRES schemes, will remain in the spotlight. Despite the widespread use of savings schemes, there has been no attempt to compile them for easy reference. This is, in part, because savings schemes can be subtly different from one organisation to another. The schemes, however, are often sufficiently generic to warrant comparison.

As part of a brief survey by the HFMA’s Financial Management and Research, a list of the most often used CRES schemes has been drafted. Listed here (and the following pages) with brief explanations, the schemes fall loosely into three types: pay, non-pay, and efficiency.


PAY

Freeze on vacancies and/or panel to review all posts before advertising
The initial purpose here is to freeze costs. If a department has been running without the position filled, it may be reasonable to assume this could continue for the short term. A review panel, however, also provides an opportunity to assess whether the position is really needed. Has it simply been in the establishment for historical purposes and, perhaps because of new ways of working, is it no longer needed? Or perhaps this is an opportunity to adjust the banding of the job to one more appropriate to the duties that need to be carried out. Is this an opportunity to adjust the skill mix within the team/department?

Embargo and/or director approval for the use of agency staff
Controls for reducing avoidable use of agency staff have featured in practically all turnaround plans. The aim here is to ensure that decisions are taken at a more strategic level. The need for more staff may well be unavoidable at, say, the ward level. If someone with a broader view of the organisation is involved, however, they may know that staff could be moved from other parts of the organisation, where activity is low on that day. This does not always need to be at a director level, but could involve moving the approval to matron level, covering a number of wards, preventing decisions being taken in isolation.

Benchmark the mix of Agenda for Change bandings with appropriate peer groups
Agenda for Change aimed to bring consistency to the remuneration of NHS staff using a common knowledge and skills framework and assessment process. However, it is clear that it has left serious inconsistencies in the skill mix and bandings within teams used to deliver comparable services. Simple benchmarking with an equivalent organisation can provide confidence that the skill mix is appropriate or highlight the need for investigation.

Some trusts have already done crude benchmarking on the number of band 6 and above as a proportion of all staff. Differences are not necessarily a sign of a problem, but should trigger further analysis and explanation. Even if a problem is identified, the organisation may not be able to address it at once. Given the banding and points system and any remaining protection arrangements, staff costs may be locked in. In cases where the skill mix is biased towards the higher bands, however, adjustments may be achievable when vacancies arise.

Elimination of unfunded posts
There can still be a tendency for departments to recruit to positions despite the absence of a specific budget. They have often been recruited as a response to a short-term issue. With no associated budget, however, they cannot be sustained.


NON-PAY

Supplies savings through procurement hubs/standardisation of usage
Many organisations are now within procurement hubs, and delivering savings in many areas. There is, however, scope to increase the savings produced by collaborative procurement.

Often, the issue is not actually in getting the savings to the gates of the organisation, but in bringing those savings within the organisation. It is not uncommon to find consultants using a specific prosthesis or device out of habit or with no real understanding of any viable alternatives.

A simple change in the product used may produce a direct saving from its cheaper unit price. But standardisation on one or a few devices across the organisation may also enable discounts to be negotiated for bulk buying with the manufacturer/supplier. This could be through a procurement hub or individually.

It is important, however, to note that such schemes are only successful if there is clinical involvement in the standardisation. Attempts to impose a ‘management decision’ are likely to fail.

Review of SLAs
Reviews of service level agreements to ensure value for money are often undertaken in estates, human resources and payroll. The value issue can be looked at from both sides. In terms of a bought-in service, is it providing value for money? Should the service be re-tendered or is there room for renegotiation? Are there other services for which tendering might lead to reduced costs/ better services? In terms of services delivered to other bodies, have all avenues been explored for maximising income?

Drugs
Drugs costs are, potentially, a significiant source of savings in primary and secondary care. The NHS Institute indicators on levels of statins prescribed show that some PCTs could save money by achieving the same rates as the top quartile. Some PCTs still have generic statin rates below 50%, compared with top quartile rates of 77% or above. Drug costs savings are not confined to PCTs. Hospitals, too, can make savings. Many of them have found that investing in pharmacists on wards produces net savings.



Efficiency

Reduce number of beds
Beds are a key driver for NHS costs, primarily because of their associated staff and running costs but also because they take up space. If beds can be reduced permanently, there may be opportunities to free up buildings and reduce capital charges. In fact, reducing beds is often the key in any savings programme. The classic areas for reducing beds, for which much support is available from the NHS Institute, include: reducing length of stay, improving discharge, increasing day case rates, and flexing for seasonal variations.

Improved theatre use
Reducing cancellations and improving planning can significantly improve theatre use. Efforts to improve efficiency have centred on matching staffing levels to clinical activity, changing theatre layout to ease patient flow, reviewing the start and end times of operating lists, and ensuring that ‘feeder’ services do not cause delays.

Management structure reviews
Management reviews remain a common way of trying to reduce duplication and eliminate bureaucracy. There is no preferred model for the number of divisions that should be in place, but many trusts are looking to restructure around small numbers of clinical departments, in line with the move to service line reporting.

Centralisation
While there is a move towards hospitals running as a collection of businesses along key service lines, centralisation of some functions can provide savings and economies of scale in waiting-list management, booking, secretarial staffing and human resources.

Review of reserves
While reserves need to be adequate to cover key risks, there can be a tendency to be over-prudent. Closely tied to improvements around management of risk, reserves are a key area for scrutiny.

Revaluation of estate
Estate revaluations can have an impact on capital charges. While revaluations can lead to higher values being placed on assets, for some organisations there can be benefits. (Valuation bases will change as the NHS implements international financial reporting standards (IFRS). For much of the NHS, a reduction in valuations is expected, with a consequent reduction in capital charges.)

Consultant programmed activities
Some trusts have found value in benchmarking the number of programmed activities (PAs) they are paying for from consultants. With a national average of around 11.4 PAs, there is known to be a wide variation across consultants and trusts.


Comment on this article