Feature / Ground control

Staff costs cannot be ignored as trusts seek to achieve their QIPP savings targets, but how are they cutting costs and maintaining quality? Seamus Ward finds out.

At up to 70% of an acute trust’s spend, the pay bill (including all pay and pensions) has to come under scrutiny in this time of austerity and productivity and efficiency drives. Trusts are looking at how their staffing budgets are spent and are uncovering many opportunities to make savings both on the frontline and in the back office.

Redundancies are part of the picture, although trusts will try to avoid compulsory redundancy by offering voluntary schemes, early retirement or redeployment.

Back-office reductions are inevitable, with the government’s plan to cut administrative spending by a third. Up to 20,000 jobs are set to go in England as part of the current restructuring and the Department of Health estimates this will save the NHS around £3.2bn between 2010/11 and 2014/15.

However, with a total of £20bn to save, efforts cannot focus on the back office alone. Indeed, in July a Centre for Workforce Intelligence report on nursing and midwifery workforce pointed out: ‘Large cuts to administrative and managerial staffing costs can make a modest contribution to savings, but the most significant savings can be achieved by increasing the productivity and efficiency of existing resources.’

That means frontline staff. But it is a difficult balancing act as providers seek to ensure quality and safety are maintained while savings are made.

Ruth Warden, NHS Employers’ deputy head of employment services, says back-office savings are often the starting point, but trusts are using a variety of weapons to reduce frontline staff costs, including cutting sickness absence, better rostering of substantive staff and reductions in bank and agency costs.

‘It’s about looking at your whole workforce expenditure, including agency, and asking how much it costs, why you are using these staff and is this the best you can do with that money,’ she says. ‘Trusts are looking at workforce redesign – ensuring those who are best placed to meet the activity do so – and making sure people who are highly paid and highly qualified are not doing things that could be delegated to lower grade staff.’

While Ms Warden insists trusts must use the levers they have in their control, there are national initiatives that aim to help cut staffing costs. NHS Employers has been talking to staff representatives at the NHS Staff Council about a number of ideas, including freezing pay increments, an extension of the working day and a reduction in sick pay rates.

National deal

Several trusts contacted by Healthcare Finance said they would be interested in any of these initiatives, but it would be unworkable in the current economic environment if a national or regional deal could not be reached.

‘Only a national agreement or at the very least a local agreement with our neighbouring trusts would work. Otherwise if we put a freeze on our increments, say, and the trust down the road didn’t, we’d see an exodus of our best staff to our neighbours,’ says one finance director.

Although trusts have been bearing down on the use of agency workers for years, there is room for improvement. NHS Employers says the service spent more than £2.2bn on agency staff between 2009 and 2011 and the Department has targeted cuts in temporary staff of £300m as part of the QIPP (quality, innovation, productivity and prevention) initiative.

Savings may be made when NHS Employers renegotiates national agency framework contracts over the next year. But Ms Warden insists trusts must take control of spending using the tools they alone control – chiefly their local agency spending. ‘That doesn’t necessarily mean you won’t spend money on agency staff – but when you do it will be in a controlled and managed way,’ she says.

Consultancies say trusts are showing renewed interest in getting money out of their staff budgets. ‘It’s probably the first conversation we have with potential clients,’ says NHS Professionals chief executive officer Stephen Dangerfield. ‘They will ask: “How much money can you save us?”’

The Department-owned provider of temporary staff can take over the management of a trust’s temporary staffing needs, including offering a bank service. A bank – a trust’s own register of temporary workers, including staff working overtime – is usually cheaper than agencies. Mr Dangerfield explains that outsourcing temporary staff management increases savings further.

‘When you add up a trust’s spending on flexible workers, if it is around £5m – which is fairly typical for a medium-sized trust – we would be able to save around £1m,’ he says.

In an outsourcing arrangement, bank staff are transferred under TUPE rules to NHS Professionals. It currently provides its managed service to 80 trusts, filling 1.6 million shifts a year. The bank’s 40,000 staff throughout the UK can sign up for shifts or make themselves available through a web-based system. Ward managers book shifts over the NHS N3 network. Timesheets are completed and approved online and shifts are integrated with the trust’s electronic staff record – which in turn generates the payroll.

Salford Royal NHS Foundation Trust, which faces a 5% CIP this year, is one of the trusts that receive NHS Professionals managed services. Assistant director of finance Andy Chilton says it was spending too much on agency nurses. In 2002/03, before the involvement of NHS Professionals, the trust spent about £2m on agency staff and a similar amount on bank nurses on a turnover of £160m with 3,700 staff.

 Now the requests for agency workers from ward managers are booked through the NHS Professionals online system, with substantive staff as the first port of call. ‘We had reduced that £2m on agency down to around £800,000 over the first two years, though of course there has been an increase in bank costs,’ he says. He believes using staff that know the trust systems and culture helps maintain quality and safety.

Major savings

 Agency spend last year was down to £200,000 – 10% of the original figure – with bank spending at about £2.5m. Before a Transforming community services transaction, which increased its turnover to £400m and staff to 6,000, it was spending £2.7m per year on temporary staff, compared with around £4m in 2002/03 – down £1.3m in less than a decade.

Following TCS, Mr Chilton says temporary staff spending has increased a little recently, but this is probably due to the new staff getting used to its systems. The TCS transaction added £45m and 1,000 nursing staff to its roster plus a range of therapists and the challenge is now to ensure spending controls are as tight as in other areas of the trust. ‘Even though the trust has doubled in size since 2003 and we have had a significant increase in staff, we are still only spending about £3.7m, so expenditure on temporary workers has not increased,’ he adds.

 While the service comes at a price, Mr Chilton insists the trust would have to spend more to get the information and manage the bank in-house.

 One of the benefits of involving a partner has been the production of information that can be analysed and acted upon. Better data leads to more control – for example, it found agency staff who had been working at the hospital for more than a year. ‘That happened because we didn’t have a system in place to identify what was going on. People are having to justify why they are using someone.’

 Senior staff such as assistant directors of nursing authorise shift requests. Even a last-minute request for an agency nurse at night when senior nursing staff are not available will be examined the next day to ensure trust rules were followed.

Mr Dangerfield believes the paper-based system used in many trusts, where time sheets are filled out and sent to payroll for manual entry, are prone to error. Moving to a computer-based system reduces errors and gives the trust greater control over its spending. ‘The information shows where and why they are spending money. It can raise questions like: “Why are we spending money there?”,’ he says.

Asking such questions can help reduce demand for temporary workers – by 2%-5% initially. The next step is to convert agency shifts to bank shifts and validate agency invoices. ‘Agency invoices are sent to us and validated against shifts worked,’ says Mr Dangerfield. ‘Typically, 15% of invoices are incorrect – it might be the rate is wrong, or the agency is charging for break time as well as hours worked.’

Information benefits

While the service comes at a price, Mr Chilton insists the trust would have to spend more to get the information and manage the bank in-house. One of the benefits of involving a partner has been the production of information that can be analysed and acted on – better data leads to more control. For example, it found agency staff who had been working at the hospital for more than a year. ‘That happened because we didn’t have a system in place to identify what was going on. People are having to justify why they are using someone,’ he says.

Much of the effort so far has focused on saving money on temporary nursing staff, but many believe tackling spending on locum doctors will be a bigger challenge.

A recent report from the Northern Ireland Audit Office showed trusts in Northern Ireland spent £22.5m on locums (almost 8% of medical staff expenditure) in 2010/11. It estimated that £5m a year could be saved if all trusts spent at average levels.

Some trusts have been able to make savings in medical locum costs – York Hospitals NHS Foundation Trust saved £72,000 across six medical teams by co-ordinating rotas more efficiently.

Others are trying novel ways of making savings across staff budgets. While Whipps Cross University Hospital NHS Trust has asked staff to give up some annual leave (see box above), George Eliot Hospital NHS Trust believes it can make savings by bucking the trend and increasing the proportion of qualified nursing staff it employs (see box previous page).

Mr Dangerfield says some trusts are offering new staff contracts with guaranteed hours (20 a week, say), with the expectation that the remaining hours would be worked flexibly through its bank.

While Ms Warden insists there is little evidence this has been adopted widely, trusts are increasingly interested in building up a temporary bank workforce – either through operators such as NHS Professionals or in collaboration with neighbouring trusts – to help them maintain safe services and be as efficient as possible while they deal with the peaks and troughs of demand.

Hospital bucks staffing trend

In recent years, trusts have increased the number of (cheaper) healthcare support staff while reducing the proportion of qualified nurses. But earlier this year George Eliot Hospital NHS Trust in Nuneaton decided to go against the flow and increase the ratio of qualified nurses.

By the end of November the £1m project will be completed as the trust recruits 32 new registered nurses – increasing the ratio of registered qualified nurses to healthcare support workers to 60:40.

 The trust says it took the decision to invest the money in recognition of the improvements that can be made to the quality of patient care by increasing the number of qualified nurses. Evidence shows this reduces occurrences of patient pressure sores, falls, drug errors and other events that can have a negative impact on a patient’s treatment and recovery, it says.

 Nursing director Dawn Wardell says the investment will improve care and reduce costs in the long term. ‘George Eliot Hospital recognises the value of investing in frontline healthcare staff, the improvements it can bring to patient care and safety and the long-term financial benefits brought about by reductions in length of stay and the use of expensive agency staff,’ she says.

Whipps Cross asks for staff help

Facing a QIPP target of up to £28m this year, Whipps Cross University Hospital NHS Trust has several initiatives in place to cut spending, such as reductions in length of stay and readmissions. But last month it also asked its staff to voluntarily give up annual leave or to take unpaid leave.

The trust has also asked its consultants to work an extra clinical session a month, while every member of its executive team is giving up two days’ annual leave before the end of the financial year. 

‘Staff across the trust are responding positively to the measures, and to our efficiency plans,’ says chief executive Cathy Geddes. ‘We recognise many people already go the extra mile and deliver over and above their job requirements. By working together, we will all help to ensure that we can put maximum funds into our frontline services.’

The trust insists its QIPP plan will benefit patients and increase efficiency. It is also working closely with commissioners to develop new pathways of care, which can help patients avoid hospital attendance.