News / Health Foundation: hospital efficiency gains prove elusive

The charity examined audited accounts and reference cost returns of NHS providers between 2009/10 and 2013/14 to establish their financial performance, efficiency and productivity. Data for the first nine months of 2014/15 was also included. The study focused on the 160 acute and specialist hospitals, as well as 51 mental health providers.

Report co-author Anita Charlesworth, who is the foundation’s chief economist, said: ‘Our analysis shows efficiency has improved in the NHS in recent years. In acute providers, efficiency has improved by an average of just under 0.4% a year between 2009/10 and 2013/14. This is substantially below previous estimates.’

Work by Deloitte for Monitor and NHS England found efficiency improved by an average of 1.2% a year between 2008/09 and 2012/13, she added.

At the time of the analysis, providers faced an overall projected deficit of more than £600m at the end of 2014/15. The report said: ‘In 2013/14, operating costs rose by £1.4bn, but income only rose by £700m. The biggest increase was in staff costs, but not as a result of pay [rises].’

In fact, NHS average earnings fell in real terms between 2009/10 and 2013/14 as the government policy of public sector pay restraint began to bite. Providers’ pay costs rose because of an increase in the number of staff (both substantive and temporary), she explained. The biggest increase was in temporary staff spending, which rose by £1bn (almost 28%) in 2013/14 and continues to rise, she said.

Ms Charlesworth said providers’ declining financial position was mirrored in their performance on productivity (measured as the ratio of outputs to inputs).

Crude productivity, which does not allow for changes in care quality, in the 160 acute and specialist providers increased in the first two years, she said, but then declined by almost 1% in each of 2012/13 and 2013/14.

‘The key factor driving this reduction in productivity would appear to be increased spending on staff and largely spending on temporary staff,’ said Ms Charlesworth.