News / Hospitals not sole way to efficiency savings

The search for NHS efficiency will have to go beyond the acute sector, Audit Commission managing director Andy McKeon told the HFMA annual conference in London earlier this month.

Mr McKeon highlighted NHS chief executive David Nicholson’s £15bn-£20bn estimate of the savings needed over the three years from 2011/12. He told conference that there was a tendency for all the talk to be about demand management, keeping people out of hospitals or finding efficiencies in acute care, but that this was taking too narrow a view. ‘There is a lot more to the NHS than the acute sector,’ he said.

He said that the acute sector accounted for just £37bn of the total health service expenditure of more than £100bn and that the whole £15bn-£20bn cannot be found from just the acute and specialist sector. ‘We need a realistic view about how savings can be made,’ he added.

He said that the impact on hospitals of moving services to the community – and in particular how they cope with unavoidable fixed costs – would also need to be factored in. ‘If we are serious about the transfer of services into the community, there is a real issue about the financial framework that will enable trusts to do that and remain financially viable,’ he said.

Mr McKeon stressed that the £15bn-£20bn did not represent a cash cut in NHS budgets. The service has a year of growth in 2010/11 and has been promised ‘flat real’ – growth in line with inflation – for frontline services in the two succeeding years.

However, he said that while there would be no cash cuts, real cash savings would be needed to enable the service to cope with rising demand and afford new technologies and pay pressures.

Mr McKeon warned that structural change or reconfiguration would offer no easy solutions to the service’s financial challenges. He said it tended to take more than three years for reconfigurations to yield savings and the service needed to find economies much sooner.

He said there would be pressures on back office costs, but suggested that with total costs of these services amounting to around £6bn, they could only make a contribution to the savings needed.