Comment / Magic solutions?

It’s tempting to take refuge in the world of make-believe, but today’s climate of harsh realities calls on us all to work together 

Students of Harry Potter books will appreciate the co-existence of magicians and muggles. In the magic world of Harry Politician, the most desperate calamity can be resolved with the wave of a wand, while in the real muggle world, the harsh realities of 21st century existence are all too obvious.

So it was refreshing to hear David Nicholson and David Flory, our two most senior NHS civil servants – and our link with the political world –  talking so frankly at our annual conference in December. No smoke and mirrors here. It did not always make for comfortable listening, but the straight talking should be acknowledged. ‘Hospital services’ may have won funding protection in the pre-Budget report, but we know in the service the huge challenge ahead – a challenge the conference and the subsequent operating framework have helped to crystallise.

In short, the NHS needs to find recurrent savings of around 20% during the next four years if it is to meet the costs of rising demand, new technologies and traditional cost pressures such as pay and pensions, while maintaining hard-won access standards and further improving quality and safety.

 For PCTs, 2010/11 will be the final year of major growth for the foreseeable future. But this masks big challenges. The headline growth of 5.5% does not apply to the total cash limit – it is likely to be accompanied by a record number of pre-commitments as central and strategic health authority funding bundles are squeezed. And PCTs will have to cope with social services and other local authority functions suffering even greater privations.

Any headroom PCTs were eyeing from the reduced margins paid to providers for emergency flows is likely to be sequestrated by the local SHA.  And PCTs will be required to show that at least 2% of allocations are committed only non-recurrently next year.

If life for commissioners looks difficult, then life for providers is arguably worse. Zero tariff growth and reduced income for emergency flows will bite deep.  Years of delivering increased efficiency through top-line growth has apparently created a wave of false optimism in trusts. Monitor chairman Bill Moyes told conference that a sizeable majority of foundations were banking on major volume growth next year to replace lost income and to fund inflation. 

This seems at best optimistic and at worst positively foolhardy in a market shrinking in real terms. The reality for providers is that sufficient annual cost savings will need to be driven from the supply side to cover annual pay awards (2.25% in 2010/11, 1% per annum thereafter), NICE technical assessments, drugs and technological improvements, demographic effects and impact of the recession not recognised in tariff, non-pay (demand push and cost push) inflation as the economy recovers, and rising consumer expectations.

Everyone knows that delivering savings of this level requires a new approach. Indeed, while choice and competition remain important policy drivers, savings of this magnitude can only be achieved through wider co-operation across organisational boundaries. If this means compromising on competition or setting aside aspects of payment by results for the greater good, so be it. The task that now lies before us? To work to support our clinical colleagues in delivering a better service that happens to be cheaper.

That means it is a case of focus and hard slog across professional disciplines and organisations. With no magic solutions.