Feature / New directions

With historic deficits, rising costs and a squeeze on income, NHS Wales faces big challenges. But, as NHS?Wales finance director Chris Hurst (pictured) explains, the nation has plans for a high-quality, affordable service.

A year has almost passed since the reorganisation of the NHS in Wales. In line with a commitment by the One Wales coalition Assembly government, the NHS internal market was abolished on 30 September 2009 and seven health boards and three NHS trusts replaced the former seven trusts and 22 local health boards. Now those new organisations face the most challenging of financial agendas and the expectation they will transform NHS services in Wales over the next five years.

As the new structures took shape we began work on a five-year service, workforce and financial framework (SWAFF) for NHS Wales. The intention was not to develop a fixed and inflexible all-Wales plan, but a framework to support local plans for the integration and transformation of healthcare.

The framework has been developed within a context of huge health challenges. Wales has some of the highest rates of cancer and heart disease in Europe, a high proportion of elderly people, a severe burden of chronic disease and persistent health inequalities. Added to this, NHS Wales has a history of variable performance and financial deficits that have frustrated previous attempts at transformation.

Working together with consultant McKinsey, the new boards and Assembly have developed a framework focused on four key areas:

• Improving performance, quality and financial stability by reducing harm, waste and variation
• Capturing the opportunity of an integrated healthcare system
• Empowering frontline clinical and non-clinical staff with the tools to deliver
• Supporting services to deliver through good government and strong partnerships.

Deficit challenge

The first challenge for the new organisations was to address the 2009/10 financial gaps they had inherited. At mid-year, a deficit of £70m was forecast and the NHS was chasing savings of £240m (circa 5%) to break even. This was nearly double the previous year’s savings targets and was proving difficult to deliver using traditional efficiency and cost control.

The financial challenge was not the only hill to climb. The deadline for delivery of the government’s commitment to a maximum waiting time of 26 weeks for referral-to-treatment was fast approaching (December 2009). And the operational challenges of responding to a swine flu outbreak were pressing up against boards’ efforts to contain acute capacity to hold down their costs.

Despite the scale of this challenge, at the end of March 2010 all NHS organisations met their financial targets, after receiving non-recurrent support from the government to help reduce the impact of the exceptional in-year pressures.

However, the financial challenge facing NHS boards in 2010/11 is even greater. As a result of a reduction in the Assembly government’s budget for this year, the extra cash funding received by NHS organisations in 2010/11 is only around 0.5% more than in 2009/10. 

Faced with the cost of the Agenda for Change pay deal and annual non-pay pressures – drugs, continuing care services – the NHS must deliver savings of more than £430m (7%-8%) this year to break even.

To achieve savings on this scale, NHS organisations must begin the process of making fundamental changes to services – where most NHS money is spent.

The usual NHS response is to centralise decision-making and adopt short-term measures to contain cost. But if not replaced with sustainable measures quickly, this will demoralise staff and stifle clinical co-operation. And later it will unwind financially, adding to future savings requirements.

Teamwork

The Assembly government is closely monitoring progress and working with NHS organisations to underpin the delivery of their savings plans, but the scale of financial risk is significant and cannot be ignored.

It is clear the new architecture of the NHS in Wales puts organisations in a much stronger position to standardise quality, systems and performance, thereby reducing cost. The challenge is the pace at which this must be achieved to retain affordability.

A key component of work on developing the five-year framework has been to model the financial pressures facing NHS Wales alongside potential funding scenarios. The commitment made by the UK government to protect real-terms spending on health does not automatically apply in Wales. The Assembly government must determine how best to manage the reduction in funding across all of its areas of devolved responsibility.

The impact for the Welsh budget for the next three years will not be known until October’s UK spending review. In the interim, work is being undertaken to assess the impact of annual budget reductions of up to 3% for revenue and 10% for capital. Modelling potential increases in NHS unit costs, including the cost of increases in demand (from demographic and other factors); we estimated that without action NHS costs would rise by 4% a year.  Put alongside a ‘downside’ funding scenario, this modelling indicated NHS Wales faced a financial gap of up to £1.9bn by 2014/15. This would require NHS organisations to make annual savings at a similar level to this year for the foreseeable future.

While the scale of the financial challenge facing NHS Wales may appear overwhelming, early work on the SWAFF identified 14 high-value opportunities for improvement, which if secured will enable high-quality, affordable services to be provided and sustained (see box).

There is little doubt strong and visible clinical leadership will be essential to the successful transformation of services. This means clinicians having the authority to shape and direct programmes, and being visible and proactive supporters of the proposed changes. 

An excellent example of clinical leadership in Wales has been the ‘1,000 lives campaign’ (2008-2010). It is estimated that more than 850 lives have been saved over the two years by adopting best practice in six key areas, including fewer surgical complications and healthcare-associated infections, and improvements to critical care and medicines management. The campaign was clinically led and engaged both managers and patients. It is now being taken forward with the ‘1,000 lives plus campaign’, which aims to ensure every patient receives the same level of safe care wherever they are treated in Wales.

All health boards plan to implement service line reporting in 2010/11, which will help align the clinical and financial agendas. Although initially considered by many to be irrelevant in a non-market-based NHS, it is now seen as an important tool for understanding the financial implications of variations in clinical practice.

As most boards are managing clinical specialties over multiple sites, service line reporting will help them make comparisons on clinical practice, cost and efficiency. Patient level costing has the potential to further this. Cardiff and Vale University Health Board is due to launch its system in September. Its 300 users – clinicians and managers – will have online access to data to assist in identifying variations in direct costs of treatment and the costs of avoidable admissions.

Early work at a national level in late 2009 to initiate the SWAFF is being complemented by local plans by each of new NHS organisation. In addition, 11 national programmes have been established with leadership shared between the NHS chief executives and Welsh Assembly government executive directors.

The challenge for NHS Wales is to deliver a fully integrated care system, including working closely with partners in local government and the voluntary sector. That is no easy task, but abolishing the internal market has clarified accountabilities and provides a framework that focuses on collaboration in the best interests of the citizens of Wales.

Chris Hurst will address the HFMA Wales annual conference this month.

High-value opportunities

Capturing the opportunity of integrated care

• Develop new settings of care and improve long-term pathways
• Improve the quality of continuing care through health and social care integration
• Improve unscheduled care pathways
• Implement cross-system patient information and informatics

Improve quality and financial sustainability by reducing harm, waste and variation

• Stop wasteful clinical interventions
• Improve acute care performance and decrease length of stay
• Improve primary and community care performance
• Improve mental health service provision
• Manage medicines more effectively
• Improve procurement and supply chain
• Drive highest-value prevention campaigns

Empower the front line

• Establish service line management and patient level costing
• Modernise the workforce

Supporting services to deliver through good government and strong partnerships

• Streamline and refocus the centre