News / NHS bodies under pressure over back office efficiency

NHS bodies are being put under pressure to demonstrate the value for money of their financial services and other back office functions.

The operational efficiency programme set up in 2008 published its report in advance of last month’s Budget.  The overall report identified opportunities to save £15bn a year across the public sector by the end of the next spending review period. The savings will come from five key areas: back office and IT; collaborative procurement; asset management; property; and local incentives empowerment.

As part of the push to improve back office efficiency, the OEP report called on all public bodies to collect performance indicators on their back office functions to enable benchmarking and public reporting of costs. It said that all organisations employing more than 250 people ‘must collect and publish data using the five audit agencies’ approved value for money indicators for back office operations’. This should take effect from June for central departments and ‘by December 2009 for the wider public sector’. The information should be included in management information and public reports and be audited.

More specifically for the health service, the report said: ‘All NHS organisations should sign up to the audit agencies’ value for money indicators to benchmark themselves and identify scope for improvement, including through use of the NHS shared business service.’ The report added that ‘savings in back office operations should be incentivised through the tariff.’

The Budget report stated that ‘the government accepts the recommendations of the OEP in full’, suggesting that the use of the back office indicators would be mandatory. However the  Treasury told Heathcare Finance the measure was a strong recommendation. ‘We won’t be legislating for it but the view is it is the right thing to do,’ a spokesman said. In a narrative on the Budget, the department said it ‘will continue to encourage NHS organisations to benchmark their back office operations against peers and to seek ways of reducing their costs including through NHS Shared Business Services’.

The value for money indicators referred to are published and maintained by the Public Audit Forum, which includes the UK’s main national audit agencies. They cover five corporate services including finance, human resources, ICT, estates and procurement. They were first released in 2007 but revised indicators, for use in assessing performance in 2007/08, were released last October. The finance suite includes seven primary indicators, such as total cost of finance function compared to running costs, and 10 secondary indicators, such as debtor days and cost of accounts payable per invoice.

The Department said that NHS SBS had already delivered savings of over £40m and estimated a further £150m could be saved if all organisations used SBS.

SBS managing director John Neilson welcomed the proposals saying benchmarking was important to any organisation trying to improve efficiency. He added that the measures were similar to ones included on dashboards issued to SBS clients and further work would ensure the indicators were aligned.