Comment / Out of the zone

Finance directors must leave their comfort zone and become quality champions in the quest for transformational change

So, what are we to make of the chancellor’s Budget? And how will the NHS in England cope at the end of the current spending review when annual public sector growth is projected to fall to 0.7%?

As recently as November, we were told to expect growth of between 1% and 2% per annum, still considerably lower than the NHS has experienced in recent years. With real terms growth as low as this revised forecast position, we could face the prospect of cash settlements of around zero once the impact of no or negative economic growth is factored in.

The Budget also indicated a higher level of efficiency savings requirement in 2010/11 – moving from 3% in the current year to 3.5%. At the same time, the NHS share of the previously announced additional £5bn public sector savings is £2.3bn. Although this will not be funded from PCT allocations, it may indicate the size of efficiency saving required in the next spending review period.

Areas that could contribute to savings included: greater use of NHS Shared Business Services; extension of the payment by results tariff; a new efficiency competency; improved estate utilisation using new metrics; and collaborative procurement.

These measures will undoubtedly have some impact. But on their own they are unlikely to deliver the level of savings needed to cope with ongoing cost pressures in a time of low or zero growth.

In addition we will require a level of transformational change that we have not seen before in the NHS. A number of commentators have compared the cost reductions taking place in the private sector with the continued levels of investment in the state sector. But these comparisons miss one crucial differentiator – demand. If demand for a product reduces, income and profit decreases. The issue for the NHS is much different – demand has continued at the same or higher levels in recent years and this has been buoyed by increased public expectation. It is therefore not as straightforward as discontinuing unprofitable product lines or making wholesale redundancies.

Instead, we require a much more subtle and sophisticated approach. We must look at the latest international studies that indicate waste elimination and quality improvement go hand-in-hand rather than being mutually exclusive.

There is evidence from the UK and elsewhere suggesting that: 40% of medications are unnecessary; 25% of radiological tests are unnecessary; and £300m of medicines are returned to pharmacies for disposal each year in the UK. The delivery of savings from areas such as these will not be straightforward. But can – or even should – the finance function have any part to play in this programme?

Work done by the Institute for Healthcare Improvement in the USA has identified seven leverage points to achieve system level results. One of these is to make the chief finance officer a quality champion. Adopting this approach will require us to move from our comfort zone of only being the voice of constraint, ensuring effective control measures are in place, to become the interface between clinical processes and the management of resources. We have to be able to frame efficiency and productivity issues in ways that connect with the values and priorities of clinical teams.

If we are to meet the challenge ahead and build a world class system of finance in the NHS, we cannot afford to ignore the need to engage in a fundamentally different way.