Feature / The power of two

Ahead of its annual conference, HFMA incumbent president Paul Assinder and president-in-waiting Suzanne Tracey size up the significant challenges facing the NHS and its finance function. Steve Brown reports

It has been quite a year for the NHS. Two operating frameworks, a new government and a health white paper that many believe will usher in the most radical changes in the service’s history. However, Paul Assinder and Suzanne Tracey – outgoing and incoming presidents of the HFMA – remain firmly focused on the future. This means driving productivity improvements in the NHS that will deliver up to £20bn of efficiency improvement  to cope with demand and technology pressures within a broadly flat (in real terms) financial settlement.

Both foundation trust finance directors (Mr Assinder at Dudley Group of Hospitals, Ms Tracey at Royal Devon and Exeter), they recognise the relatively good settlement the NHS received in October’s spending review. You only have to look at local government to get an idea of the relative protection afforded to the NHS. Its 26% cut in government funding equates to an average 14% cut in budgets once council tax is taken into account.

Many practitioners in other sectors may be jealous of the generosity directed at the NHS. But they are unlikely to understand that even the flat real settlement (in fact, a 0.4% increase over the review period) feels like a major cut given the financial pressures and demographic changes facing the NHS.

Given this challenge – and the service has been preparing for it since before the coalition coalesced – is it the right time for such a radical change programme as set out in summer’s white paper? Mr Assinder acknowledges some may be ‘surprised’ by the extent of change given the current economic climate and the significant financial challenges facing the NHS.

But he believes there are opportunities and there is a synergy between some of the white paper’s aims and the need to improve productivity. ‘It is incumbent upon us to manage this change and to exploit the opportunities,’ he says. ‘A significant part of delivering this agenda will require different pathways and a more creative way of doing business clinically. Putting GPs into the frontline of the commissioning process has to be a good thing.’ In fact he goes further: it’s essential. ‘Getting GPs face to face with hospital doctors has got to be the only way to deliver the financial agenda we now have to face.

‘We simply can’t save £20bn of NHS spending by reducing back-office costs. Working across organisation boundaries to streamline clinical pathways is the only solution.’

Ms Tracey echoes this. ‘The scale of what we are trying to achieve – finding efficiency savings worth one fifth of our current expenditure – is such that we won’t be able to take an incremental approach. We need to move into the transformational change arena.’

But does the service really need the distraction of structural upheaval when all hands should be on the productivity pump? After all greater clinical involvement is not the exclusive ambition of the new government. The last administration, with practice-based commissioning, and the last Conservative government, with fundholding, tried to give GPs the lead role in commissioning.

Mr Assinder acknowledges there is a school of thought that GPs could simply have been given a more prominent role, with real practice budgets for hospital services, within the existing PCT structure. But he adds that in some ways the changes capture local developments, with practices already clustering together to drive commissioning.

Evolution and revolution

In this sense, both Mr Assinder and Ms Tracey believe the changes need to be evolutionary as much as revolutionary. Some areas had already made the link between the efficiency challenge and getting GPs and hospital doctors working more closely together on pathway optimisation. The move to consortia perhaps simply accelerates these local approaches.

It needs to be evolutionary in that the NHS must build on progress in commissioning in recent years. Progress may not have been as fast as some might have wanted but there has been progress. It mustn’t turn its back on the substantial experience in finance, commissioning and other support areas that it has accumulated in PCTs. And it must learn the lessons from earlier attempts to involve GPs.

‘In terms of GPs, it is undoubtedly right to have clinicians making the key decisions about pathways for patients, but we’ve got to avoid some of the bad aspects of earlier initiatives – transaction costs, for instance, and ensuring we don’t reward perverse behaviour,’ says Ms Tracey.

Both agree that only a system-wide approach to delivering local quality, innovation, productivity and prevention (QIPP) plans – and in turn delivering the national productivity requirement – can be successful. ‘We need to look across systems, understand wider impacts of changes and move towards shared goals,’ says Mr Assinder. ‘A PCT’s QIPP savings can be a provider’s loss of income and a further increased provider QIPP requirement downstream. It is crucial that QIPP as a concept is considered across health economies and all stakeholders buy into the consequences.’

Some of these ‘consequences’ may appear unpalatable at least on the surface. There can be savings in back office areas. But while the public might buy into the tabloid portrayal of an NHS awash with managers and administrators, the reality is that even large cuts in these areas would only make a modest contribution  to the required savings target – a point acknowledged in the white paper. Last month’s QIPP workstream back office efficiency report underlined this point. With the NHS spending just £2.8bn across seven back office function areas, the £600m potential saving (if everyone performed to the average cost level) would only scratch the surface of the £20bn target.

‘Finance directors and chief executives have a role in being honest with staff about where we are headed,’ says Mr Assinder. ‘The future is about providing more service for less money. And that means fewer doctors and nurses – at least operating in what is currently the acute sector. If we do it right, it should also mean a safer service for patients and lead to better patient experience. That is our challenge.’

That doesn’t necessarily equate to job losses or redundancies. ‘Planning the workforce for the future is crucial,’ says Ms Tracey. ‘There are opportunities, for instance, with retirements. But it needs to be planned, at an organisational and national level, or the danger is we become reactive and we’ll miss those opportunities.’

As leaders of the NHS finance profession (incumbent and in-waiting), Mr Assinder and Ms Tracey are keen to discuss the implications of changes for finance staff. The government is committed to 45% cuts in management costs in PCTs and strategic health authorities. And with all finance costs in these organisations counting towards the management cost definition, finance staff in these organisations face significant uncertainty in the transition to the new GP consortia model .

Ms Tracey’s theme for her year as president – ‘Take control’ – is aimed specifically at these at-risk staff. ‘For some finance staff this will be a difficult time – they will need to weigh up options, assess their skills and goals and potentially move into new roles. What we want to do with the ‘Take control’ programme is give finance staff the tools to support them through their personal transitions,’ she says. ‘The HFMA is seen as the finance family and we have a duty of care to the members of that family. The finance function will look different in future, and not everyone will be guaranteed a place in it, but we can help ensure staff are aware of their options and have the right support.’

Ms Tracey says she is ‘delighted’ that NHS director general of NHS finance, performance and operations David Flory and the senior team at the Department of Health have agreed to support the HFMA initiative. This will enable the association to enhance its planned support.

Targeted cuts

Mr Assinder has been clear through his year in office that finance cannot and should not be immune from the need to cut costs, specifically management costs. But he stresses that finance departments are already comparatively lean. Last month’s back office efficiency report suggested that finance function costs average around 0.6% of organisational turnover – close to best of class levels within the commercial sector. With the same overall level of funding within the NHS, cuts in finance functions cannot afford to be too deep – a point made in the association’s response to the white paper.

He says achieving the savings target in the new structure will rely on clinicians having the right information and support to make decisions. Patient level costing data, programme budgeting analysis and real time financial performance figures all have a part to play; the trick will be to change the balance of finance teams’ work. ‘The challenge will be to convert day-to-day transactional management into more transformation and change management,’ he says.

Ms Tracey believes the clinical community increasingly recognises management’s value. A joint statement from the HFMA and Academy of Medical Royal Colleges earlier this year made the point that it was unhelpful to view the service in terms of frontline and back office. She says her local experience is that clinicians view managers as key team members in delivering high-quality services within budget.

Mr Assinder agrees, believing service line reporting has helped open up the management overhead. ‘That gives us a good grounding for the dialogue we need to have, ‘ he says.

He can look back on an eventful year. But with a health bill due early in 2011, there is unlikely to be any let-up in the pace of reform. Ms Tracey can look forward to a similarly busy time in office.