Feature / Services in line for management

Service line reporting and patient level costing are, undoubtedly, the buzz phrases in the health service at the moment, particularly in the financial community, but they are not ends in themselves. Trusts, foundation trust regulator Monitor and the Department of Health are asking what can be done with the information that the programmes generate.

Service line reporting and patient-level costing can increase trusts’ understanding of their services, but trust boards will be under increasing pressure to use the information to increase efficiency and quality. Some believe the next step is to ensure greater clinical involvement and use the information to change the way their organisations are run. Service line management (SLM) potentially offers organisations a method of achieving both these steps.

SLM uses the rich data generated by service-line reporting to determine the best structure for an organisation and the optimum portfolio of services it should provide. Then, it helps each service line to be run as an autonomous internal business.

SLM is part of Monitor’s foundation trust development programme. Policy director Robert Harris says payment by results will drive efficiency in all trusts, so foundations need something to keep their competitive edge. He says SLM will keep foundations ‘ahead of the pack’. Even though foundation trusts have produced impressive efficiency savings, he adds, they still have some way to go to match international best practice. The international benchmark on annual efficiency gains is between 10% and 15%. Foundations are delivering about half that.

Monitor is working with pilot sites to examine how SLM can work in practice. ‘We are moving from it being a financial exercise to ownership by the people who deliver the services,’ Mr Harris says. Front-line staff are given patient-level information to help them improve their service and make them more efficient. ‘You talk to the clinicians, the clinical directors, general managers and service leads and say, “These are the numbers. How can we make them better?” The finance people step back; the clinicians and general managers take over.’

Monitor is asking trusts to consider where it is most appropriate to take decisions, challenging the traditional structure of the power being held at board level. In an extreme example, Mr Harris says one foundation chief executive made the final decision over the appointment of new cleaners. ‘Is it right and proper that the chief executive does this? We have to get the balance right,’ he adds.

SLM focuses on creating self-governing units within a trust. ‘This allows clinicians and managers the autonomy and accountability to deliver improvements in quality,’ he says. ‘As organisations, you should look at natural business units – you might have 10 or 20, depending on your organisation – but the important thing is to look at what fits best. Look at where you can assign accountability and responsibility.’

Though the board would step back, it would wish to retain some level of assessment and control. Mr Harris believes trusts could borrow from Monitor’s performance management system to ensure each business unit earns its autonomy. ‘Trusts could use Monitor’s risk assessment regime for each business unit,’ he suggests. ‘Just as we do with foundation trusts, you can assign risk ratings to each unit and attach levels of autonomy, spending and decision-making rights to each of these.’

Ben Richardson, a partner with consultancy McKinsey, says service line reporting is all about unleashing clinical leadership. ‘In my experience when you have clinical leadership, great things can happen,’ he says. ‘SLR can create a common linkage between clinicians and finance.’

However, he warns results would not be achieved quickly. ‘The first time you produce figures, they will almost certainly be wrong,’ he says. ‘You must improve it and come back again and again, and begin to help people understand the information they are looking at – how does profitability relate to costs and how do costs relate to our operating practice?’ In the medium term, clinicians will understand how their practices affect profitability and they will begin to ask how they compare with others. In the long term, clinicians take ownership of their service and understand how to use finance to reach their long-term goals. Targets will be set by the staff themselves.’

Mr Richardson also believes finance directors should look for clinical role models. ‘They must ask themselves how they get them on board, what types of clinicians should they have as champions and how to use them to build momentum.’

While few will see SLR and patient-level costing as a ‘finance only’ project, Peter Donnelly, payment-by-results project manager (costing) at the Department of Health, reinforces the message that finance must lead the way. But clinicians will only be engaged if information is accessible and easy for them to understand, he says.

‘We have a duty of care as managers, but we are a long, long way from the top of our profession when it comes to being finance professionals,’ he says. ‘If you were working in the City selling derivatives as they were sold 25 years ago, you wouldn’t last the morning, but we are delivering financial information and reports in the same way as we did in the 1950s and 1960s.’

He adds: ‘Don’t present clinicians with monthly variance on budget. Variance on budget went out with the Sputnik. It is meaningless to those who make the difference – the clinicians. They are the real financial controllers, but we are not going to change clinicians’ behaviour unless the information makes sense to them and it makes sense to them at the patient level.’

He believes that savings of 6%-10% could be realised through the implementation of patient-level information and costing systems, which on spending levels of around £50bn on acute care in England could translate into efficiencies of £3bn to £5bn.

Chelsea and Westminster Hospital NHS Foundation Trust has been operating SLR and patient-level costing for two years. Lorraine Bewes, the trust’s director of finance, says that during implementation, engaging and motivating clinicians and service teams was one of the key challenges they faced. ‘You must share the right level of data,’ she says. ‘We had shared healthcare resource group and reference cost information with clinicians for a long time, but it was not until we could look at variations at consultant and patient level that we started to get interest.’

She says it is important to pilot the programme in individual service lines. One of her trust’s first pilots was in trauma and orthopaedics, in which it introduced real-time patient ‘bills’, detailing the services, tests and prostheses that individual patients receive, together with the cost of each intervention. ‘This is shown to the surgeon as they finish the operation, allowing them to validate it,’ she says. ‘We found some coding issues, but it also made them more aware of the prostheses they were using.’

This has resulted in a consultant-led review of prostheses use, with the aim of standardising the supplies used and reducing costs. Length of stay was identified as an issue through patient-level costing and benchmarking. A multidisciplinary team has looked at long-stay patients and its work has led to a 26% reduction in length of stay.

Finance has an important role to play, Ms Bewes adds. ‘I challenge my finance managers to treat each service line as their business. They have the professional skills and the objectivity to challenge some of the variations we are now seeing.’

And she says patient-level costing has produced tangible benefits for the trust. ‘For the first time, we have a transparent picture for each service line. From the service line point of view, it’s given a common agenda to the finance and clinical teams. In orthopaedics, a 10% improvement in length of stay would save them £300,000 – that’s nearly the cost of a step-down facility they had been looking at.’

The information has also been used to strike better deals in local negotiations, such as in paediatric community services.

Mr Donnelly urges finance managers to ‘lift their game’ by adopting service line reporting and patient-level costing. ‘We are running a multibillion-pound business, but most people don’t have a clue at a meaningful level what our profitability is,’ he says. And he insists a patient-level costing system is not expensive. ‘In the worst case I have come across, a hospital had to save one half of 1% of its year five revenue in order to justify the expense.’

Mr Harris says headline figures for profitability are no longer good enough when applying for foundation status. Applicants have to understand their organisation by breaking down the figures to speciality level. He adds that service line management is not a passing fad but is in line with the direction of policy outlined by Lord Darzi in his Next Steps interim review.

‘A lot of what Lord Darzi is saying resonates with the idea of service line management,’ Mr Harris says. ‘His basic remit was to establish a clinically led, patient-centred, accountable NHS. If you take each phrase in turn: clinically led – we are driving a clinically led business; patient-centred – absolutely. We are looking at clinical quality and have done a bit on workforce and patient satisfaction and accountability is key.’

Much store is being placed in service line management and with Monitor currently considering the SLM requirements for trusts applying for foundation status, most trusts will not be able to ignore it.

All opinions in this article were expressed during the HFMA’s service line reporting conference in London on 4 October.