Feature / Sharper focus

Efficiency and productivity will remain the watchwords for the NHS in England over the next few years and significant opportunities remain to find savings or avoid costs. This was the key message from the HFMA Provider Finance directors’ forum in January.

The theme was prominent in a speech from Lord Prior. Setting the scene in a keynote speech, the NHS productivity minister acknowledged the challenges ahead. But the government would help by frontloading some of its promised additional Five-year forward view (FYFV) funding – £3.8bn in 2016/17. With six-month figures forecasting a £2.2bn deficit at the end of the current financial year, 2016/17 would be ‘tough, but doable’, he insisted.

He conceded some trusts may have felt: ‘If we are going to lose £40m, why not £50m and pull it back the following year’. This was dangerous, because having lost its financial discipline, a trust can find it difficult to convince staff that tight financial management is important again.

‘With staff groups, particularly medical staff, if you lose individual discipline it makes your job incredibly difficult. But on the other side of the equation, in a financial crisis you may be able to do things that you couldn’t before. I know a lot of hospitals are looking at joining up with other hospitals; rationalising service lines; and looking to do deals outside hospital. People are looking at things differently because there is a recognition that we can’t drag ourselves out of it just by our own efforts. We shouldn’t waste a good crisis.’

Efficiency push

Lord Prior told Healthcare Finance the £5bn of productivity and efficiency savings identified by Lord Carter in his review was achievable. ‘The £5bn is based on trusts getting to the average. It takes in a whole range of clinical specialties and all their activity, but it is not a stretch target,’ he said. He did not underestimate the scale of the challenge and in some trusts it would be more difficult than others. ‘I am conscious of the fact that it can’t be done overnight. It’s not going to be easy, but it is possible.’

The money did not have to be saved in the first year, he insisted, but over the five years of the FYFV process. Away from these savings, other changes such as new care systems – accountable care organisations, MCPs and PACS – will take time to establish and begin delivering savings.

Lord Prior dismissed claims that efficiency targets were invalid because the reference costs on which they are based are inaccurate. ‘What else have we got? The spread of patient-level information and costing systems will improve them,’ he told Healthcare Finance. ‘I’ve been working closely with Lord Carter over the past few months and I think the methodology he has developed should be very helpful. It’s not perfect – the reference costs are not perfect and the market forces factor is not perfect – but it should provide you with a methodology for looking at variation within and across your organisations.’

Carter’s adjusted treatment index (ATI) gives the health service a currency to examine and improve efficiency and productivity. ‘Carter is providing people with the methodology,’ he said. ‘It will help finance directors and all the board.’

Chiefly, it would help trusts answer the question ‘Are we good?’. Lord Prior said this was difficult to answer – should it be based on outcomes, infection rates, value for money or other factors?

‘The great benefit of Carter is the model hospital,’ he said. ‘They will be able to see how they compare against other similar hospitals around the country as a way of stimulating improvement. However, I recognise that the work still has to be done.’

Procurement savings are a key element of the Carter efficiencies. Lord Carter told the HFMA annual conference in December that NHS procurement was a ‘shambles’ and, speaking after the directors’ conference in January, Lord Prior agreed. ‘It reflects the disaggregated, fragmented structure of the NHS. When every hospital is isolated, it is hard to get economies of scale in purchasing. We have a national supply chain but less than 40% of supplies goes through it. It’s disaggregated and we don’t think about economies of scale.’

The Department’s new procurement strategy, outlined in January, would allow a greater degree of aggregation, he added. A new return would require trusts to publish receipts on a monthly basis for their top 100 purchased items, such as bandages, needles and rubber gloves. This would allow hospitals to compare costs and drive down prices.

The directors’ conference heard how the introduction of GS1 barcodes can increase efficiency and improve patient care. Derby Teaching Hospitals NHS Foundation Trust director of finance and performance Kevin Downs outlined some practical examples of the benefits for his trust. It has introduced barcode scanning at point of use in a number of areas, including general surgery and cath labs. The information not only feeds into its supplies system for reordering and audit, but also into its finance system.

This has helped reduce costs by allowing the trust to hold only the stock it needs. And, as other information such as OPCS codes and staff badges are also scanned, it produces rich data to be analysed by clinicians, finance and operational managers.

For example, the trust can produce a ‘cost of operation’ sheet, listing costs such as consumables and staff time. These can be compared at an aggregate or individual level to identify and address variation.

The system meant the trust did not suffer from some of the procurement weaknesses outlined in the interim Carter report. ‘We don’t have different departments buying the same product at a different price,’ Mr Downs said. ‘That’s controlled by the e-catalogue. At no point is there manual intervention apart from overseeing the level of stock held.’

As well as procurement, Lord Prior said transforming care and driving down agency staff spending were fundamental to meeting the £22bn funding shortfall identified by the FYFV. ‘We have a huge property estate that is under-utilised in hugely expensive areas. There are lots of areas where we could do quite a lot better,’ he said.

Use of beds was highlighted by other speakers. Portsmouth Hospitals NHS Trust chairman Sir Ian Carruthers told the meeting most hospitals had seen a 4%-5% increase in the number of older people admitted in recent years. This had a knock-on effect on bed availability, as lack of capacity meant many could not be discharged into the community or social care when they were ready to leave hospital – 20%-25% of a hospital’s beds could be occupied by an elderly person fit for discharge. ‘It should be no surprise that if we are using 20%-25% of our asset base in this way, that we are going to struggle in other areas,’ he said.

Royal College of Emergency Medicine president Clifford Mann said, in general, commissioners’ plans to limit the rise in A&E attendance had not worked. ‘We have to stop this fantasy and start planning for the expected increase in activity,’ he said.

Patients occupying 20% of beds when they need not be in hospital had been ‘kidnapped by the system’, Dr Mann said. ‘We have to release these people or we need more beds. We must do one or the other.’

Benefits of devolution

Representatives from the Greater Manchester devolution project insisted, however, that the city’s new structure offered a fresh opportunity to tackle the causes of ill health and reduce demand. Greater Manchester health and social care devolution project chief finance officer Sarah Senior added this would take time.

Tameside Hospitals NHS Foundation Trust finance director Claire Yarwood said Greater Manchester had worked with NHS England and the Treasury to create a transformation fund, on which the national £1.8bn transformation fund was based. ‘The fund allows us to do things differently,’ she said. ‘We have had to be quite radical and stretch our ambition and it’s been a challenge for the directors of finance in commissioners and providers.’

Lord Prior said the FYFV was about ‘place, not institution; population not systems’. The NHS had to step outside institutional silos.

And he had a stark message on the future of district general hospitals. ‘The age of the DGH is behind us. They must integrate [with other providers] or join in some sort of chain.’

While barriers to change remained, he was optimistic because the NHS had a widely supported narrative for reform in the FYFV, while NHS Improvement’s focus on development, not just finance, was a ‘huge step forward’. New technology and transparency of information would drive improvement. ‘Transparency is the closest thing we can get to a market without having a market,’ he said. ‘It is better than the other interventions of the past 10-15 years. We’ve tried targets, tried top-down performance management, but transparency is a better way to self manage the system.’

He concluded: ‘It’s going to be tough, but if we can do this we will be the envy of the world. We spend 7-8% of GDP on health (in Europe it’s 11% and in the US 15%), commissioning is efficient, and now our hospitals will be among the most efficient in the world.’