Feature / Stepping up

Transformation of service delivery, with continued pressure on traditional approaches to efficiency, is how the health service will deliver on quality and productivity, NHS deputy chief executive David Flory tells Steve Brown

A ‘strong financial position’ was NHS deputy chief executive David Flory’s summary of the service’s quarter one returns, which forecast a  year-end £1.2bn surplus across strategic health authorities, primary care trusts and NHS trusts. And with QIPP savings on target for 2012/13 (25% of the planned £5.1bn annual plan), building on last year’s £5.8bn, the service had a ‘solid financial platform’ for the challenges ahead.

But speaking to Healthcare Finance ahead of this year’s HFMA annual conference, Mr Flory says there is an even bigger positive to take from recent NHS financial performance. ‘One of the most important things that NHS finance leaders have achieved in recent times – that we now almost take for granted – is that overall we do what we say we are going to do,’ he says. ‘There are no surprises in the actuals against plan. For me that’s an indicator of the professionalism, culture and behaviour of the finance profession. That dependability has become a core strength for us.’

This consistency will be vital as the service moves into the new world of GP commissioning and an all-foundation trust economy. Robust plans and delivery against those plans will be the key to the new structure meeting undeniably difficult financial challenges.

Mr Flory acknowledges that there remain difficulties within the positive overall picture. ‘I’m frustrated we haven’t been able to solve some of the longest standing problems,’ he says. He points to the need to trigger the unsustainable provider regime for South London Healthcare NHS Trust and the appointment of a trust special administrator. With the trust overspending by more than £1m a week, the recommendations for change – still out for consultation – involve a three-year transformational change programme. If pursued, the programme will see major changes to the services provided by the trust’s constituent hospitals – with some services being reprovided by other organisations – and will require central support to make it happen.

‘The report from the administrator shows how complex the solutions and the implementation of these solutions can be,’ he says. ‘There is no quick fix for those problems.’

His frustration is tempered by other organisations that have turned around big problems. ‘On the other side of the coin, there are places like Imperial College (see page 14) and PCTs in places like Surrey that have got to grips with financial problems and sorted them out.’

But Mr Flory stresses that ‘the environment is harsh and it only gets harsher going forward’.  The size of the service and financial task has been neatly captured in financial terms by the £20bn ‘Nicholson challenge’. This is the broad estimate for the value of the productivity improvement the NHS would need to meet the demands arising from an increasing population with a growing proportion of elderly people, rising incidence of chronic disease and the costs of new drugs and technology. While he says it is useful to have put a financial value on the challenge – helping to focus minds – some of the debate around the savings challenge is ‘counterfactual’.

‘Some of it isn’t about saving money that we’ve previously spent,’ he says. ‘It is about avoiding spending money we’ve previously never had to spend, but if we had it would have bust us. Much of it is about delivering more for the same.’ He says the restraint on pay awards has helped and demand management is key. But new pathways of care are now needed.

‘We’ve had a good start on QIPP,’ he says. ‘We are facing year-on-year efficiency gains of the order of 4%. By the time the spending review period ends, a provider will need to be 12% more efficient than it is today. You can’t do that by keeping reducing length of stay and by getting smarter on procurement. All these things play a part in it. But across the system, 12% efficiencies over three years equals a significant transformation in how we organise care from higher cost, lower quality to lower cost, higher quality.’

Mr Flory is clear that the biggest risks to achieving this transformation are increases in activity, particularly non-elective activity. So a 2.4% increase in Q1 non-elective activity on the same period last year is not great news. Mr Flory’s quarterly report for Q1 said figures were largely in line with seasonal patterns and complicated by a ‘unique distribution of bank holidays and school half-term holidays’. So no panic. But it is the key issue that needs to be controlled, given the demand that could arise as a result of changing demographics.

‘We need to avoid people going to hospital where it can be avoided,’ says Mr Flory. ‘This includes patients with long-term conditions who, because they are not being supported to manage their conditions effectively, end up as emergency admissions. Or discharged patients who, in the absence of good primary and community services, come back into hospital.’

This is not a new call for alternative community-based support to be developed, particularly for those with long-term conditions. But important follow-up actions are needed too. ‘In some ways the easy bit is for a commissioner to say: “We’ll take the money away; we’ve got better models of care and so we’ll take the money out of the hospitals”,’ says Mr Flory. ‘But the hard thing is the hospital then taking the capacity out behind it.

‘This is the real issue because it fills up again, so in the end we are providing two services – the new better service becomes additional instead of substitutional.’

Call for transformation

Transformational change is what is needed. Some, such as the work on hyper-acute stroke, is all about outcomes. ‘Better quality at no more cost – why wouldn’t you do that,’ says Mr Flory. But some change will need to deliver greater productivity or proactively avoid unnecessary activity. ‘There are lots of good practices out there on more efficient use of capacity, shorter length of stay, better operational processes and better management of flows through hospital,’ he  says. ‘But when we achieve that, we need to ensure we take out the capacity behind it that we don’t need.’

Telehealth and telecare could help change pathways. By monitoring vital signs of long-term condition patients, they could help patients better manage their own conditions, in many cases avoiding multiple emergency admissions each year. ‘The evidence is emerging; a lot of it is quite compelling,’ says Mr Flory. ‘But where appropriate we need this to spread more significantly through the system.’

Integration is also widely regarded as a key ingredient. Mr Flory says that from the outset of the QIPP programme there has been a hypothesis that much of the potential for improvement was in the ‘white space’ between different organisations and different sectors. This year’s mandatory post-discharge tariff for integrated acute and community providers (covering rehabilitation for COPD, cardiac, hip and knee replacements) is one example of how the Department is trying to enable organisations to move into this space.

But Mr Flory acknowledges that the bigger challenge remains inter-sector integration, particularly the potential value that could be derived from more joint work with social care.

Mr Flory has already taken up his role as chief executive of the new NHS Trust Development Authority alongside his role as deputy NHS chief executive. But he says one of the other new organisations within the new structure will have a major role to play in the transformation agenda. ‘The NHS Commissioning Board is uniquely placed to drive the QIPP agenda going forward,’ he says. ‘The specification of service standards, contracting for primary care and its support for primary care contracting with secondary care – it will have a real opportunity to make a difference in these areas. It is central to moving all this forward.’

This will extend to the board’s role in currency development and tariff setting, which it will share with sector regulator Monitor. But Mr Flory says there needs to be complete clarity about what the tariff can and can’t do. ‘The tariff is an enabler and can provide some incentives but it can’t lead the change,’ he says. ‘It just enables it to be implemented.’

Although he understands calls for greater experimentation around tariff models – articulated recently by the King’s Fund (see page 6) – Mr Flory underlines the importance of having a clear, rules-based system. ‘We need to strike the right balance,’ he says.

Mr Flory believes finance has a pivotal role in helping the service deliver on the quality and efficiency improvement needed in the coming years. It needs to maintain its track record on good financial performance, delivering a stable platform on which transformation can be built.  It needs to continue to work on clinical engagement to enable a combined effort on improvement. And it needs to sharpen some of its tools – costing being a good example.

‘Good costing data will be vital as we move ahead,’ he says. ‘You can only make good decisions based on good evidence and at times the evidence hasn’t been good enough.’ He recognises that improvements have been made, particularly with the uptake of patient-level costing systems, supported by the Department and in recent years by the HFMA through the clinical costing standards. But he welcomes the faster pace on costing, triggered by the handover of tariff responsibilities to Monitor.

With increased expectations on finance leaders, Mr Flory says, the profession must adopt a self-care approach. Some clinical commissioning group directors may have found themselves in a director role faster than they had anticipated. ‘There are issues about how those people who have been here before provide support, mentorship and guidance to others,’ he says, adding that this would not conflict with ‘doing the right thing for their own organisation’.

‘We need our finance leaders to be confident to be as good as they can be – confident to take on the new roles and to be innovative and creative,’ he says. Success in these areas would only enhance the function’s existing reputation for reliability and delivery.