Feature / A system shared

In terms of numbers at least, where shared services are concerned the NHS provider sector jury remains out. While some trusts have taken the opportunity to outsource elements of finance services, payroll, pensions, IT, procurement and estates, others either haven’t got round to it or are unconvinced. This is despite some shared services providers claiming savings of at least 20% and numerous appeals from the Department of Health and satellite organisations during the past decade.

The primary care sector has taken steps to introduce shared services, from commissioning support units to the contract for primary care support services recently awarded to Capita (see box overleaf). 

In addition, the clinical commissioning groups involved in the Greater Manchester devolution have set up a shared services provider, hosted by Oldham Clinical Commissioning Group. This followed NHS England’s rejection of the North West Commissioning Support Unit’s bid to be on the lead provider framework for support services. Oldham CCG is now responsible for the CSU staff supporting the Greater Manchester CCGs, though they are still employed by the NHS Business Services Authority.

Yet some suppliers believe the trust market is picking up. NHS Shared Business Services (SBS) managing director David Morris says there is a hunger for savings in back office and business support functions, driven by the forward view projection of £22bn of savings needed in England over the next five years. ‘There are still a lot of organisations where the finance, IT and payroll are in-house, so there is a lot of potential for shared services to provide savings that can be put back into frontline care,’ he says.

Graham Gornall, managing director of ELFS, a hosted shared service provider, says the marketplace is developing. ‘It doesn’t feel mature, particularly in financial shared services. Our analysis informs us that around 33% of trusts are using some form of financial shared services. However, with regard to payroll it is very difficult to quantify as it is often the case that a number of trusts and CCGs share payroll across their local area rather than outsourcing the service to a national provider.’

However, the financial environment and the rule changes last year that mean trusts needing financial support may be required to introduce shared services has given some impetus to the push for shared services.

Mr Gornall says ELFS has seen a lot of activity in the past 12 months. The shared services provider has gone live with three new clients for a mix of payroll and finance services taking its total number to 24. ELFS is currently working with two new clients to implement its services – Greater Manchester West Mental Health NHS Foundation Trust (payroll) and Birmingham Community Healthcare NHS Trust (finance). Both are switching to ELFS from their current outsourcing arrangements.

If the financial shared services market is immature, the opposite could be said of the relationship between East Lancashire Hospitals NHS Trust and ELFS, its financial shared services provider. The trust was one of the founding members of the hosted shared services provider, launched in 2002.

Michelle Brown, the East Lancashire trust deputy director of finance, says that aside from reduced costs, there are also benefits to be gained through collaboration with ELFS and its other clients. ‘There is improved access to technology – as a trust on its own, we would not be able to have this,’ she says.

‘Also the staff needed to provide the services are quite scarce and I don’t think we have the capacity to have these staff in every organisation right across the NHS.’

She adds that having experienced shared services staff with NHS backgrounds is a key benefit. As in many trusts, East Lancashire is trying to reduce its agency spending by asking staff to move to its own bank. But, in discussions with staff, it discovered that they didn’t want to join the bank because they would not be paid each week. Agencies pay on a weekly basis, but it could take weeks to be paid for a bank shift.

The NHS payroll system is provided nationally, with the service paying staff on a monthly basis through the payroll module of the electronic staff record (ESR). A local solution was needed.

‘We worked closely with ELFS to change our bank payments to weekly. It was introduced in April and it works because it has helped improve our take-up rate of bank workers,’ Ms Brown says.

But they believe the local changes are a temporary fix. IBM has recently taken over the contract to provide the ESR. ELFS payroll has worked closely with the North West ESR special interest group to request an enhancement to the national system, which if accepted will streamline the process further.

There are added benefits – staff previously at the trust are now at ELFS and in the intervening years have increased their knowledge and skills. ‘This is as a result of getting exposure to the work of other trusts and we have benefited from that,’ says Ms Brown. ‘On the move to weekly pay for bank staff, for example, when we called them to say what we wanted to do, they used their skills to make it happen.’

So how does shared services make savings? It should be noted that some finance staff believe the savings are marginal and the loss of control too great to justify outsourcing.

But Mr Morris says SBS – a joint venture between the Department of Health and Sopra Steria – has been operating for 10 years and in that decade has delivered £350m of savings back to the service. Most of the £350m has been found through efficiencies, which has included redundancies, typically taking 20% to 30% out of the previous in-house team costs.

He says SBS now wants to deliver a total of £1bn by 2020, another £650m. It’s a huge leap, but while he sees scope for savings in transactional services, Mr Morris believes analysing and acting on the data that flows through its systems could find much of the additional efficiencies.

This includes analysis of the £96bn of spend through the integrated single financial environment for commissioners. ‘I can see big savings coming through greater control and having more transparency in the data,’ he says.

Analytic progress

One of the first signs of this new approach is a dashboard and analytic capability being developed in partnership with Wrightington, Wigan and Leigh NHS Foundation Trust. This will give organisations greater detail of how it manages its finances and spending.

‘Take procurement as an example. If there is £12bn of influenceable procurement spend and you can put in some processes and constraints around that to save 5%, that would be £600m on procurement alone and just by having the right controls,’ says Mr Morris.

The dashboard it is developing could inform this by indicating usage of supplies. ‘It’s not just about whether you are buying at the right price, but whether you need to buy it at all at that time. So it’s about demand as well.’

ELFS says that while some clients may focus on savings in the initial delivery of the service, a move to shared services tends to be accompanied by access to new technology. ‘Improving trusts’ reporting capabilities can in turn give the client greater information on which to base decisions. This will enable clients to focus more of their time on decision support and managing departmental budgets better. Also, there is greater transparency in terms of raising awareness through the shared service KPI analytics provided, which can help clients lower their costs and improve operational efficiencies locally,’ Mr Gornall says.

‘They can also have an expectation of greater efficiency, continuous improvement and a lowering of audit costs. This will mean they can focus more on decision support and managing their budget better.’

Capita believes it can improve on the traditional model of shared services. Neil Griffiths, its market director for health, says trusts are looking for much greater savings than those delivered by outsourcing elements of their finance functions.

‘They need to focus on areas where they can generate more significant savings and I’m not sure the savings you can get in financial shared services would make a significant dent,’ he says. ‘However, if you look at shared services more broadly the savings could be increased.’

In traditional shared services, elements of finance, IT and human resources are outsourced to a provider that’s also performing those functions for several other organisations. Savings come from more advanced technology and fewer people providing the services.

However, Mr Griffiths argues that outsourcing financial and other functions, such as HR, IT and estates, across a single trust as shared services is a better model for the provider sector. ‘The issue with [traditional] shared services is you have to get absolutely standardised services to maximise the savings. If you want a bespoke service, savings are smaller as you can’t get economies of scale.’

Its model means the client trust can have bespoke services, but also release significant savings, he says. Capita serves two trusts with this model, including Central London Community Healthcare NHS Trust. Earlier this year the trust selected Capita as preferred bidder for its corporate services, such as IT, payroll and recruitment, estates and facilities management. These will be followed by finance services.

Not one shared services provider or client approached by Healthcare Finance pretended a move to shared services was easy. ‘There is a challenge getting organisations to understand the changing roles when you move to shared services,’ says Mr Gornall. ‘It’s critical for us to manage the relationships, ensure there is good communication and service in place from the start. Establishing clarity regarding the joint responsibilities of the service level agreement and to promote an understanding of the changing nature of the service delivery model is key.’

A shared services client must think differently, taking a step back while also keeping control of governance arrangements and processes, Ms Brown says. ‘There’s a lot of planning to understand how you are going to manage someone else delivering a process, but there’s also an opportunity to review systems and processes before they go to shared services.’

Mr Gornall says that trusts must commit resources and boards must be fully behind the move to shared services. He adds that the scale of a project to move to shared services should not be underestimated. ‘The cost savings sometimes equate to finance staff redundancies. It’s a critical element of where the initial savings can be made, but it is important to remember this and ensure the TUPE arrangements are handled sensitively.’

Mr Morris says a provider and its client must work in partnership. ‘For me, it’s about track record,’ he says. ‘If you are moving to a shared services provider, have they got a track record of delivery, particularly in the NHS? If the provider doesn’t understand the NHS, it could be a complete mismatch.’

Given the pressure on NHS budgets over recent years, one might expect trusts to have rushed to shared services. Although there has been movement, if Mr Gornall’s estimates are correct and more than 60% of trusts still have no shared financial services arrangements, the change has been gradual. The continuing squeeze on overheads to release funds for the frontline, however, means suppliers will be impressing on these 60% that not only can they save money, but also add value.