News / Temporary fix

There are increasing signs that price caps and controls aimed at curbing agency staff costs are starting to have the desired impact. But continued pressure is needed, particularly with medical staff. Steve Brown reports

The NHS has saved more than £600m in just one year as the result of measures to curb spending on agency staff, according to NHS Improvement. But before anyone gets too self-congratulatory, agency spending is still a problem, and the oversight body is introducing a further series of measures to clamp down on expensive temporary staff.

Let’s recap the problem. In 2014/15, NHS providers spent £3.3bn on contract and agency staff – 31% more than the previous year. For foundation trusts (subject to separate reporting at the time), this compared with plans for a 44% cut in these costs. Again for FTs, agency costs were 6.4% of total staff costs, up from 5.2% in 2013/14.

Jump forward another year to the end of 2015/16 and a similar picture of rising costs can be seen. Total agency spending across all providers was £3.6bn – now accounting for 7.5% of trusts’ and FTs’ collective total pay costs. This was again above plan – by £1.4bn and despite an intention to cut agency costs. In 2015/16, the first agency controls were also introduced.

These included an initial ceiling on overall agency nurse spending for each provider, and requirements to use only approved frameworks to source agency staff, followed by caps on the actual hourly rates paid by providers to agencies.

Phased cap

The capped rates for medical staff were lowered in three steps and from the beginning of April this year, the spending ceiling was extended to cover all agency staff, not just nurses. There are now also wage caps setting the maximum amount an agency worker can be paid per hour by an agency.

Back in April, NHS Improvement declared itself happy with the progress – saving £290m from October to February compared with expected spending. It has now given an update on the impact of the agency controls a full year after they were introduced – putting the updated savings figure at £600m.

‘The progress we have made in a single year is really promising and trusts have responded well to the caps,' said Jim Mackey (right), NHS Improvement chief executive. ‘They’ve worked hard to cut these bills and, in many cases, improved the way they manage their workforce. But there’s much more to be done, especially to reduce how much
trusts pay for medical agency staff
and bringing staff back into the NHS.’

More on the additional measures soon, but let’s stick with the figures. The £600m reduction is compared with what would have been spent if the controls had not been introduced in October 2015 (based on previous trends). The Q1 figures published by NHS Improvement at the end of August actually showed a £10m underspend on the total paybill – although a £72m overspend against plan on agency staff was masked by an £82m underspend on permanent staff. More encouragingly the Q1 agency spending was just 6.1% of the total pay bill – back to just below the 2014/15 full-year proportion – and £100m down on the same quarter in 2015/16.

Backing up the impact of the controls, NHS Improvement said that sample data showed an 18% reduction in nursing agency prices and 13% cuts in medical agency staff prices since October 2015. And monthly agency spending figures do appear to show that reductions have been maintained. Average monthly spend in the first five months of 2016/17 of £254m compares with an average of £304m in the first five months of 2015/16. And the August 2016 spend of £252m was 19.5% less than the same month last year.

‘The vast majority of trusts – 73% - have reduced their agency spend since the same time last year,’ NHS Improvement economics director Chris Mullin (above ,right) told Healthcare Finance. ‘Agency spend is at about 20% below the equivalent month last year and over half those trusts have reduced spend by more than a quarter.’

Compared with agency spend growth in recent years of 25%-30%, he said this was ‘quite a turnaround’.

However, NHS Improvement sees significant potential for further reductions. It has been monitoring price cap overrides, which continue in their tens of thousands each week. The most recent figures show some 47,000 cap overrides
in the last week of August. At this level, a reduction in the rate paid for each shift above cap of just £1 would save £19.5m across a full year. A staggering £51m could be saved just by reducing the medical and dental shifts above cap by £5 per hour.

There is still an issue about reducing the overall reliance on temporary staff. For example, the Royal College of Midwives said last month that the more than £72m spent in 2015 on agency, overtime and bank midwives could have employed 3,318 midwives – effectively solving the current midwife shortage in England, estimated by the college to be 3,500 midwives.

Improving use of bank staff should also reduce overall costs. A special report from NHS Professionals in June identified a range of options, including never cancelling a bank shift – certainly not in favour of agency staff. And it may seem counterintuitive, but increasing bank pay rates – closing the gap with agency rates – can increase bank-filled shifts and reduce overall temporary staff spend.,

Bringing staff back into the NHS and better use of bank staff are also on NHS Improvement’s agenda, but its main focus at the moment is reducing the costs of agency staff when the NHS does need to use them.

Medical locums costs – a third of the overall agency bill – are the biggest concern. While there are similar numbers of nursing and medical cap overrides (each making up just under 20,000 of the 47,000 total), the number of nursing overrides has been falling throughout this year. In contrast, the overall trend for medical and dental is rising. Mr Mullin said that some of this increase is a result of better data and reporting.

‘When we started this process, a number of trusts didn’t know what they spent on medical locums or how many times they were overriding the cap,’ said Mr Mullin. Nursing directors ‘got a grip relatively quickly’ with overrides falling and, where they are exceeding the cap, they are only doing so by a small amount. He believes the better data is a sign that medical directors are also improving their grip.

Liaison, which provides a workforce management system and service to NHS providers, has been monitoring use of medical locums closely for the past year, publishing a series of Taking the temperature reports. Drawing on data from 58 trusts, it highlights a significant increase in the hours booked by its sample in 2015/16 (2.3 million) compared with 2014/15 (around 1.5 million). There were spikes – an increase of 435% for ST2s, 69% for consultants and 162% for staff grade – and associated costs rose from £100m to £160m.

Reducing costs

While pay rates increased across all grades of staff in 2015/16 compared with 2014/15, the rate caps introduced during the year did have an impact – with a 1.5% drop in overall average pay rates between Q3 and Q4. This continued into the new financial year, according to the latest Taking the temperature report. ‘Overall average pay rates fell from £62.64 in Q4 to £62.49 in Q1, while average commission fell by 1.6% to £6.86,’ the report said – the third consecutive quarter in which rates have fallen.

It also shows a 5% fall in core hours pay rates between January and June for consultants and ST3 grades. But it exposes the clear potential for significant further savings – making NHS Improvement’s talk of £5 rate reductions not seem that ridiculous.

Across the sample, the average rate paid for an ST3 was £58.80 compared with the average national framework rate of £41.08 – but the highest rate paid was £105 an hour. For a consultant, the average rate paid was £91.68, compared with a framework rate of £60.67 and a highest rate of £147 an hour.

Mr Mullin identifies a range of reasons for continued problems with medical rates – shortages in particular specialties, market conditions, individual doctors determined to keep rates high and a few agencies that are ‘still out to make a lot of money out of the NHS’.

To encourage trusts to focus even more on this issue, NHS Improvement plans to publish league tables of agency spend on best and worst performing trusts. It is also collecting anonymised information on the 20 highest earning agency staff in each trust and on long-standing agency staff. Providers will also have to tell NHS Improvement about any shifts that cost over £120 an hour. Interim senior managers who charge more than £750 per day will also be subject to an approval process.

The further ‘clampdown’ is not because the original controls are not working, but because ‘we want to give trusts as much support as possible’, according to the oversight body. Mr Mullin insists what the measures have done to date is to ‘give negotiating strength to trusts and empower finance departments and human resource departments to take on agencies’.

‘Controls also sharpen the level of management focus on finances and agency spend – that has been a big factor behind the improvement we’ve seen, not only the price cap per se,’ he said.

The hope is that with greater transparency of data and spend levels, providers will collectively be better able to hold the line against unreasonable rate demands from temporary staff and agencies.