Feature / Ties that bind

It has been more than 10 years since the NHS embarked on a plan to share financial services. An initial feasibility study suggested savings of up to £180m a year. The plan was grand, based on a single finance system, and the ambitious savings potential was dependent on significant reductions in finance staff and, crucially, the service being used by all NHS bodies.

A different path was taken. While the two original pilots did prove the concept, there was no mandated roll-out across the whole service. Instead a joint venture – NHS Shared Business Services – between the Department of Health and initially Xansa, then Steria, was handed responsibility for taking the service offering to market and persuading individual NHS bodies to sign up.

But that original vision of a single finance system and service looks finally set to be realised – at least across the new NHS commissioning community. In a paper to the NHS Commissioning Board (NCB) in April, the then interim director of finance Paul Taylor announced that a contract had been signed with NHS SBS to provide an ‘integrated single financial environment (ISFE) service’.

This will initially be provided to the Commissioning Board from October 2012 and then to clinical commissioning groups (CCGs) from April 2013. The £15.4m a year cost will be picked up by the NCB.

Key to authorisation

Perhaps the important part of this announcement – apart from the introduction of a completely new acronym into an already crowded market – was that use of the ISFE will be an authorisation requirement for CCGs. ‘If you go back to the original vision, this is effectively just a realisation of that – creating a flexible shared services environment,’ says NHS SBS chief executive John Neilson.

In fact NHS SBS has been successful in attracting customers over the past few years. It now serves 209 discrete customers and some 300 individual contracts across its different service offerings – finance and accounting, payroll, family health services and procurement. And among this number it has some 103 primary care trusts, around 80 of which take its core financial service.

Commissioning coverage

But making the service a condition of authorisation for CCGs will deliver full coverage of the commissioning market, which is seen as providing additional benefits on top of the service benefits SBS already claims for individual customers. 

The NCB paper identified five reasons for procuring a single solution. Key among these were ensuring consistency of approach, enabling the centre to keep an eye on the financial position of the NHS commissioning sector and avoiding a procurement free-for-all (see box below).

Mr Neilson is keen to stress that more than half of PCTs had already chosen the SBS approach and that there has been a steady influx of new customers – even during last year while there was uncertainty over future structures. In addition, there were already plans for more to join this year ahead of the handover to CCGs. 

However, he highlights two aspects of the NCB’s rationale for wanting a single solution for CCGs – consistency and risk avoidance.

‘This is the safest and most effective way to manage the transition from one world to another,’ he says, underlining the NCB’s view that the SBS solution was the only ‘feasible’ option for delivering a common system.

‘You won’t have 230 organisations all trying to go out to market to buy a new finance system or put a new service in place,’ he says. ‘And having a standard chart of accounts on a proven finance system is the best way of ensuring you are consistently providing a high level of financial management and all the discipline that goes with that.’

He adds that the move to CCGs ‘is a substantive change and the accountability for a very large amount of money is passing from one group to another – ensuring discipline and standards are in place is key’.

Future proofing

CCGs won’t have to worry about future proofing their technology or recruiting IT people to support their financial platform. And the common chart of accounts should allow for simpler consolidation, standardised reporting and benchmarking.

SBS customers routinely receive a dashboard showing performance against agreed key performance indicators, covering the whole customer base and comparable peers. The dashboards for CCGs will be developed in conjunction with CCGs and the Commissioning Board. In fact, Mr Neilson says the new start for CCGs provides a ‘unique opportunity’ to deliver a bespoke service that meets CCG needs.

Mr Taylor’s paper to the Commissioning Board did acknowledge downsides to the arrangement. In particular he recognised there could be both concerns over the lack of ‘competitive tension in the procurement process’ and a reaction from CCGs in not being able to make their own choice.

There has been some muted response to the deal in the GP press, the chief concern appearing to be over SBS’s use of offshore facilities in India to deliver part of the non-customer facing service. But Mr Neilson points to internal user satisfaction survey findings to demonstrate service quality.

Improved ratings

While user satisfaction was struggling below 40% in 2007, more recent  figures suggest 95% of users would recommend the service and 91% believe it adds value.

Clearly NHS SBS’s gain is a loss for other providers of financial services, although those spoken to by Healthcare Finance continue to see a significant role for themselves and others both outside of the specific finance service covered by the ISFE and more generally for the bigger acute, mental health and community service provider market (see box below).

Mr Neilson acknowledges that NHS SBS faces a challenge in meeting next April’s deadline. ‘We will have to ramp up our resources,’ he says.

 He anticipates that an extra 100 jobs will be created to support the ongoing service and more staff will be needed to support the initial implementation. Over time he expects roles at all levels to be created – even the most senior. He hopes to draw staff from the existing pool of NHS finance, some of whom will be at risk from the ongoing reorganisation.

‘The skills and knowledge people have in the NHS are exactly what we need to further develop the business,’ he says.

In particular he believes there will be roles to help SBS build on the established standardised way of working to develop the service in terms of management reporting in the way finance managers understand procurement.
 

Other sectors

But while the ISFE deal is a significant coup for SBS it will not be transformational for the service provider. It will take its commissioning income up by about a third and lead to an overall revenue increase of about 10%. But, as those numbers suggest, the provider side of the business remains vitally important.

 It has some 65 trusts (including about 40 foundation trusts) on its books, alongside its 103 PCTs and 41 other bodies. And Mr Neilson suggests the work for CCGs won’t distract from looking to develop the service and expand the business for providers.

While he claims SBS can add value across finance, payroll and procurement, he uses the procurement service to illustrate his case. He says SBS’s procurement service, which is built on the North West Collaborative Commercial Agency acquired by SBS at the end of 2010, looks to transform how goods are procured, rather than just focusing on contract price.

‘The starting point is the data and financial analysis we have of what happens in organisations,’ he says. ‘We can put in the basic systems – for example, to drive up the number of purchase orders in organisations. Typically across the NHS in our experience this is around 30% or, if you are lucky, 40%. Of these, only a third might be intelligible.’

He continues: ‘There are basic disciplines around the completion of purchase orders and the standard information you include. If you get that right at the beginning, it can suddenly give you some high-quality procurement data.

‘The starting point is compliance. The NHS has put great effort into creating framework contracts and then people don’t use them. Rather than squeezing a few pennies out of suppliers, there are bigger savings to be had if people started using the contracts that are already in place and rationalised products and suppliers.’

Savings issue

Back to the CCG deal, it is difficult to identify direct savings for the NHS. After all, CCGs don’t exist yet. However, the deal was scrutinised and approved by the Cabinet Office (as a result of which the contract price was reduced by £1.8m). But the numbers around savings have always been complicated despite a seemingly straightforward face-value offer of at least a 20% saving on new customers’ costs.

 The £180m a year savings talked about back in the 2001 feasibility study – alongside separate figures of £300m a year from a national e-commerce system – reflected a different vision and were perhaps somewhat speculative. They are certainly a distant memory. However, SBS says it is on course to the deliver target savings of £224m by 2014 – the objective set for the joint venture at its outset back in 2005.

As part of these benefits, NHS customers of SBS have collectively enjoyed profit shares for the past two years of more than £1m. A similar further  payment is widely anticipated this year. In fact Mr Nielson says the ‘movement into the procurement space will deliver significantly greater savings for the NHS, which means we expect to substantially exceed the original target’.

But SBS has said before that the wider benefits of signing up for all types of organisation (such as greater control, better management data and benchmarking opportunities) are greater than the direct reductions compared with previous costs. And again Mr Neilson asserts this is the case for CCGs and the new Commissioning Board deal.

‘There is a cost benefit,’ he says. ‘The Commissioning Board has got a good deal but the real benefit is the fact that the financial infrastructure will exist for the CCGs to come into existence on 1 April 2013. And that added value probably far outweighs any financial saving.’