Health Service Focus


Get ready to do it all over again

Source: NHE Jul/Aug 2017

NHE hears from Jim Mackey and Lord Carter of Coles about the ongoing efficiency challenge.

At Confed17, Jim Mackey and Simon Stevens both commended the health sector for its efforts in the past 12 months to break even financially in 2016-17. The provider sector finished the year with a deficit of £791m, but this was covered with commissioning underspends, which included an £800m risk reserve to balance the anticipated provider deficit. 

But before anyone could finish patting themselves on the back, they were promptly reminded that the NHS needs to “do it all over again” in 2017-18, and this includes further efficiencies, service redesign and taking part in initiatives like the Model Hospital and NHS RightCare.

“There has been a fantastic effort across the NHS. We managed to break even overall,” noted Mackey. “The provider system ended that £735m pre-audit in deficit, but two providers chose to defer two transactions into this financial year taking us to £791m. It is a fantastic achievement, given where people were at the end of Q3. 

“Providers delivered a cost-reduction that in virtually every system in the world is impossible. I don’t think anyone could reasonably expect any system to deliver this level of efficiency for so long, but you’ve managed to do it. Sadly, we’ve got to do it again. Overall, 91% of providers earned STF during the year, and 74% of providers managed to hit or exceed their control total.” 

He also revealed that the NHS Improvement (NHSI) will shortly publish details of financial plans, but stated that this would not be another ‘financial reset’. 

Responding to this, Chris Hopson, CEO of NHS Providers, stated that while a year-end figure of -£791m exceeds the -£580m target set by national bodies, it is substantially better than the £2.45bn deficit in 2015-16, and is a significant improvement on the third quarter forecast issued in February, which stood at -£886m. 

“This reflects a huge amount of hard work to control costs, increase productivity and improve efficiency whilst continuing to provide outstanding patient care with record levels of demand. The £700m of savings in agency staff costs is particularly notable, and is a credit to the great progress trusts have made in addressing this priority,” he said 

But the figures need to be kept in context. “NHS England funding in 2016-17 rose by 3.6% but this year that drops to 1.3%,” explained Hospon. “Two-thirds of trusts told us at quarter three that they were very or fairly reliant on one-off non-recurrent savings to meet their year-end figures. That is not sustainable.” 

Earned autonomy, CEP and change in approach 

During his final speech at Confed17 as CEO of NHSI, Mackey discussed the need to usher in a shift towards “earned autonomy” and “distributed leadership”. However, this would not take the form of earned autonomy in the old FT way but instead apply increasingly to systems of health. This was a move welcomed by Hopson, who said that trusts are ready to talk to the regulator about this. 

The change of direction also comes at a time when NHSI needs to go into a slightly different phase. “We can’t lose a grip of the money and performance, but you will see quality, hopefully, being more centre stage to our priorities,” said Mackey. 

“Obviously, there will be a lot more joined-up working with NHS England and the CQC,” he noted. “We need to be more pragmatic around transactions, and be clearer about the rules. We also need to be clearer about what support we can offer to systems, recognising that you have to deliver them.”

Mackey went on to discuss the capped expenditure process (CEP), a new regulatory intervention designed to radically and rapidly cut spending in geographical areas with the largest budget deficits, where leaders had been asked to ‘think the unthinkable’, as remaining within these new spending limits required difficult decisions over the level of care that can be provided to local patients. 

The CEP differs to existing financial controls in its focus on healthcare systems, including both commissioners and providers of healthcare, rather than individual trusts or CCGs. 

“First of all, I think everyone would understand that if a lot of the country has moved back into balance, it is very difficult to justify that parts of the country are seriously out of balance,” said Mackey. “We have to try and close the gap where necessary, and often that requires very difficult decisions.

“The CEP was an attempt to do that with people in a local system. I think that a lot of the concern hasn’t been about what, it has been about how. And about how the process has been conducted. There have been examples of perceived bad behaviour, or actual bad behaviour, and style not being how people would like to see it carried out.” 

Sustaining efficiencies 

Speaking a couple of weeks later at the Health+Care Show, Lord Carter of Coles, a non-executive director at NHSI who led the recent review into productivity in acute hospitals, stated that part of the challenge in delivering long-lasting change is “getting people to understand and accept the data”. 

“People always reject the data immediately because it doesn’t suit them,” he said. “But often the case is we can work our way through it and, gradually, unwanted variations can be sorted out. We’re beginning slowly to see it, this isn’t a rocket going up into the sky; this is a trajectory, and it is about taking people with us and making sure it happens.” 

Not wanting to focus just on clinical variations and productivity, he highlighted two areas that are receiving a lot of interest with regards to efficiency: pathology and back office. 

“It’s not to say it isn’t hard to drive change in those areas, but we have seen it,” said Lord Carter, adding that in areas like Frimley and Reading there have been enormous efficiency savings delivered. 

“This is about boots on the ground doing things, not about some strategic call on an STP. It’s about people getting out there, working with colleagues, integrating and taking the cost down,” he explained.

Lord Carter, who is also leading a productivity review into mental health, community and ambulance trusts, added that while acute services are looking to make savings in their areas there is also scope to reduce unwarranted variations in other settings. 

“We’re going to be publishing some information on that,” he said, reflecting that there may need to be a greater education of the local population with regards to the cost of some community services. 

“Up and down the country we have small community hospitals which are popular in the communities they serve,” noted Lord Carter. “But sometimes we should point out to those communities that a bed can cost up to £210,000 a year, and ask is that money well spent?

“How do we educate our populations to actually make the right choices? I find it rather strange that people are prepared to drive 60 miles to an Ikea to get their table leg fixed, but they aren’t prepared to go 30 miles to get their own leg fixed. We do have a problem, of actually what we might reasonably expect from our populations if we are to get first-class healthcare.” 

Discussing the Model Hospital and the productivity programme, the the Labour Peer said the regulator is  going to continue to push information out into the system to make sure that people know it’s happening and that the programme is beginning to work. 

“The danger will be, we won’t get it sustained, it will become a one-off and we’ll run off and do something else. We have to actually push over that, we have to make sure pathology consolidation occurs. And it’s difficult, hospitals do not want to give up their labs, they see it as the first move into consolidation and their services being removed,” he explained. “And the pressure we’ll face all the time is, when do we ask and when do we tell? And that’s the thing we’re going to need guidance on. Because sometimes the greater good requires people to give things up, which instinctively they would not do unless there was some pressure applied. A very, very difficult task for NHSI and NHS England going forward.


“What you want to hear from people like us is how we’re going to fix it, and that’s what we’re determined to do. I don’t want to come back next year and say, ‘we haven’t made any progress’. And it is incumbent upon NHSI to actually provide that guidance and make sure that things are there to help. 

“What’s critical for us is to demonstrate that we’re there, we’re going to support you, and it goes forward. Efficiency is an everyday thing, and what you see, as I said in the past, is that these things can be episodic; we get excited, then we move onto the next thing. If there’s one great thing that will come out of this, we just have to make the pursuit of this excellence, both in quality as we’re seeing but also in operational efficiency, an everyday thing, it’s not a one-time effort.” 

He argued that NHSI, which is going through leadership change, will need to continue the excellent work Mackey has done. 

“I think it’s critical that the work with NHS England strengthens,” he said, but added that the important issue is how to focus those resources in NHSI in helping people, getting the information into people’s hands, and then having quite robust discussions sometimes about the choices. 

“These aren’t going to be easy, but you could argue, and I think I would, that if you look forward into the next 120 weeks, you can make significant progress” explained Lord Carter. “We’ve got to strike the balance between the continual improvement that we need and actually living the reality of everyday life in a very stretched system. I think people have done incredibly well. If I had said to providers five years ago ‘you’ll be taking £3bn a year out’, I’d be laughed out of the room. You have done it, people have risen to the challenge. As ever we’d like a little more, but this isn’t something we can’t do, because we’ve already done it.”



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