interviews

Carter review: where to find £5bn more savings a year

Lord Carter of Coles, chair of the NHS Procurement Development Delivery Board, discusses how he aims to help improve NHS provider productivity after releasing his interim report.

Following the release of the interim Carter Review into NHS provider operational productivity, there was widespread support for most of its recommendations – which were widely seen as helpful, if not necessarily groundbreaking.

During an interview with Lord Carter of Coles at the Treasury, NHE asked the Labour peer for his thoughts on this. “I think that is true,” he said. “What it does propose, though, is a methodology to let managers and boards rank their performance. That is the key difference.”

Lord Carter said that time and again, he had seen trusts misjudge their own performance levels. Carter said people from trusts his team had worked with and whose data they had analysed would say things like “we didn’t know we weren’t much good at this,” or “until you showed us this we didn’t realise how good we were at that.”

Trust barometer

In his interim report, Lord Carter’s first recommendation “at this point” is for the NHS to adopt and use the Adjusted Treatment Index (ATI) developed with the cohort of 22 hospitals he has been working with.

He believes the ATI can serve as a barometer by which hospitals can compare themselves with their peers, taking account of complexity of care provided, and more importantly be a baseline for future improvement.

The calculation of the headline ATI metric requires two steps. Firstly, the volume of each type of treatment delivered by each hospital is weighted by the average cost across all hospitals of each type of treatment. The total of each weighted treatment volume for each hospital represents the cost-weighted output of that hospital. Secondly, the actual costs the hospital incurred in producing their cost-weighted output is divided by the cost-weighted output. This generates an ATI, to enable comparison between hospitals.

Generating the ATI from nationally available data, such as operating expenditure in hospitals’ accounts, has revealed variances between hospitals.

Lord Carter told us: “My job is to get a set of metrics and then share what is excellent practice in parts of the NHS with those where it isn’t so good, and encourage them to get better.”

Over the coming months Lord Carter and his team will continue to work with the 22 cohort hospitals to identify more saving and begin the delivery of savings already found. He will also add a further 10 hospitals to the cohort, which have been identified, but remain undisclosed.

‘Model Hospital’

Everyone in the health sector knows that the Carter Review estimates that £5bn a year could be saved by 2019-20. Of this, up to £2bn could be found by improving workflow and containing workforce costs, and a further £3bn of savings could be delivered through improved hospital pharmacy and medicines optimisation, plus better estates and procurement management (£1bn from each).

Carter says a ‘Model NHS Hospital’ can show how good clinical practice, workforce management and careful spending lead to measurable efficiency improvements whilst retaining or improving quality.

This is not a new concept, but coupled with the ATI metric, Lord Carter believes “we can bring it to life”. NHE was told “one of the next things we’ll do is publish the Model NHS Hospital, which is a very important thing for us”.

Lord Carter said: “If you think about a hospital, what is it? It is a series of departments. In simple terms you have A&E, specialities, wards and admin. If you take A&E, most people have a good sense of what the staffing in A&E departments look like and how many cases.”

The Model Hospital idea gives chief executives and boards a clear set of standards and benchmarks to hit – or explain why they aren’t.

He added that a lot of people since Mid-Staffs have felt vulnerable to inadequate staffing and, in some places, there has been a reaction where people have put on more staff unnecessarily.

Lord Carter explained that people in some areas are starting to practice ‘defensive nursing’ in quantity terms. “So, some people are taking agency [staff resources] when they don’t need it,” he said. “We’ve data to show that. One hospital in our cohort re-did all its policies around rotas and moved from a shortage of nurses to having 27 too many. There is an argument that says if you use your resources really well you shouldn’t need institutionalised agency. Plus, one of our hospitals let everybody go off on half-term; they didn’t have a roster policy saying ‘you can’t go’.”

Lord Carter’s review revealed that in 2013-14, the cost of nurses in the NHS was £19bn. And with the increased focus on safer staffing and a 29% increase in the rate of nurses leaving the profession in the last two years, the dependency on agency nurses has risen significantly, doubling between 2012 and 2014.

Electronic catalogue

Another key recommendation of the report was creating a “tightly controlled” single NHS electronic catalogue for products bought by hospitals.

NHE asked how work was progressing with the catalogue, and whether there would be preferred providers. Lord Carter said: “I think that is undecided yet. The question I’m asking is: how do you aggregate enough demand to trade, price and volume? And there are different ways.

“If there is a national catalogue (and, above all, a national specification) it means manufacturers have to respond to our needs not us to theirs. If you’ve ever dealt with manufacturers you’ll know they have very sophisticated re-coding tricks.

“We have [NHS] Supply Chain and the contract is being renegotiated. Supply Chain was a giant catalogue as opposed to a demand aggregator. We are now trying to move that to a demand aggregator to get lower prices and focus on that. We’ll see how that plays out. On the one hand you could argue that a lot of people rely on Supply Chain, but it needs to get better prices.”

NHS Supply Chain welcomed the findings of Lord Carter’s report, and said it is working with him and his team to achieve further savings. A spokesperson said: “We have achieved over £81m cash-releasing savings of our £150m target by working closely with our customers and suppliers. We are on track to deliver the £150m target by the end of March 2016.”

Lord Carter, who chairs the NHS Procurement Development Delivery Board, added that his team are very keen to establish the efficacy of devices at any given price.

“For instance, how do we make sure people are using the right model, not the latest model? These are very different,” he said. “They have significant price connotations and we’ve seen that in anaesthesia.”

His interim report revealed that there is a large variation in the cost of inhaled anaesthetic gases. It was suggested that by ensuring longer-acting gases are used for inpatients and shorter acting gases are reserved for day-patient and more complex cases, early findings suggest that the cohort of 22 providers working with his team may make a combined saving of as much as £1m annually.

NHE was told that another area where improvements can be made is in inventory management. “We can track purchase orders and track invoices, but unless you track stock you don’t know what the usage has been,” said Lord Carter.

“And that has been a really difficult thing to ascertain because we suspect various hospitals use much more of certain supplies because they haven’t got a good materials management system. We haven’t been able to get the answer to that so we are pressing hospitals on better materials management systems in the hospital.

“This is because if you don’t have stock control it leaks. Historically, we have had so much focus on buying – ‘can we buy these gloves tuppence cheaper’ – the fact our control systems in the back don’t stop people using twice as many has been absolutely hopeless.”

Discussing how this can be improved, Lord Carter said: “We need to barcode everything. We just have to get there.”

He added that electronic invoicing should become the norm, and from his point of view the NHS often knows what to do to improve procurement and productivity “we just do it very slowly”. Although Lord Carter said there is still a long way to go in terms of delivering savings, he is confident that they will be delivered.