interviews

How to achieve a financial turnaround

Stephen Eames, chief executive at Mid Yorkshire Hospitals NHS Trust, explains how a major programme of change and using a consultancy has helped deal with one of the largest NHS budget deficits in just two years.

In the last edition of NHE, we reported that Mid Yorkshire Hospital NHS Trust and consultancy EY won the Performance Improvement in the Public Sector award from the Management Consultancies Association (MCA).

The judges praised the trust for cutting “one of the largest NHS budget deficits in history” while improving outcomes and patient access, and called the turnaround – achieved in just two years – “quite remarkable”.

NHE wanted to find out more and spoke to the trust’s chief executive, Stephen Eames, and Michael Allen, the EY director for the project.

Before the consultancy’s services were engaged, the trust’s board was reporting that it was going to break even in 2011-12. But the new finance director, Robert Chadwick, wasn’t convinced and appointed EY, on an initial six-week consultancy from March 2011, to uncover the trust’s true financial position.

Gigantic deficit

It was soon revealed that there was a structural financial deficit in excess of £37m –proportionately, one of the largest seen in the NHS.

Stephen Eames, who is now the trust’s chief executive, was brought in as interim CEO from March 2012 to lead the organisation out of trouble. He had been the chief executive of County Durham and Darlington NHS Foundation Trust.

In May 2012, the Department of Health, via then-director of provider delivery Matthew Kershaw, wrote to the trust to say that concerns were being escalated because of the underlying financial deficit of £37.6m; the need for year-on-year financial support in the current configuration; significant efficiency and productivity challenges and opportunities; concerns over achievability, granularity and delivery of the future Cost Improvement Programme (CIP); under-use of PFI capacity; and the need to establish a clinically and financially sustainable future strategy.

The 2011-12 outturn was a £19.7m deficit, achieved via non-recurrent financial support of £21m. The trust’s PFI project was based on underlying assumptions of a 20% cut in the workforce, which was not realised, the DH said.

All the trust’s non-executive directors stepped down in July 2012, feeling “unable to remain in office” because of the financial situation, and had to be replaced.

Initial work

Michael Allen, the EY director for the project, said: “Stephen Eames was initially given 100 days to advise whether the trust could be sustainable in the future. Our role initially was to support him in making this assessment. Since then, we have helped the trust implement many of the changes necessary.”

EY worked with the trust to identify very short-term changes to stabilise the organisation, including sound governance and reporting, and reducing the trust’s expenditure.

Allen added: “I wouldn’t say the changes were easy to implement, they involved stopping people from spending money which they were spending freely, tightening up controls and really scrutinising and challenging every penny spent in the organisation.

“So it was definitely not easy, but there are measures that organisations in that type of situation can take without any impact on safety, quality or access to reduce the amount of spending in the short term.”

Two years on

Two years on from the initial EY report and after undertaking a major financial turnaround project, the trust has started delivering recurrent savings of more than £50m (since April 2012), and is on course to eliminate its deficit entirely.

Speaking about the journey, Stephen Eames told NHE: “Whilst there has been a significant focus on finance, there have been three important things to concentrate on in order to get an organisation of this size and complexity to be in a position of clinical and financial stability: getting the money right (which is where we started); making sure there is a consistency in quality hitting national standards, such as waiting times or infection control rates; and then productivity – in other words, maximising the capacity in clinical teams by doing more with less.

“It is the interaction between these things that get you to clinical and financial sustainability.”

As well as making financial improvements, the trust’s mortality rate has dropped 21 percentage points, long-term care has improved, and plans are in place to provide better care for women in and after pregnancy. Waiting times have also significantly reduced, with 99.2% of patients being seen, assessed or either discharged or admitted within four hours in A&E – one of the best across the 144 NHS trusts and A&E units in England.

Big changes

A major reconfiguration and centralisation of services finally got the go-ahead from health secretary Jeremy Hunt in March 2014, after a long and difficult consultation and scrutiny process, and following advice from the Independent Reconfiguration Panel. Full details about the changes to services are available at www.meetingthechallenge.co.uk

The trust explains: “It is no secret that our local acute trust, in particular, is facing major financial challenges. It is inevitable, therefore, that some people may think that the proposed changes are first and foremost about saving money. However, we can give an absolute assurance that this is not the case. The over-riding reason for wanting to make these changes is to improve the quality and accessibility of clinical services across all parts of the local NHS. We expect that the changes proposed would save in the region of £9.7m annually. That would help us to protect and improve the quality of hospital services. We also need to make sure that money is available to improve and extend services outside hospitals.”

Same for less

But with more than 20 years of experience as a chief executive, Eames noted that in any NHS organisation, most of the costs are in people or in estate. Some of the reorganisation across the Pinderfields, Pontefract and Dewsbury hospitals has arisen from needing to manage the pay bill better – addressing  a lot of issues such as terms and conditions, extra payments for on-call and the use of agency staff. Eames added: “We are now running each year with a lesser number of staff. And this goes back to my point about productivity – getting the same for less.

“I don’t want to give the impression of mass redundancy because it is not, but there are lots of different ways of managing your workforce numbers down and they have reduced by about 400 – what we call whole time equivalents (full-time posts). We’ve also done quite a lot in cutting our corporate costs, so we are quite thin on the ground managerially – and you need to keep an eye on this as demand changes and fluctuates.”

Eames was keen to reiterate that the trust hasn’t been laying off frontline clinical staff, but it has made a lot of changes. “For instance, we have introduced, in concert with our staff, an 11-and-a-half hour shift for our nursing staff – and that change in the shift pattern saved us between £3-4m,” he said.

‘Like an untended garden’

Obviously those changes didn’t come without controversy and anger. Unison said in January 2013 that there had been 74 back office redundancy notices straight away, and many administration staff saw pay cuts under re-grading and banding changes. Strike action followed in late 2012 and early 2013.

“It was a bit like an untended garden,” said Eames, “in the fact that there was no logic between the grades and no career structure. We did that and it was very unpopular, we had some strikes as a result, so it hasn’t been plain sailing from that point of view.”

Unison branch secretary Adrian O’Malley was quoted at the time as saying: “Our members are angry. Anyone can come in and ask staff to take pay cuts. You do not have to pay £3.4m to consultants to tell you that.”

That figure relates to payments given to EY and consultants Finnamore, now GE Healthcare Finnamore, by late 2012.

But by introducing the new ways of working, the trust believes it has made shift changes, handovers, planning and rostering much more effective than they were before.

There have been changes at the top, too: in May this year, four directors left the trust, saving £750,000 a year, after their jobs ceased to exist following an annual review of board roles.

The next two years

Eames told NHE it is great that the trust has achieved so much, but the next two years will be even more difficult than the last two. “The world outside is still very austere, and we still need to find £23-26m in cost savings, while hitting quality standards and being more productive – while embedding all the policies we’ve introduced,” he said. “The hardest challenge is staying here and sustaining it.”

Eames added that one of the biggest issues with regards to sustainability for any organisation is having a clear vision and strategy that is being executed to deliver a long-term future that the staff can get behind, which he believes the trust now has. Mid Yorkshire is also now in the process of investing in a bespoke leadership development programme, run with the Manchester Business School, which it hopes will develop its current crop of managers and leaders.

“Staff engagement is the tough challenge,” he said. “We have 8,000 people at the trust – we have the vision, values and objectives but it is now about the long haul and connecting it up to them.

“I think if we get 40-50% of our people being really engaged with the agenda that will be comparable with the best performing organisations – it isn’t that we aren’t aspiring for them all it is just being realistic.

“We are doing a huge amount in engaging differently with our staff. We now really want to invert our communications and engagement and enable our staff to be more accountable in their own areas, take more responsibility and develop their ideas.”

Using consultants

Asked about paying management consultants at a time of financial constraint for the NHS and the trust, Eames acknowledged the criticisms received along the way.

“But the proof is in the pudding,” he said. “If we weren’t able to demonstrate the various things I have already outlined, then it wouldn’t have been value for money. However, if you set it against where we are – given that the trust was on the point of being in the failure regime – it is a much better position to be in.”

He added that despite being initially wary that the trust had brought in consultants, it has proved to be good value for money.

“What was different about how EY has worked with us is that they have helped us in benchmarking, supporting and providing analysis and information, and we’ve used EY to help with the execution of our plans – including getting basic management systems in place in the trust.”

EY also provided detailed reviews of the trust’s clinical services so staff could understand the nuts and bolts of the economics of these services. “We got a lot out of that, and in a lot of instances it was helpful to the clinicians working in those areas,” said Eames. “It hasn’t been about cutting people out of departments to save money: it has been about standardising some of the materials they might be using in clinical practice or organising in a way that got more out of theatre sessions they we deploying.

“In a nutshell, they helped support our turnaround execution effectively.”

Allen added that in this particular case, the amount that the trust paid to EY as consultants was a fraction of the costs that would have been incurred if the trust had gone into administration.

He said. “The reason we continue to work with the trust is that there has been a very clear return on investment all the way through the last two and a half years.”

His advice to any chief executive or finance director finding themselves in a situation like Mid Yorkshire’s two years ago, is to look at the potential return on investment before bringing in a consultant.  “If you can spend £1 on advisors and save £10 as a result, there is a compelling case to do so,” said Allen.

MCA CEO Alan Leaman praised the approach taken by the consultancy and trust “which is now being deployed more widely across NHS organisations”.

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