The financial challenge is starting to bite. As reported here, eleven foundation trusts are in serious breach over their finances, to such a degree that they would not be authorised if being assessed for FT status today. The review by Monitor of FT annual plans raises concerns about the viability of a number of trusts too.
And then there are the non-foundation trusts, where viability issues are more likely. The slowing of the ‘pipeline’ and the rising talk of reconfiguration suggests that a good proportion of the remaining 100 or so may be unable to achieve FT status in their current form.
So we have a developing crisis in the acute sector. Hospital trusts must achieve 5% and upwards each year in efficiency improvements, without the annual income increases they have had before. They must also, according to received wisdom, reduce bed capacity as care ‘shifts to the community’. And they must do these whilst maintaining at least current levels of operational performance, quality, and safety.
It is hard to believe the sector will survive the coming years unchanged. But what options do boards have?
Roughly speaking, the annual efficiency requirement is the same as in recent years – that is 4-5% for trusts without deficits they have carried forward. But a careful look at trust accounts will show that few have genuinely achieved this on a year-on-year basis. Most have topped up their efforts with non-recurrent (one off) measures, or offset them with income growth that has come with increased activity.
To do 4-5% in the present ‘flat cash’ situation is hard, even unprecedented. Other measures have to be explored, especially as the present economic constraints are likely to continue for some years yet. But what other measures are there?
Seeking new work, or growing activity in some specialties, is unlikely to be the answer. Even if there are opportunities, they are unlikely to be material and, anyway, it is a zero sum game so the health economy will compensate by spending less elsewhere.
Disinvestment is difficult. The politics are well known to all. Seemingly it is easier to rationalise more specialist services (stroke, major trauma, vascular surgery are examples), but smaller trusts in particular find the loss of income often exceeds the costs they can take out to compensate.
In the South West, a group of trusts is examining how savings can be made by reducing the cost of the workforce. This is predictably contentious, and it does feel counter-intuitive to risk demoralising staff at the very time we need their support in such a challenging climate? I suspect this will yield little unless there is a national lead given.
And then there is reconfiguration, of either services or trusts. But the evidence for savings from mergers is difficult to find. Reducing boards generates little – savings really need to come from rationalising services. Maybe there are possibilities with specialist services, as hinted at above, if very large organisations are created? Even on our scale (three hospitals, £600m turnover) we have found opportunities to be limited, but maybe the mega-trusts emerging in London will demonstrate the ability to generate efficiencies?
Hospitals alone, therefore, seem to be facing an insurmountable challenge? I suspect the solution, assuming there is one, must come from a ‘whole system’ approach. This will require hitherto unseen levels of collaborative working, in order to drive down demand across the health economy. It would also require a different kind of leadership, a sharing of risk and reward, and a commitment to a common goal that transcends the narrow interests of individual organisations.
This would be truly transformational. Are we up for it?
This article was published on HospitalDr on 26 September 2012
Jon Shaw
The NHS suffers from a high degree of fatalism and the general attitude by individuals that it is too difficult to change. I attended an outpatient clinic yesterday and it was painfully inefficient.
My epiphany moment before leaving a career in surgery was when I realised we had spent more time in the coffee room than operating. Whether it was due to delays from the ward, the porter, the anaesthetist or not having the right kit, it was ridiculous. I thought, “if this was my business I would be kicking some serious arse right now”.
The real problem was no one was in charge. It certainly wasn’t my consultant and so that’s when I decided it wasn’t the career for me. I wanted control over my destiny.
Some free market thinking would do the NHS a lot of good. There are plenty of doctors and nurses with simple ideas of how to run things better. At the moment they remain subservient to half cocked plans in socialist healthcare system.
Simon Hackwell
Hi Mark
There seems no prospect to the end of the flat cash era for the NHS. Given the complexity of the system and the interconnectedness of its different players, no one individual, organisation or sector alone can bring about the scale of transformation required. Isolation and hiding behind organisational walls will simply not do it.
But we need a supportive policy environment and we have a problem here.
The current pressure for many non Foundation Trusts, who are unlikely to scale the financial bar set by the regulator, is to merge with another organisation. Can we not move away from this binary question and try and find other forms of organisational development that might help trusts move forward?
We are going to have to seek new forms of collaboration between trusts. The emerging Academic Health Science Networks might begin to play a role here taking a more system perspective recognising the interdependent nature of hospitals, community and other services. It’s not necessarily integration (again another simplistic binary question) but collaboration and working in patient’s best interests about where and how they are looked after.
Let’s have some better quality thinking and acknowledge it’s about a system and we should build the future from there.
Simon
Roger Stedman
In response to Simon’s comment – there is also a lot of ‘low value’ but essential work done by high cost staff. We have consultants overseeing straightforward care leaving them little time to deliver the high value technical care they are trained and paid for. Until we can design our delivery models to triage out patients that respond to linear care from those requiring complex iterative care there will be huge waste in the system. But that requires a re-framing of the whole ‘Medical Model’ – are we up for that?
Simon Dodds
The Black Swan effect is where just one example breaks the first assumption of “impossibility”. There are a number of Black Swans in healthcare productivity improvement. The second assumption is “it takes a long time” and there are few Black Swans swimming there too. Systems have many interdependent parts so an incremental approach only works for a system if you choose just the right part to improve in just the right order. This is why Lean doesn’t work quickly in healthcare – the order is determined by where the champions are – i.e. by chance. The Black Swan here is Value System Design – and it works and it works very fast. The barrier is very very few people in the NHS have ever heard of it or know how to do it. But not zero.
Mark Easton
The evidence for whole system transformation is equally elusive, Reconfiguration takes years and the evidence for cost savings is equally weak. I suspect it will be more of the same unless we break into the big pay issues.
MarkN
I agree Mark, it can’t add up without this. Big question is how because we need to take staff with us through this period, it isn’t the time to demoralise our workforce. I personally would favour some measures on sickness absence, which is costly and demoralising because of the relentless pressure it puts on colleagues.
Jacky davis
Hospitals are in trouble and losing money for several reasons – care staying ‘in the community’ for better or worse, cherry picking of easy secondary care work by the private sector, massive PFI debts and reduced NHS core services eg less hips and cataracts. They can’t fail financially so they will have to look to the 49% cap and fill beds with paying patients. Hospitals are already advertising for ‘self funded’ NHS patients, Orwellian doublespeak for having to pay for NHS services that were free before.
Collaborative working will be pounced under the new Act where competition is the answer to everything. We should have seen this coming, it is no accident.
MarkN
Thanks for your comments. I think the main reason for the financial pressure is that hospitals have always been run on the basis of rising incomes each year, which have made the efficiency improvements that are embedded in tariff possible to achieve (money in rather than cost out). Now we don’t have the annual increase, and since demand management hasn’t worked, we have the pressure.
Not sure about ‘can’t fail financially’? I think we are seeing that now, perhaps for the first time. How far it goes remains to be seen. I do not think private work is the answer for most NHS hospitals – this is an irrelevance as the work isn’t out there.
The system is not helpful to collaborative working as it stands, but it can be done. I think the incentives need looking at and changing, because we urgently need to incentivise this.
Mark
@Jeremy_Twunt
Sorry Newbold but you are WAY off message here. I have deployed Dr ‘D100′ Poulter to say IN NO UNCERTAIN TERMS that the austerity-NHS can deal with the challenges it faces. ARE YOU AWARE that hospitals only generally have ~85%bed occupancy…EH?!! With that kind of slack in the system it should be VERY easy to tighten things up. SO, please belt up about ‘The looming crisis’ or Ill have a DoH hit squad up your arterial corridor before you can say MONITOR. Kapish??!!!
Regards
Your SoS4Health
Rt. Hon Jeremy Twunt
MarkN
Honoured that the SoS reads my website!
Simon Dodds
Modern, high technology healthcare as a whole is expensive because of the high cost of highly trained staff. So reducing costs will always imply either fewer staff working full time, or same staff working fewer hours, or same staff working the same hours for less pay – or a combination. The focus then becomes “what are our highly trained and expensive staff having to do?” – and the evidence shows that a high % of time (far more than 20%) is doing work that is technically described as “non value adding but required”. The cause of this two-fold
a) the poor design of our processes
b) the quality-by-inspection model
So transformation to a safe, effective and financially viable NHS will require two thing that are currently missing:
1) Capability to design safe and efficient processes
2) An acceptance that full-time work for all could move to part-time work for all.
I’d rather work 4 days and feel I’ve contributed fully – and have a day off to do something else (maybe another part time job) – than be one of the 20% who has been “salami sliced” or one of the 80% who is running around like a headless chicken spinning 20% more worthless plates than I do now.
julie smith
Thanks for giving me a new perspective, appreciate is not leasr cos its sunday and I really ought to forget work…
David
No chance. Collaborative working will mean managers lose their job as you wont need such duplication. In my experience managers do/make up stuff as much as possible to keep their job that this will never work.
MarkN
Depends how success is defined, and therefore how they are judged?
Nigel
I am not sure that savings from rationalising services are that effective either – you really have to treat fewer patients or treat the current one much more cheaply
MarkN
Ideally yes, but we know a lot of money goes into propping up unsustainable services with locums and agency staff. I just wonder whether rationalising the more specialist services is palatable, and concentrating staff and expensive equipment should (intuitively) be more cost effective?