Mark Newbold

Nicholson Challenge: what’s the consultant view?

For those who are not familiar, this is the economic challenge facing the health service, as set out by Sir David Nicholson, NHS CEO, a couple of years ago. It is usually quoted as being £15-20bn over a 3-4 year period.

I believe the term was coined by Stephen Dorrell MP, chair of the Health Select Committee and former health secretary.

Broadly speaking, it is saying the following: the NHS budget is circa £100bn per annum. Growth in demand is historically around 5% per year and this has, in the last decade at least, been funded by annual increases in the NHS allocation. Indeed, we have had seven years of funding over and above this, the so-called ‘Brown billions’.

The current Prime Minister has promised that he won’t ‘cut’ the NHS budget, and indeed he has kept his word, literally speaking. We have ‘flat cash’. This, of course, leaves us with 5% growth in activity to fund – in other words a black hole of £5bn each year. Multiply by 3 or 4 years and you get the £15-20bn ‘challenge’.

Our task then, is to generate some 4-5% ‘efficiencies’ in order to cover this gap. For some trusts, it is more than this. Depending on inflation, there is maybe a 1% efficiency requirement in tariff that is built in, and then some trusts have historic efficiencies that were not made, or deficits that were not tackled, that will roll forward.

It’s daunting isn’t it? Dorrell is quick to remind us that the NHS has never made a 4% efficiency improvement in a single year, because activity and funding increases always offset shortfalls in efficiency programmes. And there is no health system in the world that has achieved 4% per year for four years running!

Will the government make more money available, perhaps before the next election? Well, it has done so in the past as we know. But this time it may be different. Because the NHS budget is such a large proportion of public spending, protecting it has a disproportionate effect elsewhere. It is already leading to extremely painful cuts in other public services – can these be made even more painful in order to supplement health? You will have your own opinions on this, but the government looks increasingly boxed in to me?

What we should do is limit demand, rather than try to make savings to pay for extra demand. But that is hard. It needs whole system reform, probably including community care, primary care, social care, and maybe housing as well, together with the acute sector. We have never done it before, but do we have the imperative now?

We could ration, I hear you say? Well maybe, but I think that is unlikely given that we know there are many possible productivity improvements to be made, hard though they are. Many would feel rationing is immoral whilst we could get more care for the existing investment that is made.

Otherwise, it will be savings from increased efficiency. Also hard. And how will doctors react to some of these? I’ll leave you with one to consider…

Lord Carter, some years ago now, produced a report showing that at least £500m savings each year could be made if pathology services were rationalised. Nothing has happened, but it might now. In the Midlands and East, it is likely that direct access (GP) pathology will be tendered. So what, you might say? Well, your own hospital lab will earn half of its income from this work, and in all likelihood make a surplus too. That subsidises hospital laboratory services, and it looks as if the days of subsidy might soon be over.

Your colleagues (my previous colleagues) will not be pleased. But it is a lot of savings from something that patients will not notice, nor complain about, nor vote their local MP out of office for. If we put this one back onto the back burner, where else should we look instead?

It’s a tricky one, this Nicholson challenge!

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13 Responses to “Nicholson Challenge: what’s the consultant view?”

  1. cd says:

    how about looking into the cost of e.g. cleaning and maintenance? hospital estates departments are in urgent need of reform as hospitals pay hugely inflated prices for anything from bread rolls to changing light bulbs.

  2. Dr Grumpy says:

    I know the economic horizon looks dreadful but I am less convinced that the Nicholosn Challenge will be achieved.

    I am keen to think of what this will do as %GDP spent on health. If there is sustained GDP growth but a static health spending then this % will fall (probably to <7.5%). Contrast to Obama care where GDP spending will reach 20% (public and private mix).

    As health outcomes will start to deteriorate there will be an obvious link with this reduced health spending = next government will therefore push private or will be forced by public opinion to increase the budget along the lines of Brown et al.

    Either way I think there will be a limit on efficiency savings and there will be more spending to keep in line with European averages. A while ago in Sweden they voted to spend less on defence and more on health – any potential government vowing to ‘save’ the NHS would get a lot of votes.

    If the government can U turn on little things just think how they would be perceived if they looked at the big things. However I don’t have my hopes high and I think moral anaemia will prevail.

  3. graham says:

    The PFI billi s the main problem inmy neckof the woods.

    Has anyone looked into abolishing primary care altogether and substituting “Google” for triage to an appropriate specialist teams run from the local DGH.
    Public health issues could be run centrally and massive saving made.

  4. Bob Bury says:

    I find it disturbing that a senior manager is going even further than politicians (who simply refuse to use the ‘R’ word) by dismissing rationing as immoral. No it’s not, it’s inevitable in any health care system where demand exceeds supply, and the supply is cash-limited.

    Rationing is going on everywhere in the NHS, unless you really believe that there is no unmet need, and no hard decisions being made. What is commissioning, if it’s not rationing? What is the postponement of cold surgery to the following financial year if it’s not rationing?

    What we need to do is accept that we have to ration care, and then do it on a rational (no pun intended) basis, with consensus decisions on what the NHS will/can do, and what it can’t/won’t/shouldn’t.

    But good luck with getting any politician to run with that. Until we do, it’s just a deck chair re-arranging exercise.

  5. Mark Newbold says:

    Thanks for comments:

    cd – cleaning and maintenance have been squeezed much harder than most services, there is little left I’m sure. Indeed, they have frequently been outsourced and the private sector has struggled to undercut, such that the pension costs have become the only difference between NHS and private suppliers

    Dr Grumpy – you may be right but many think that other areas of public spend have already suffered major cuts in order to protect health spending. Many who understand economics such as Paul Johnson from Inst of Fiscal Studies are saying there is little or no room for extra health spend? And electoral repercussions of further education/social care/police cuts will be significant too?

    graham – PFI a major problem in about half a dozen instances. Nuffield Trust and Kings Fund would say other factors more important in majority of cases

    Bob B – point I was making is that there is much to go at in terms of reducing waste and inefficiency, so against that it feels wrong to opt for (more) rationing? I have same dilemma in not wanting to go to enforced redundancies in my Trust when I am well aware there are far less painful savings we could make if we improved performance in terms of, for instance, unnecessary bank and agency staff usage.

    I’m feeling brave this evening so will put forward an example pertinent to docs! We pay for an agreed number of DCC sessions in the job plan, but we rarely get them. This is because we readily agree to study leave and other commitments being taken in these sessions, rather than solely during SPA sessions (for obvious logistical reasons), and they are not ‘paid back’. So, instead of the 42 sessions per year paid for (52 wks less 6+ wks annual leave less statutary holidays less 2 wks study leave), we mostly get a few less. Across a Trust that is a huge amount of lost time. Moving to annualised contracts would reap major productivity benefits, and indeed give us a mechanism for paying consultants for any extra sessions performed over and above the 42? Just one example that, to my knowledge, has not really been tackled anywhere at scale, although I know there are pockets where it has been implemented.

  6. Dr W says:

    My Trust is moving towards annualised DCC’s for Consultants. Thuis will hopefully address those who repeatedly take off more DCC sessions than they should which are either lost or have to be picked up by colleagues. Targets then mean that expensive waiting list initiatives are put in Of coures the alternative is better management of leave requests.
    How else can the NHS save money? Better management of sickness abscence. Every Trusy has a policy but unfortunately policies are frequently not implemented fully. There are very few jobs where within weeks of starting you can go off sick and receive a months full pay and then a months half pay! My friends who run private businesses just can’t believe it. They pay statutory sick pay and have little trouble. Apart from the cost of the NHS scheme, locums and bank staff are hugely expensive. Cuts to sick pay would be hugely unpopular but would not adversely affect patients and may actually release a lot of money for patient care.

  7. Lab rat says:

    Pathology modernisation has been tried in some parts of the UK such as Leeds, and is currently being implemented across London with NHS London aiming to have only 5 mega-labs across the whole of Greater London.

    In theory a sensible place to make efficiency savings. In practice a nightmare. Talk to colleagues from Imperial and they will tell you of important samples like CSFs getting lost in transit. Managers are aggressively trying to axe posts such as microbiology consultants without appreciating their clinical input and the inevitable knock on effect on infection control, MRSA rates, antibiotic stewardship etc. In my experience managers really do know the price of everything and the value of nothing.

  8. X-Razed says:

    I challenge Mark’s assertion that agreed DCC sesions are “rarely” provided.

    Far from loss of DCC for study leave, restrictions on study leave budgets and pressure of work – together with that oldfashioned notion of cross cover so we don’t all push off to popular meetings, has resulted for us in delivery of DCC over agreed activity.

    The full allowance of study leave is never used. Much planned SPA activity is simply cancelled due to the pressure of urgent radiological/interventional work. Have never had a complaint from a manager about not fulfilling SPA aspects of the agreed job plan, not in their interests when additional DCC provided for free

  9. Mark Newbold says:

    Dr W – I agree completely. Annualised contracts seem fair to both parties, though the challenge to employers is to facilitate additional sessions when needed. Not always easy!

    Lab rat – I think we must draw a distinction between laboratory work, particularly the automated work, and consultant advice and input to colleagues. Very different, obviously, and must be handled separately

  10. fenland harrier says:

    Mark hasn’t read the same Carter report as me. Carter did not say that £500m could be saved annually – that was what he was told to find by the DoH before he started. Instead, Carter said that some savings could be made but that the money should be re-invested in the labs antiquated IT systems. The restructuring being foisted on the East of England is apparently going to be used as a template for the whole ‘Middle East’ including his patch. There will be no savings here – indeed it is unlikely to work at all given the geography and sparse population and the general belief is that the labs are being set up to fail so that Serco can take over in 3 years time when the current contracts end.

  11. Simon Dodds says:

    The Challenge to increase activity by 20% to meet a projected increase in demand using the same resources means redesigning the NHS to be 20% more productive. There is one way to do this – to design out some of the time spent on unproductive activiuties and reinvest it in the productive ones. Fortunately the unproductive ones are also ones that cause irritation, frustration, even anger and sometimes disrepsectful behaviour, and eventually skepticism and even cynicism. The outcome would be a friendlier, more productive NHS where we all keep our jobs – though the jobs might change a bit. The trick is learning how to design the c**p out of processes – and if we knew that we’d be doing it. Is it possible? Yes – there are many small scale examples. Is it time for hospital doctors to trasform themselves and then the NHS? I’m with Mark on this … if we don’t who will?

  12. John says:

    The main source of real growth in demand for NHS services is population growth. Not only is the English population growing at 1% a year but fertility rates have risen dramatically. See Causes of financial strain on the NHS. This growth in population is deliberate.

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