Mark Newbold

Tackling the looming crisis in the hospital sector

The financial challenge is starting to bite. As reported on this website, 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?

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9 Responses to “Tackling the looming crisis in the hospital sector”

  1. joshek says:

    how about reducing personnel cost by getting rid of the numerous admin jobs that were created between 1997 and 2010 – for starters?

  2. A N other says:

    I guess we’ve gotta invest to save. As you say, ‘whole system change’. Develop telehealth, integrated care, community services, effective social care.
    Redeploy hospital staff, reconfigure acute services. Change the funding system from incentivising admissions. But all this requires tonnes of public engagement and cross party support. Docs and managers will only be able to do so much.
    I guess lots of the general public know that the NHS is being reformed, but the majority won’t know why, how or what. They don’t like smaller DGHs. And that’s why local politicians will go quiet.
    And as far as I’m concerned – and I’m hopefully a little more expert – there’s very little direction in the reforms for secondary care. Whatever the rhetoric, I think we’ll just plod onwards with less resource and with fingers crossed that we won’t be allowed to collapse. V unsatisfactory.

  3. Janet Wilson says:

    Could you as an opinion leader perhpas turn the cost saving spotlight back at the DH?
    An FOI enquiry reveals that the Department’s total staff costs plus non-staff administration costs increased from £416.6 million 2009-10 to £426.1 million 2010-11.

  4. palu says:

    No mention made of the ineffeciencies of constant re-organisations nor the fragmentation/cherry picking that’s be planned for many years by the private sector.

  5. Mark KM says:

    Chaos is the likely result with more losers than winners. Eventually the nhs will have to become an emergency/serious illness service based in large tertiary centres and the private sector will provide the rest for a fee. This is not all bad news as much of the elective care has limited efficacy. However the path will be rocky as I doubt the government has the balls to cope with the inevitable outcry as hospitals close and MPs lose their seats!

  6. Paediatrician says:

    I work on front line in secondary care (large DGH, non surgical speciality). I think it is possible to ‘Demand Manage’ hospital work by 2 measures.
    1. Consultants taking referrals from GPs and A & E, there by telephone triaging what is coming in the departments as well as offering GPs and A & E staff advice on telephone. When we tried this in my speciality it was possible to avoid up to 30% patients coming in acutely and many not coming in at all. How do we find consultant time to do this?
    2. Consultant time could be made available by reducing ‘worried well’ OPD attendances. All OPD referrals could be triaged by experienced consultant or groups of consultants to see which pts need to be seen in OPD and for which pts advice can be given to GPs by letter.
    In each department, if each consultant gave one more day/week to provid acute front line service, hospital admissions and expenditure on urgent tests and scans will be reduced.
    For this to happen there will need to be fundamental change in thinking of consultant body as well as willingness from ‘Primary Care’ to do there share in making this work.

  7. Mark Newbold says:

    Thanks all for your comments:

    AN Other – I fear you are right, unless we get ourselves galvanised and work to change the system. My own view is that, this time, there will be no ‘bail outs’ because the govt cannot afford them

    Janet Wilson – No problem making the point, as indeed you have done. Trouble is, the costs there are a fraction of a drop in the ocean aren’t they? Make us feel better maybe, but certainly won’t solve the problem

    Paediatrician – I agree. We, collectively, tend to prioritise specialist work over acute front line work. I think this is inappropriate?

  8. Once was a Soldier says:

    The SW Consortium is the answer – from a financial & political angle at least. The income is fixed by tariff, the capital costs are relatively fixed – buildings & their maintenance are straightforward.
    Thus the only place to make savings is in the main part of the costs – the 70% of outgoings that are salaries. HMG can’t do that as it signed the national T&C’s. Equally the politicians don’t want to privatise the NHS fully as it’s still a vote winner, but then they don’t want the responsibility for the mess that it’s in!
    Ergo – offload a whole region to a consortium headed by private healthcare to run the hospitals and the clinical care – paid for by the NHS. For example a consortium known as SW Hospitals could run all the hospitals & their maintenance for the NHS (a form of regional PFI) and SW Healthcare consortium could run all the clinical services for the NHS. In order to do that they will have to have their own T&C’s which invariably will involve across the board pay cuts (5%? – try 10% at least – the maths makes sense then). The NHS pension scheme will have to evolve rapidly into something closer to a private scheme – this years financially unnecessary changes were only the first step.
    Thus FT’s become redundant – too expensive a solution – and a smaller regional board runs hospitals with much smaller administrative overheads a la private model. The off loading of unnecessary administrators (and clinicians) would be the responsibility of the Consortia & not HMG – so little comeback on local politicians who will undoubtedly make all the right noises but will be “full of sound & fury, signifying nothing” [cf any local politician and their PFI!]
    Clinicians who don’t like it can always move to another region – who will undoubtedly be doing the same or into private – which will be owned by the same people.
    Services will be rationalised and become cheaper (rationing but not by HMG) – and NOT driven by clinicians. The essence of the NHS – by clinicians for patients will be dead & buried. The nation will have the NHS it deserves not the one it needs.

  9. Mark Newbold says:

    Once was a Soldier – crikey where do I start!

    One Board would save very little, the US experience suggests 1-2% only from mergers and simplifying admin. The real savings (10-16%) come from service rationalisation, which is as politically difficult for one Board or many, NHS Board or private.

    Workforce cost reduction is crucial I agree, but it is a very difficult area. Ultimately, in the public sector, society as a whole takes a view on what public servants should be paid. I fear the trend will be downwards in the next few years, driven by the facts that the economy is turning down and that private sector pay is falling too?

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