Accenture's NHS losses grow as NPfIT delays mount

29 Mar 2006

Accenture, the leading management and technology consulting firm, announced a provision for a further $450 million of losses against its contract to deploy IT systems on behalf of the English NHS. The provision led to a sharp drop in quarterly profits.

The additional $450m loss provision was linked to “significant delays by one of Accenture’s major subcontractors in delivering software”, “higher development costs and increased integration costs” together with “revised programme release schedules”.

The Bermuda-based company holds two prime contractor, or local service provider, deals under the £6.2 billion NHS National Programme for IT, to implement new IT systems in the North East and Eastern regions of the English NHS. Accenture’s main clinical software subcontractor is iSoft.

Accenture also said in a statement that it believed there would now be now be “slower and lower future demand for the new systems from local healthcare providers”, it said the principal reasons for this reduced demand were “software delays” and the government’s decision to “allow local healthcare providers to choose alternate systems”.

William D. Green, Accenture’s CEO, said, “We are very disappointed that recent developments prevented us from meeting expectations this quarter. During the quarter, several issues increased the risks and uncertainties associated with the NHS contracts and affected our estimates of the expected contract revenues and costs.”

Green said that Accenture remained committed to delivering the NHS vision of integrated patient records, but added the company was taking remedial action to resolve problems with the NHS contracts. “We have established guiding principles for success for our ongoing work with the NHS and have devoted additional management resources at the highest level to resolve the NHS matter as quickly as possible.”

In a statement Accenture said the major new developments in the second quarter that impacted its two NHS contracts were:

Accenture’s assessment that there would be significant delays by one of Accenture’s major subcontractors in delivering software that is critical to the systems’ deployment, creating additional cost implications, including more interim solutions;
Accenture’s assessment that it would incur somewhat higher development costs and increased integration costs, due to the company’s recent experiences and to revised program release schedules; and
Accenture’s assessment that there would now be slower and lower future demand for the new systems from local healthcare providers primarily due to software delays and the announced government initiative to allow local healthcare providers to choose alternate systems.

Last April Accenture said its contract with the NHS to deliver integrated electronic patient record system had been experiencing delays and would result in losses into 2007.

At the time the company indicated that it was drawing a line under losses from the NHS contract, but according to the Washington Post on Tuesday Accenture “indicated that costs from the contract would outpace revenue over the life of the contract”.

Link

Accenture feels the squeeze on NHS contracts

Reader's Comments

Worrying undertones

29 Mar 06 09:01

There are some interesting insights in this article.

(1) "Lower demand" for their systems and the notion of "local alternate systems": this must surely affect the business case for the whole NPfIT / CfH venture, which was largely premised on the economies of scale achieved through centralised LSP provision.

(2) "Costs outpacing revenue" - another way of saying "making a loss on the venture"? So will Accenture's shareholders be looking for cost-cutting (job losses, efficiency savings, lower systems specification); or increasing revenues (additional costs to the NHS?); or even termination of the contract?

And where does all this leave CfH and, more importantly, the NHS?

Some other reason

andy.mak@virgin.net

29 Mar 06 11:05

If Accenture are blaiming the late delivery on sub-contractors failiure to deliver software, why are other LSP's (i.e. CSC) not hitting the same issues? It must be assumed that both CSC and Accenture are delivering the same software from iSOFT so it must be asked why one is failing when the other is implementing.

$450 million of alleged losses

29 Mar 06 11:06

While Accenture's failure to deliver may have impacted the NHS, I applaud CFH for not funding these losses; at last we have "risk sharing" with teeth in procurement from the private sector. I note with concern that local healthcare providers are allowed to choose alternate systems; this development weakens the case for the National Programme for IT.

'Alternate systems'

29 Mar 06 11:33

I believe 'allowing local healthcare providers to choose alternate systems' refers to GPs, not to e.g., acutes, MH, Community etc.

Weakens the case?

29 Mar 06 11:51

One might argue that - given the complexity and diversity of the NHS - local organisations were inevitably going to require choice, and that this should have been taken into account before committing to the CfH approach. So, perhaps it's not so much that the case for the National Programme is now being weakened; rather that events are calling into question whether a robust case for NPfIT ever existed in the first place.

Also, I'm not sure what the previous commentator means by "risk sharing" but it seems to me that he/she is only talking about direct financial risk here. There is a range of other risks related to failure to achieve patient benefits from health IT (many with associated indirect financial costs) that don't appear to be addressed by the procurement approach and, indeed, may be accentuated by the delays to CfH implementation.

Choice

david.pearson@nhs.net

29 Mar 06 11:55

I understand GPs now have a choice but there are NO FORMAL choice arrangements for Acute Trusts, unless you are a Foundation Trust, who only have to comply with the license from Monitor. The lack of available software for Acute Trusts is however resulting in some going out to procure replacement systems. (Post edited by EHI)

You can lead a horse to water

29 Mar 06 12:33

nothing more to add

You can lead a horse to water

29 Mar 06 14:40

There is no water, the well is dry. But there will be a delivery some time in 2008.

Another well planed and executed project.

29 Mar 06 15:29

Is the Department of Health looking in to this? Or is it going to be swept under the carpet and hope nobody notices. (Another well planned and executed Prince 2 project.)

(Edited by EHI)

Don't blame PRINCE 2

29 Mar 06 16:43

When the inexperienced attempt the impossible, failure is likely whatever the project management methodology. Let's not overlook the significant loss of "corporate memory" that occurred when NPfIT replaced the NHSIA as the implementation organisation, and the sheer magnitude of the task of rolling out IT in the NHS.

corprate memory

30 Mar 06 09:34

The NHSIA always seemed more interested in trying to micro-manage trust procurements than work with IT and clinicians to develope useful standards. With few exceptions, the lack of technical standardisation in the NHS (around interfacing, coding etc) is pityful. If NPfIT / CfH didn't spot this from the off then they were blind / didn't consult widely enough. Their approach to developing standards now seems to be to "consolidate the market". I suppose no choice = defacto standard....

The sooner it all dies

30 Mar 06 20:49

The sooner it all dies and we get back to an open procurement market the better. Too many up and coming solutions died and hit the wall while many that remain, yet outside the official party, are no doubt going to be looking to make up for lost ground.

What are contracts for?

01 Apr 06 12:15

I thought contracts were meant to result in viable solutions for the end client , in this case the NHS and its patients - I would suggest there is no defence in the 'we will get penalty monies back if the suppliers do not deliver' view!! It leaves the NHS without (as yet) the decision support that will make a real difference .... and does it leave social care waiting for even longer in the wings???