Nicholson warns of ‘unprecedented’ savings

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22 May 2009

NHS chief executive David Nicholson has warned the NHS that it may need to make “unprecedented” levels of savings from 2011 to 2014.

In his third annual report on the state of the health service, Nicholson says NHS investment will grow by 11% over the next and final two years of the present comprehensive spending review.

But he says that “after those two years we must prepare for a range of scenarios, including the possibility that investment will be frozen for a time.”

Zero growth would be a worse scenario than the one set out by Chancellor Alastair Darling set out in his recent budget, which forecast a drop in NHS spending to 0.7% from 2011-12.

Nicholson also says: “We should plan on the assumption that we will need to make unprecedented efficiency savings between 2011 and 2014 – between £15 billion and £20 billion across the service over three years.”

These savings would come on top of the substantial cash releasing efficiency savings that the NHS is already being expected to make.

The annual report says that in 2008-9, the NHS exceeded the Gershon efficiency savings target of £6.47 billion and delivered £7.88 billion of savings. Overall, it finished the financial year with a £1.7 billion surplus.

Nicholson says the NHS must look to productivity gains and innovation to generate further cash. A page of his annual report is devoted to a trip that he made to India to see the work of NHS Shared Business Services, which was also singled out by the Treasury’s Operational Efficiency Programme.

The annual report says NHS SBS has achieved efficiencies of up to 30% for its NHS trust customers, and trusts that want to keep corporate services in house must be able to prove that this represents better value for money than outsourcing them.

The National Programme for IT in the NHS is also put into an efficiency context. The annual report says the NHS needs to get more value from commissioning and one way of doing this is to “make better use of the incredible breadth of information held in the NHS.”

It says that providing better tools for accessing and organising this data “lies at the heart of NPfIT.” And it goes on to claim that it has delivered “some impressive benefits”, citing PACS and Choose and Book.

There is only an oblique mention of the problems to have hit the programme and to the lack of delivery of strategic electronic patient record systems.

“Christine Connelly joining the Department in September as the first chief information officer for health was the right opportunity to review the programme and to sharpen our focus on the deployment of hospital-based systems,” it says.

In the rest of his annual report, the NHS chief executive praises the NHS for delivering the 18 week waiting time target five months early and exceeding the government’s targets for tackling hospital acquired infections and providing extended hours at GP surgeries.

However, Nicholson also says the poor care uncovered at Mid Staffordshire NHS Foundation Trust is a “stark reminder of what happens when the NHS does not work together for the benefit of patients” and warns that the health service must focus on quality even as its finances tighten.

Link: The Year: NHS chief executive’s annual report 2008-9.

Lyn Whitfield

Readers Comments

Efficiency Savings: Would QA be better?

27 May 09 10:39

Suppose that the recent target of 3% efficiency savings continues? What are the options in the face of static or increasing demand for healthcare?

One strategy would be to stop 1:~33 patients (in terms of cost) from being treated. Clearly this is not viable but in a sense the introduction of arbitrary rules (guidelines) around the use of lab/radiology services and expensive treatments is an attempt. The side effect has been to created divisions between clinicians and between practitioners and management.

Other short-term budget management strategies have not helped. Avoiding the replacement of employees; reducing the costs of staff e.g. by replacing nurses with NVQ qualified personnel; buying cheap disposable equipment (IV lines etc) or deferring investment in equipment/drugs all serve to exacerbate the situation. Ominously for the NHS, the costs of litigation have risen, despite best efforts and the data on patient safety are worrying. The plethora of new inspectorates and the GMC re-validation scheme are unlikely to improve matters.

There is a ray of hope: quality assurance is quite capable of improving productivity and reducing costs. It is not new and it is not a magic bullet but it works. Companies that focus properly on QA survive recessions better than those that do not. Let's get rid of arbitrary efficiency targets and work together on QA supported by decent IT.