News / News analysis: Efficiency first

Last November’s Pre-Budget Report confirmed the worst fears of
many in the health service. Growth in public spending – and consequently the NHS share of that growth – would fall dramatically
in the period after 2011. In the shorter term, the word from Whitehall was that the health service would have to deliver efficiency ‘like never before’, starting with a reported additional £1bn in 2010/11.

Back office functions, such as payroll, were back in the government’s sights so it was little surprise that the Department of Health raised the issue of switching to shared services last month.

In a letter to chairs, chief executives and directors of finance, NHS chief executive David Nicholson (pictured above) reminded trusts of the need to seek out efficiency savings in the current economic climate and highlighted the benefits of switching back office functions to NHS Shared Business Services (SBS), the Department’s joint venture with IT services and outsourcing company Steria. Any organisation retaining back office provision in-house would have to demonstrate it offered better value for money.

What surprised some was that his message was not more strongly worded, given the current economic situation, the gloomy predictions of NHS spending growth in the next spending review and the government’s requirement for additional efficiency savings.

Mr Nicholson said NHS SBS has already delivered savings in the order of £40m across the NHS. ‘In the current economic climate the NHS, in common with all other public services, needs to plan in recognition of the funding levels it is likely to receive in the coming years.  An important element of this is delivering efficiencies in back office functions, including finance and accounting, payroll, human resources, family health services, estates and security.  This would free up more funds for frontline care and deliver real savings for the NHS,’ he said.

‘Where corporate services are currently retained in-house, I would encourage NHS management boards to be clear that the decision to retain them represents better value for money than alternative options such as NHS Shared Business Services, or other shared service or outsourcing solutions.’

The Department has tried this approach a number of times since the joint venture was set up in 2005. While SBS has successfully attracted almost a quarter of NHS organisations in England to sign up for its services, it is fair to say most NHS bodies have not been in a rush to join.

NHS Confederation policy director Nigel Edwards said it was sensible to have some services shared across organisations but the Department could no longer mandate it. ‘People have had poor experiences with shared services in the past and are nervous about it,’ he said.’ If shared services can deliver the savings they are supposed to, people will vote with their feet. Many organisations, because they are now foundation trusts, will need to be attracted by the quality of the offer.’

SBS welcomed the letter and the Department's support. John Neilson, NHS SBS managing director, said there was 'no doubt' that his company's offering was in step with the government’s desire to divert more resources to the front line by achieving greater efficiencies.

And while NHS organisations could save money by outsourcing to SBS, he emphasised that the real benefit was in the added value gained by joining the joint venture. 'At one level they get a service that's better quality, consistent, reliable and saving them some money, but having that and consistent, high quality management information reports that are on time will enable them to create added value in their own organisations. They can gain a better understanding of what's happening in their business so they make the right decision, for example.'

He said the typical saving for a trust was 25%, though some had saved over 30%, but the amount depended on their starting position. 'We would hope they would get more out when they act on the information we provide them, particularly in areas such as procurement,' he added.

He denied SBS was more expensive than its rivals. ‘Our perception is that we are competitive. Generally I don't think there’s a problem on price and I’m not aware we are losing business because of price. Some specific aspects of a service may appear more expensive but I would be confident that the quality of the service we provide would outweigh any marginal pricing difference, if it were to exist.’

There is a perception that SBS is more attractive to PCTs than foundation trusts. Mr Neilson said the joint venture has a range of clients, reflecting the different types of organisations across the NHS. In December last year SBS announced that it had added 12 clients, including high-profile organisations such as NHS Direct and London Strategic Health Authority and two foundation trusts (Christie Hospitals and the Royal Marsden).

However, he admitted he would particularly like to gain more foundation clients. 'Although we have foundation trusts as customers there are fewer proportionately than PCTs. There may be a variety of reasons for that but we are focused on developing our activities in FTs and I am sure we can bring benefits to all organisations.

‘The primary focus of some organisations has been to become foundations and not some of the things we can help them with. Now the time is right to move forward in these areas and my sense is that it will start to change.

‘Word of mouth is a very strong factor and our reputation as a shared services provider has considerably improved – 86% of finance directors to whom we provide shared services would recommend us. That's up from 39% in 2007.'

Mr Neilson admitted SBS had not reached its business plan target, set in 2005, of signing up almost 50% of NHS organisations within three years. However, he added: 'In that period we have expanded into other service lines that were not in the original concept. The business plan is absolutely on track in terms of the level of savings we are delivering. In terms of actual numbers of trusts we haven't been successful but in many ways we have ended up in a better position. We have broadened our services and they have great long-term potential.'

He said the fact that the Department had not mandated SBS was in their favour. 'Anybody who comes to us wants to come – we had to baseline their current service, demonstrate added value, that we can save them money and improve their service. That's a far better way of doing things.'

Back office efficiencies are moving to the centre of the stage, with the government believing they will be pivotal in helping maintain frontline service provision during the lean years ahead. How big a role shared services will play in this remains to be seen.