Accounting for digital investment

by Nicci Briggs

01 December 2021

Digital technology offers huge potential to transform how health services are provided, but it raises important questions about how a project is being funded and how it should be accounted for.

Digital must be the item that spans almost every NHS portfolio. It is exciting, it has the potential to transform services and the way we provide care and, at the same time, help us understand more than ever about the population we serve. Digital also has the potential to empower patients to participate in their own care.

In an ever-increasing digital world, the NHS is waking up to the fact it needs to be at the forefront of some of these developments. The HFMA Digital Council was set up to help steer the Health Education England-supported HFMA programme to raise awareness about digital healthcare technologies among finance staff. It has already heard of some great examples of digital innovation. These range from digital check-in kiosks in outpatients and an app that sends real time alerts for patients with acute kidney injury to the latest use of robotic process automation (RPA) across several corporate and clinical functions.

The Covid-19 pandemic taught us a few things about digital. First, it taught us that there is nothing like a burning platform to kickstart fast implementation and to get the job done. Second, I think it removed the mystique and cynicism behind digital approaches to care. Third, it exposed some limitations – there are some conditions and appointments that just cannot be treated or provided virtually. However, this last point isn’t a reason to ditch the digital agenda. Instead, it absolutely validates the need for clinical input and consideration on scope.

This year we have seen increased capital funding released to support the digital agenda with the Targeted Investment Fund. NHS England and NHS Improvement have indicated there will be more funding, mostly capital but some revenue, ringfenced for the digital agenda in future years. This is fantastic news, but also brings on the hot sweats for many accountants.

It raises so many questions, largely around how the expenditure will be classified in accordance with accounting standards and whether this is at odds with the type of expenditure that is being funded. Some finance teams across the NHS may almost be fearing the additional digital capital funding. It will give operational teams hope and an agenda to transform services, but a lot of the latest digital innovations are software and, hang on, isn’t that revenue?

This topic is covered in a new briefing from the HFMA Accounting for revenue and capital: implications for the digital age. Before investing in digital technologies, a business case needs to be developed that sets out what the problem is and how the proposed solution will deliver value for the NHS body and its patients. The business case will need to set out a compelling case for investment, which requires an understanding of its financial impact.

This briefing deals with the three interconnected issues that finance teams need to consider during the development of a business case for new digital technologies:

  • How will the expenditure be funded?
  • How is the expenditure classified in accordance with both government budgeting guidance and accounting standards?
  • What is the impact if the funding, budgeting, and accounting do not align?

These issues affect all business cases and all new investments, not just those on digital technology. The briefing includes illustrations to highlight how these issues may impact on plans for digital innovation. I encourage all finance professionals to read this, but particularly those involved in digital transformation, business partners and those capital and financial accountants.

Digital technology can enhance and, in some cases, transform the delivery of healthcare services. Funding and accounting issues should not be an obstacle to accessing these benefits. But they do need to be considered as innovative projects are being planned, as well as throughout the project as the new arrangements change and develop.

Nicci Briggs is director of finance, contracting and governance at Leicester, Leicestershire and Rutland Clinical Commissioning Groups

The HFMA, supported by Health Education England, is delivering a 12-month programme of work to increase awareness amongst NHS finance staff about digital healthcare technologies, and enable finance to take an active role in supporting the use of digital technology to transform services and drive value and efficiency.