Feature / Right processes, right now

The NHS finance function is well placed to play a leading role in healthcare service transformation, but first it needs to release resources by implementing best in class systems and processes, argues Bill Shields.

The NHS is nearing a critical turning point. The Nicholson challenge remains and we all know that continuing to seek efficiencies and economies from current processes will only address a fraction of the savings needed. The service needs complete transformation and a shift in focus to improving value.

I believe that finance can and should play a leading role in this transformation. However, there will be no further investment in the function, so the question becomes: how do we devote more resources to ‘value adding’ work? This will need co-ordination across the whole health and social care economy.

I have been pursuing the building of world class finance in my own organisations since adopting it as my theme as HFMA president in 2008. I have previously reported on the Building world class finance programme at my current organisation, Imperial College Healthcare NHS Trust (Healthcare Finance, December 2012, p14).

I’m privileged to have been invited to lead the work stream on efficient systems and processes as part of the Future-focused finance (FFF) finance development strategy. This initiative, backed by national leaders, provides the perfect collaborative platform to support development of a function fit for the challenges ahead.

We will only improve the value of the finance function by adopting lean processes and best-in-class systems. We have had some success at Imperial, but I recognise that I have overseen this in just one context – a London teaching hospital. We also need to consider value in different settings and across whole health economies. So we need to understand how we might extend the work I have undertaken in Imperial to other organisational contexts and to whole healthcare systems.

We have a lot to learn from each other and from world-class organisations that supply and service the NHS. To facilitate this, I have established an FFF working group of ‘thought leaders’ in different NHS organisations and leading private sector organisations. There are three phases to Building world class finance:

• Improving transactional systems
• Improving financial management systems
• Moving to measuring value and system leadership.

Transactional systems

To maximise the value from the finance function, we need to deliver transactional processes at the lowest possible cost to an acceptable quality standard. To measure where we are now, we need to benchmark against international best practice. There are four aspects that need to be addressed:

Lean processes Process-map existing processes and eradicate non-value-adding steps or adopt examples of best practice and only modify them where there is evidence that change is required due to compliance with law or mandatory requirements for your type of NHS organisation.

Best in class systems, tuned to process requirements We should be making full use of technology to automate processes, reduce the level of intervention needed  and ensure treatment is right first time

Risk-weighted control systems The most common cause of process delays is a one-size-fits-all approach to control. This often results in substantial transactions requiring senior level approval. The risk profiles of spending £0.5m on theatre consumables or consultancy with a major firm are very different and require different levels of control. Getting a senior manager or finance person to sign off the former adds no real control or value.

Organisational platform Should services be in house, outsourced or in partnership with another NHS or commercial organisation?

The working group will give examples of leading class processes and best-in-class systems and offer advice on control systems and organisational platforms. We will extend the scope of processes to incorporate areas outside finance, such as transactional human resources as part of employment processes and supply chain management as part of the purchase to pay cycle.

Financial management

The service remains obsessed with a singular measure of financial success – variance against budget. Recently this has been supplemented by progress against cost improvement plan (CIP) targets. This narrow focus often misses the point. I have known organisations where measurement of CIP progress against target indicates that much of the target has been achieved, yet where there is hardly any movement in the headcount over the year. Success is measured against budget, and this is a construct that often does not reflect reality.

A budget is a plan expressed in financial terms. In the NHS, budgets are constructed in February or March and are based upon a wide range of assumptions about the coming year.

Most, if not all, of these assumptions will prove inaccurate to some degree. So why do we place such store on compliance with the plan? Surely what really matters is the bottom-line financial target – the variables that make up this figure need not be the same as in the plan.

Instead, the budget becomes a rigid target and can drive behaviours that are not in the best interests of the organisation as a whole. At best, this drives senior managers to ask for expenditure to be moved to another cost centre when such a transaction will not improve understanding or add any value. At worst, it will encourage unnecessary expenditure.

Imperial has developed a more rounded measure of financial success. Our financial risk rating (FRR) metric has five themes:

Financial sustainability Are we earning sufficient income to cover costs, overheads and planned surplus? Are we capturing all income and are services profitable?

Cost containment Are costs in line with expected costs and are any variances driven by external factors that could not be mitigated? Are we controlling variable costs such as bank or agency, non-contract supplies and services?

Forecasting How good is forecasting on a monthly, quarterly and annual basis? And how good are we at forecasting income, pay and non-pay costs?

Working capital management Are we processing creditor payments efficiently and how good is our stock control and debt management?

Financial governance Are our senior managers trained and engaged in the financial management  process?

I believe we need to provide our managers and clinical leaders with insightful  financial management information that will enable them to manage their resources properly. They need to be able to identify the root cause of any adverse variance if they are to establish and implement the appropriate corrective action.

We have begun to build a hierarchy of costs and cost drivers to facilitate this, so that those responsible can drill down to the root cause.

For example, suppose one of the measures was consultant earnings per session and in one month, in a given surgical specialty, this dropped by 40%.  The first question would be how many sessions have been run and how many cases. What if the number of cases operated on in the month was within planned limits? Drilling into the pay information might reveal a number of additional sessions in this particular month, arranged because some planned sessions had no patients.

Further interrogation of individual session data might reveal that patients were cancelled due to lack of beds. Bed occupancy figures might show an increase in over-seven-day length of stay patients and no increase in admission numbers. After further analysis, you might find that the root cause of this fall in earnings is in fact an increase in delayed discharges due to shortage of supported discharge packages.

I also believe that managers and clinical leaders need to be engaged in the development of plans and forecasts. They need our support, but they should be in the driving seat. We have adopted a business intelligence system in Imperial called collaborative planning. This is a web-based tool that enables managers to manipulate variables to drive forecast costs and income to enable them to develop annual plans and forecasts within a framework set by finance. This has had a transformative effect on the engagement and attitude of budget holders.

We now really do have a link between forecast activity, resource capacity and costs. The process requires further sophistication to make it even more accurate, particularly in linking diagnostic and therapy resource required to varying service line activity levels. The working group will review and improve on this approach and adapt it for other sectors.

Measuring value

Once the financial systems are working efficiently and managers and clinical leaders are planning and forecasting their financial position with reasonable accuracy, the finance function should be able to move into leading the transformation of care. This will need a reasonably robust patient-level costing system.

However, we need to start combining clinical outcome data with these patient-level costs. In work so far, the data reveals we have a very incomplete perception of which patients and which stages of care are driving our costs. Furthermore, these are typically in areas where we have no quality measures. So, we are in fact very limited in our understanding of the relationship of quality and cost. The good news is, it seems relatively easy to see how these areas could be improved with reduced cost.

Clinical value can be assessed by comparing the ideal clinical and patient experience outcomes (the value proposition) for a given stream of patients with the actual clinical and patient outcomes (the value offering). This value gap requires some system of consistent measurement. A possible framework for evaluating this is shown in the box below.

The finance function needs to start identifying the hotspots. Where are the patients who consume the largest proportion of resources? Are they in elective or non-elective and, if they are in non-elective, are they medical or surgical patients? If they are medical, is it age, discharge destination or primary organ treated that will reveal the insight? In each case we have looked at, the actual answer revealed by this data mining is never what you think.

Once you have identified the hotspots, then undertake the analysis of value proposition versus value offering with clinicians. Almost inevitably, poor value will be in the high-cost areas and this provides the perfect opportunity to engage clinicians on having a focus on value.

Clinical systems have evolved and been reinvented to meet new political and managerial targets. Most pathways have not been designed with today’s patients in mind. The finance function is well placed to undertake this analysis and to join the dots across the system. But first we need to release resources by implementing best in class systems and processes.

Bill Shields is chief financial officer at Imperial College Healthcare NHS Trust