Feature / The productivity plan

With a King’s Fund report setting out its view on what the NHS needs to unlock greater productivity, Steve Brown spoke to NHS provider finance leaders about the key issues facing services as they look to transform services

In May, the King’s Fund published The NHS productivity challenge: experience from the front line. It provided a coherent analysis of the current service and financial challenge, describing it as the NHS’s ‘most ambitious programme of productivity improvement since its foundation’.  Launching the report, fund chief economist John Appleby said that on its current trajectory, the health and social care system in England was ‘rapidly heading towards a major crisis’.

‘While there is also an increase in consensus around what makes a high-quality, sustainable health and social care system, three things are essential  to achieve this service and unlock the greater efficiency and improved outcomes it can offer: more time, more money and measures to support change and value for money,’ he said.

Although the King’s Fund made wide-ranging recommendations to improve the support network around NHS bodies to help spread improvements in productivity and develop incentives to encourage improvements, it was its comments on funding and timescale that inevitably drew the headlines (see page 20).

Calls for more money are nothing new from NHS commentators, but the King’s Fund sees specific purposes for the additional funds and is clear the funds must not be used as an excuse to postpone transformation. Rather than a general increase to budgets, the funds would need to be channelled specifically at funding new ways of working and covering double running costs while new services are introduced. Further separate funds are also called for to support provider organisations that run into financial difficulty during the transitional phase.

The King’s Fund’s call for more time reflects the challenging timescales needed to get new ways of working up and running – brought into sharp focus by the start of the better care fund next year. The BCF will see £1.9bn transferred from budgets for clinical commissioning group-commissioned services to support integrated health and social care. It has been portrayed as a transfer from acute funds to social care. In part, this is because NHS England had itself suggested the £1.9bn transfer would be the equivalent of a 15% reduction in emergency admissions.

However, this was more about visualising the scale of the transfer than a ‘how to’ instruction and NHS England chief executive Simon Stevens has subsequently suggested this is an unhelpful way of looking at things.

Three-pronged approach

He told the Commons health committee that in reality there were three components to possible BCF spending. Some money will be reinvested in NHS care, both community and hospital services. There will be spending on social care activities that produces ‘some offset’ on people being admitted to hospital. And there will be some spending outside the NHS that does not offset hospital demand.

Mr Stevens said the relative size of the three pots was the key issue and that it was the third category that represents ‘additional pressure we have to solve in 2015/16’.

Finance leaders are fully signed up to the consensus around the need to transform patient pathways. However, they are also keenly aware of the pressures this presents for the NHS as a whole.

‘There is good agreement about the direction of travel,’ says Andy Hardy, HFMA president and chief executive of University Hospitals Coventry and Warwickshire NHS Trust. ‘We need to transform service delivery, not just get greater efficiency from our current ways of working. Greater integration is key to that and the better care fund – which looks to push the pace on integration – is right in its aspirations.’

But he says the timescales are hugely challenging. ‘It will involve a real transfer of funds in 2015/16 at a time when year-on-year efficiency requirements of 4% plus are already putting the sector under real pressure,’ he says. ‘The transfer of money has to be matched by real change in both health and social care systems, otherwise it will just leave the acute sector stuck in the middle dealing with the same demand with less money.’

In response to media reports in May claiming the BCF was to be delayed following a Cabinet Office review, the Department of Health confirmed that the start date remained April 2015. It added that it had deliberately asked for plans to be submitted a year early to ‘check their level of ambition and test how they would be delivered’. 

Paul Briddock, HFMA director of policy, believes these reviews are crucial. ‘The majority of funds must be spent on activities that will result in immediate reduction in the demands placed on the acute sector,’ he says.

New services that help support people in the community and avoid unnecessary hospital admissions are a key part of this, but Mr Briddock says expanding activities to support timely discharge is also key. ‘The reviews have to ensure that the majority of the funds are specifically targeted on things that enable the acute sector to take out capacity – in the form of beds and staff,’ he says. ‘That is the only way the transaction will balance. The timescales are unbelievably demanding, but they do force health economies to focus on transformation. We cannot afford to procrastinate anymore on the need for service change.’

It has also been suggested that health and wellbeing boards will be assessed on how well they have involved providers in putting the plans together. Sue Jacques, chief executive of County Durham and Darlington NHS Foundation Trust, says this is essential.

‘We work with two local authorities and the engagement around what was included in the better care fund initially was developed by the CCGs and local authorities and did not involve us in any significant way as a provider. But latterly – and particularly through our collective involvement in the health and wellbeing board – we’ve been brought more into the proposals.’

Tony Whitfield, finance director at Leeds Teaching Hospitals NHS Trust, believes there is a good reason why major changes are slow in getting going. ‘We’ve had five years since we got the first smell of hardened economic times, but the problem is that there is not enough system reform to point us towards how care could be managed differently,’ he says.

‘No place has produced a clinical model that we could look at and say is 90% right. If that model existed – dealing with demand in different ways and, importantly, operating at scale – then we’d have all piled in behind it. We also need to understand more about how investment in community and social care can reduce the need for hospital beds.’

Mr Whitfield is convinced the necessary changes will also demand much more sophistication in the underpinning IT the NHS uses, which may take time to implement in some health economies.

 ‘Different health economies are starting from different positions on this, but it is vital if you want to look after patients with more complex needs in the community and at lower costs. It is this technology that will help us to get specialist expertise into patients’ homes.’ 

Finance managers are also concerned about how removing some services from hospitals could impact on the costs of services that need to remain in hospital settings. ‘You’ve got to recognise the fixed costs in the current NHS estate,’ says Mr Whitfield. ‘Hospitals are often seen as inherently expensive places because you need to fill them with operating theatres and A&E departments that have to be ready not just to deal with the day-to-day maelstrom, but with unexpected events. We have to ensure we look in the round at what is the right way to deliver services for patients and what is the best value for the taxpayer, not just the least cost for the commissioner.’

Ms Jacques agrees that moving services into the community has to be a considered process. ‘I don’t think we have a lot of people in hospital who shouldn’t be there, but I do think that we could move people out quicker into the community – we are not yet as efficient as we could be at moving patients through the system.’ She also says that more needs to be understood about the costs of community alternatives to acute care and that changes can take time.

The trust is pushing ahead with an integrated short-term intervention service (ISIS) as part of local BCF plans. This 24-hour care co-ordination service provides a single number to help practitioners (initially) navigate the system. The aims are to reduce inappropriate admissions to hospital and permanent residential care, to reduce readmissions, and to support timely hospital discharge. The scheme has been through an 18-month pilot and evaluation process.

 ‘We are determined to move care out closer to people’s homes but we need to do it in a cost- effective way and [reproviding services in the community] isn’t cost effective by default,’ she says. ‘As a trust we have to find the optimum balance between patient experience, clinical outcome, workforce satisfaction and efficiency.’

The goal is clearly better value – which could mean better services at the same or lower cost or the same quality services at lower cost. But Mr Hardy is conscious that meeting the implications of new models of working – reduced capacity in the acute sector and fewer hospital staff – is likely to have additional costs in the short term. ‘There are likely to be double running costs as new services are introduced,’ he says, ‘and if these new services get established, there may be costs associated with closing hospital beds, including potential redundancy costs.’

Mr Briddock understands the logic behind the King’s Fund’s call for transitional funding, but says the service mustn’t simply wait for funds to be made available. ‘We can’t use the lack of funding as an excuse to put off change. We need to stay completely focused,’ he says.

One of the King’s Fund’s less reported recommendations was for the ‘thinking and evidence that supported Sir Derek Wanless’s 2002 projections for healthcare spending’ to be revisited. Finance leaders would appear to broadly support such an exercise.

‘The scenarios outlined by Sir Derek – solid progress, slow uptake and fully engaged – remain completely relevant today,’ says Mr Hardy. ‘However, the economic context is unrecognisable compared with what would have been anticipated back in 2002. Wanless was a great exercise in providing a rigorous assessment of the spending needed for the type of service the public wanted.

‘It would certainly provide a focus for a public debate around the current model for service delivery, what could be improved, why things need to change and what we all as taxpayers want to see from our health service and are prepared to pay for.’

The issue of system leadership following the demise of strategic health authorities has been flagged by commentators as many transformational changes would need to work across multiple health communities. For its part, the King’s Fund sees roles for Monitor, the Trust Development Authority and NHS England as well as for academic health sciences networks.

Finance leaders say providers have had to step into the gap. ‘It is understandable that commissioners haven’t all been able to lead on this yet, given the significant task of getting new organisations, systems and processes up and running,’ says Mr Briddock. ‘But with efficiency requirements being loaded onto providers, providers have had to get on with it. We are starting to see provider collaborations.’

Mr Briddock says some of these are still at the discussion stage, but they are being driven by the need to improve and maintain services while meeting 4% efficiency. ‘We are seeing increases in staffing levels as a result of Care Quality Commission reviews and, in some areas, recruitment is a problem, leading to use of higher cost agency staff,’ he says.

There are other drivers too. ‘The seven-day services agenda will force economies to think about if they need to have a full range of services in every hospital,’ he continues. ‘We have seen some regionalisation – for example, for major trauma and vascular services – and providers coming together to deliver joint pathology services. However, we really need to see health and wellbeing boards, alongside commissioners, taking this forward.’

Mr Briddock acknowledges that high-profile initiatives to restructure services across hospital boundaries have faced challenges. The trust special administrator proposal to downgrade accident and emergency services at Lewisham Hospital – part of broad changes to address severe financial problems at neighbouring South London NHS Trust – led to local public outcry and was overturned on the grounds that the health secretary had acted outside his powers. Similarly, health economy-wide changes as part of the closure of Mid Staffordshire NHS Foundation Trust were not popular with everyone.

But Mr Briddock says these examples should not be seen as the flag bearers for health economy-wide transformation. ‘In South London and Mid Staffordshire, things spiralled out of control and change was top down. Transformation needs to be clinically led and locally driven and should be about avoiding getting to crisis point, not getting out of crisis.’

He backs the King’s Fund call for ‘renewed effort’ to encourage clinicians to identify and lead change. The King’s Fund also calls for more sophisticated incentive systems to encourage productivity improvements. In particular, it likes the idea of tailoring the efficiency factor to individual trusts or services to better reflect variations in productive capacity. Monitor and NHS England have already revealed that they are exploring the potential for this – although there will no changes for 2015/16 under current proposals because of ‘insufficient data’.

Finance leaders remain to be convinced. ‘Reference costs aren’t ideal in representing relative efficiency, in part because they don’t cover all activity,’ says Mr Hardy. And he adds that there are specific challenges with community and mental health data. But he suggests that relative efficiency would also need to take account of unavoidable fixed costs, associated with a trust’s inherited estate or private finance initiative deals.

Mr Hardy says finance practitioners need to be involved in any further discussions around any such approach on efficiency requirements – as well as broader payment system-related reforms. But he says finance practitioners’ role locally is even bigger.

The association has outlined this key finance role in its briefing Transforming healthcare: the role for the finance team. It is also reflected in Mr Hardy’s theme for his year as HFMA president – ‘Leading by numbers’. ‘Transformation needs to be clinically led, but it also needs to be financially informed,’ he says.