HFMA summer conference: national efficiency programme refresh

He told the event, which is being held virtually and in person in London, that the programme would concentrate on temporary staffing, medicines, specialised commissioning devices, corporate services, procurement, and pathway redesign. It would be underpinned by a focus on better data and benchmarking.

Mr Ridley (pictured left, with HFMA president Owen Harkin) said finance directors have asked for a framework for reducing temporary staff costs, particularly when having difficult conversations on which posts should be filled.

‘Having a toolkit, having a set of rules can be useful. We have seen in the past that, when we brought in a set of requirements, we made a step change in the agency pay bill. We will have an agency toolkit coming out shortly, and the policy is being finalised around agency caps, making sure we go back to tracking capped rates for agencies, and using framework agencies. And we will be setting ceilings for each system around agency costs.

‘We will learn a lot this year as we reintroduce these things. We will have to refine it going forward, but we think this is one area where a bit of rigour, a bit of assurance and additional reporting will be useful.’

A discussion about the use of bank staff had been started, but this was ‘a much more nuanced area’, and further engagement was needed, he added.

There was a lot of work on procurement, with the recent launch of the NHS England central commercial function and single e-commerce platform, Atamis. The service will not be obliged to use the latter, but Mr Ridley encouraged its use as it will generate data to support better procurement.

NHS England was also reviewing the model health system, with a view to making it more useful for frontline leaders.

Financial rigour

Mr Ridley said a return to financial rigour was required.

‘At its most basic level we have to return to the funding levels described in the long-term plan. We have been through a period of cost growth in response to the pandemic and it’s always harder to take the costs out. We’ve also had two years of operating in very different ways, and I know it is difficult to start getting your organisations back into that conversation about cost improvement processes and getting back to where we were two-and-a-half years ago.’

But, acknowledging the difficulty of the situation, he said that while taking costs out, the NHS had to recover its services, and Covid was still affecting activity.

Productivity continued to be a big challenge in 2021/22 and, though it increased by 17.2% compared with 2020/21, it remained about 15% behind 2019/20 levels. The issue was felt by almost every organisation, and was ‘difficult to pull back’, but the NHS was being held accountable for this measure.

‘Pulling productivity back has got to be the answer to stay within our cost base but still treat the sheer number of patients we have to treat. Productivity is the key challenge going forward.’

There has been a significant increase in workforce across substantive, agency and bank staff over the last two years, while workforce plans in each region suggested further growth. But with this increase there now comes the challenge of meeting expectations of higher activity levels. ‘We are now talking about a workforce that is at the upper edges of our ability to afford it – can we get the activity and productivity we need from the workforce we have to recover our services?’

Most systems were behind in their cost improvement programme (CIP) plans at month 2, he said, and the plans included a lot of non-recurrent measures. He acknowledged the difficulty with making efficiency recurrent, with current year plans setting out measures to deliver around 60% recurrently. ‘One of the themes this year and certainly nationally will be that we are almost more interested in run rate and where the exit position is this year.’

The 2022/23 planning process had been ‘tortuous’, he said, but as systems moved to finalise plans, he saw them coming together to make difficult decisions to get to a break-even position. NHS England would continue to monitor the risks, but he insisted the central body wanted systems to be proactive in highlighting risks.

Inflation risk

Inflation was a key risk, and the service had been allocated an additional £1.5bn largely to help with inflationary pressures that could only be dealt with nationally. But locally, systems had to get back to the basics of financial discipline and influence matters within their control.

From quarter 3 NHS England wants to work with systems to understand how they could compensate for non-recurrent savings that will be pushed through to deliver a balanced position at the end of the financial year. The central body had made a number of requirements in exchange for the funding, including engagement with national pay and non-pay actions, as well as use of the HFMA financial sustainability checklist.

Some of the feedback is that the 31 August deadline for internal audit sign-off on this review is not realistic, so the date will be moved.

He noted other areas of flexibility from the centre. The clinical commissioning group financial position at month 3 closedown will be neutralised. However, he asked for any special severance payments to be notified to the HR director and regional HR director as soon as possible to avoid potential difficulties during the external audit.

He aimed to simplify and automate as much of financial reporting as possible. Month 4 reporting for integrated care boards would be streamlined. ‘For month 4 reporting, we have agreed to reduce the requirements, particularly on commissioners – the ICB side – because we know how much else you’ve got on at the moment. We will try to take a little bit of pressure off.’

Looking forward to 2023/24 and 2024/25, he said the aim was to move back to population-based allocations and allocate as much as possible to ICB level. Longer term, NHS England was looking to ‘build meaningful, multi-year allocations’. The next two years would continue to be challenging, and the current best estimates of the national efficiency requirement is 2.5% to 3.5%.