National Audit Office on NHS Efficiency – is it really a good news story?

Another of the pre-Christmas publications we didn’t get around to properly was the UK’s National  Audit Office (NAO) report on “Progress in making NHS efficiency savings”.

(But before we get into that – can I point out an interesting health job that’s being advertised on our Spend Matters search4 procurement jobs website – Chief Procurement Officer to lead Brighton & Sussex University Hospitals NHS Trust in a "radical procurement transformation programme". £80-100K and a genuinely fascinating and challenging role).

Anyway, back to the NAO report. The Department of Health estimates that to keep pace with demand and live within its tighter means, the UK’s National Health Service must make recurrent efficiency savings of up to £20 billion over the four years to 2014/15. This led to the “Nicholson challenge” to the NHS (Sir David Nicholson being the all-powerful Head of the NHS) – to make those savings via the QIPP programme (quality, innovation, productivity and prevention).

So the headline comment from Amyas Morse, NAO boss, in this new report is this:

“The NHS has made a good start in making substantial efficiency savings in the first year of the four-year period when it needs to achieve savings of up to £20 billion. To build on these savings and keep pace with the growing demand for healthcare, it will need to change the way health services are provided and to do so more quickly."

Digging into the report, that seems a surprisingly kind summary from Morse. A major factor here is something we’ve been banging on about for years – the methodologies for measuring “savings”.  Now the Cabinet Office, to give them their due, have improved in this area as far as central Government is concerned. Francis Maude may still talk about demand management savings (arguably “cuts”) as “efficiency savings”, but the actual measurement of these and other savings has become more rigorous.

But in other sectors within the public sphere, we’re still in the bad old days where a “saving” is, quite honestly, whatever the organisation feels like claiming. No standard methodology, no checks or audit, no control. And here, the National Audit Office could only substantiate £3.4 billion of the £5.8 billion “savings” reported by the Department of Health.  There is limited assurance on the numbers – “the Department does not validate or gain independent assurance about the data reported”.

NAO identifies that there has been limited guidance to Trusts in terms of measuring or reporting savings, the costs associated with making the savings (such as redundancy costs) are not always offset against savings, and some declared savings were one-off rather than recurrent. It is also not clear whether patients are being affected by the various ways in which trusts are applying “demand management” to  control costs.

Much of the saving has come from the pay freeze on medical staff  imposed by Government. There’s  little evidence of much real service transformation to date, yet the future plans for efficiency propose savings higher than have ever been achieved before.

All of this makes the NAO’s fairly positive overall headline a little surprising, and places a big question mark around whether this is really a decent start, or whether the proverbial is going to hit the fan sometime in the next 12 – 18 months, as demand continues to grow and funding is held flat in real terms.

You may notice that we haven’t mentioned procurement yet. Well, the ten-page NAO executive summary document doesn’t either. The full 49 page report has a couple of passing mentions in terms of procurement savings being on the agenda, but nothing about specific actions or any evidence of savings being achieved. All somewhat disappointing; given that at least a third of the NHS cost base arises from third party spend, we might have expected more discussion. However, it may be that, as NAO have produced some other reports more specifically aimed at procurement in the health service, they deliberately kept away from the topic here.

Or the lack of focus here may be indicative of the low priority most NHS Trusts still give to procurement, and to the lack of a co-ordinated approach to procurement improvement across the NHS, which we’ve commented on before. We’ve also highlighted issues with the procurement strand of the QIPP programme – some very good people have been involved, but hamstrung by having really limited resource to apply to the huge potential scope of work.

Now there are some interesting development afoot, which may make 2013 a more dynamic year for procurement in the NHS, but there’s a lot of work to do to get the subject up the agenda. And we suspect anyone reading beyond the NAO headline will be left in no doubt that the NHS faces some serious cost and efficiency challenges in the years ahead – let’s hope procurement can contribute towards meeting those.

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Voices (5)

  1. Dave Orr:

    Sam – Thanks. Read the summary and saw the dreaded in vogue “T” word (Transformation).

    Who can ever disagree with the aspirations in these documents (I want world peace, no hunger, clean water etc).

    It isn’t the WHAT or WHERE that is missing but the HOW of course

    NHS reform & savings will be made or lost on how well social care and health work together for the elderly and those with long-term health conditions.

    Massive cuts in Council funding (the brunt of cuts are in local not central government of course) are now impacting on Social Care for this key group and I am deeply pessimistic that there is a joined-up patient/person-centric approach to this issue from Home to GP to Hospital to Social Care/Community Health and back Home again.

    If GP commissioning leads to a spate of so called “strategic partnerships” (usually a euphemism for outsourcing but sounds better) then the experience here in Somerset (with the controversial joint venture with IBM called Southwest One) is that more money will be taken out of services, savings will be minimal and flexibility is lost amidst a complex (in this case 3,000 page) contract.


  2. Dave Orr:

    Is this management speak for a round of NHS outsourcing as great wads of NHS spend will be accessible in April via this Governments commissioning reforms (not in any manifesto) that have created another set of quangos representing GP Commisioning Groups?

    “To build on these savings and keep pace with the growing demand for healthcare, it will need to change the way health services are provided and to do so more quickly”.

    Next various CEOs and “experts” will start talking about the NHS services into Frontline, Mid & Back Office terms etc.

    I attended a major teaching hospital in London about 6 years ago when in a round of efficiciency savings, the low paid basic clerical staff had been decimated. The result was that I had to go up 3x (from Somerset) because the records were not up to date, records were missing and the very expensive Consultant Professor could not function safely or diagnose properly.

    Back Office failure = Frontline problem!

    1. Sam Unkim:

      Hi Dave …Theres more to QIPP than just back office.

      The RCN have a nice summary of it here

      But if you really want to deep dive

  3. Ronald Duncan:

    There is quite a lot happening in the NHS. Last May the let 3 frameworks covering spend analysis, procurement and transaction hub and we are the only supplier on all 3 frameworks so we can provide the combined solution of analysis and delivery of the savings.

    Just before Christmas the NHS Sustainable Development unit created the NHS Carbon Footprint hotspots report going down into the detail of the NHS Supply Chain Carbon footprint for the first time, and this will help deliver the 20% reduction in usage required to meet the carbon reduction targets.

    Lots happening in the NHS and a new review will be out shortly, then we should see some action.

    Come visit us again in the Thames Valley.

    @UK PLC

  4. Sam Unkim:

    More King Canute than Little Dutch Boy
    Without wanting to sound too pessimistic, NHS purchasing will not be able to make any net contribution towards the NHS slashing 20 million (1/6th!!) out of its budget.
    Whilst we are making savings, these are quickly dissolved away by increasing spend on I.T. & Software, Agency Staffing and Clinician demands for the latest sexy kit.

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