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You’ve got to think differently to save more cash, MPs tell the NHS

Current approach isn’t working and future financial sustainability is under threat

Caroline White

Tuesday, 03 February 2015

The NHS will have to ditch the approach it has been using in recent years to save cash if it is to safeguard its financial viability, say MPs.

The savings required across the NHS will be difficult to achieve solely by continuing with the same approach, concludes a report* from the parliamentary Public Accounts Committee (PAC) published today.

The NHS has typically achieved efficiency savings of 1%–2%, partly through pay freezes, but its annual target is 4%.

"From all our work across all of government, the fragility of the NHS finances causes me greatest concern,” said PAC chair Margaret Hodge.

The financial health of the NHS has worsened in the last two financial years, with the percentage of NHS trusts and foundation trusts in deficit rising from 10% in 2012–13 to 26% in 2013–14. Most (80%) of foundation trusts that provide acute care were reporting a deficit by the second quarter of 2014–15.

The government has pumped in an extra £1.8 billion to shore up NHS trusts and foundation trusts feeling the squeeze in 2006–07 and 2013–14. But the overall net surplus achieved by NHS bodies in 2012–13 of £2.1 billion fell to £722 million in 2013–14, says the report.

NHS England, Monitor and the NHS Trust Development Authority recognise that radical change and extra resources are required if the NHS is to become financially sustainable, said Mrs Hodge.

“This includes making better use of community and primary care services to reduce pressure on hospitals,” she said. But she warned: “Making this change will require significant upfront investment, but the money available for this is reducing as the number of organisations in deficit increases.”

The current system of paying for emergency admissions hinders, rather than helps, secure the financial sustainability of NHS bodies, says the report. The tariff paid has been set low to discourage admissions, but the number of emergency admissions has increased by 48% over the last 15 years, leaving hospitals out of pocket, and compounding the strain on their finances, says the report.

Monitor and NHS England should complete their review of the national payment system for emergency admissions promptly and implement the required changes within the next year, it recommends.

The costs of agency staff is another area of concern, says the report. Between 2012–13 and 2013–14, the amount the NHS spent on temporary medical staff to cover shortfalls increased from £2.1 billion to £2.6 billion.

“It costs the taxpayer £400,000 to train an emergency consultant, but there are claims that some consultants are choosing to leave the NHS to work on an agency basis at a substantial cost to the NHS, with typical charges of £1,760 per day. The Department should make better use of the NHS’ position as the dominant employer of temporary medical staff and require NHS bodies to use agency staff within a national framework contract,” said Mrs Hodge.

Further savings could also be made under private finance initiative schemes, which cost the NHS some £1.8 billion a year, says the report. Funds tied up in surplus capital assets could be used for upfront investment in new models of care, suggests the report, highlighting the £1.5 billion worth of unused land and premises in London alone.

“It is clear that the old ways will no longer work – radical change is required to make the NHS financially sustainable," said Mrs Hodge.

The report recommends that NHS England and Monitor collect consistent and detailed cost data across the NHS to set efficiency savings targets for NHS bodies and to assess whether changes to service provision, are achieving measurable and sustainable savings in practice.

More effective collaboration between local health bodies is needed to achieve better value for money, with a more integrated and better aligned system of payments, says the report. National bodies have not done enough to improve local strategic decision making, leading to a gap between what clinical commissioning groups plan to spend and the income that trusts expect to receive.

Rob Webster, chief executive of the NHS Confederation said the report reflected what everyone already knew—that radical change was required.

“The alternative is that the NHS will reach a point at which finances could collapse quickly. Given very high satisfaction with the NHS reported in the most recent British Social Attitudes Survey, this is not something the public or the NHS would be prepared to see,” he said.

“All political parties need to make clear how they will ensure both the NHS and social care are sufficiently funded. By 2020 we will need to see at least £8bn of extra funding each year and £22bn of efficiencies delivered. Alongside this, social care services will need funding. An honest debate is required to give the public a better understanding of the choices we face,” he said.

* Public Accounts Committee - Thirty-Fifth Report: Financial sustainability of NHS Bodies. February 2015

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