House of Commons - Public Accounts

Select Committee on Public Accounts Twenty-Ninth Report

1 The cost and extent of use of temporary nurses

1. Most NHS trusts experience fluctuations in the numbers of nursing staff available for work as well as variations in activity at different times of the day, week or year. Traditionally NHS trust have met these fluctuations by using temporary nursing cover, either from their own nursing banks or by procuring staff from independent nursing agencies and, since 2001, from NHS Professionals (see Figure 1).[3] In 2001, the Department of Health (the Department) stated it expected that anticipated growth in the NHS workforce, under the NHS Plan, would significantly reduce its demand for temporary staff. It subsequently stated that this anticipated reduction related only to the use of agency staff, which it has successfully reduced.[4] Figure 1. Types of temporary nurses and associated cost per hour

Description Average Cost to employ per hourⁱ

Permanent Nurse Part-time or full time nurse employed permanently by an NHS trust. These nurses can work additionally as a temporary nurse through a bank, NHS Professionals or a private agency. £14.84

Nursing Bank A nursing bank provides a reserve of nursing staff within the trust. They are normally run by the trust but can be run by an external organisation. Bank nurses are NHS employees who are willing to work extra shifts when needed either for their own or a neighbouring trust bank. £13.73

NHS Professionals NHS Professionals is the NHS's "in-house" temporary staffing service, established as a Special Health Authority in 2004. With the agreement of a trust, NHS Professionals takes over the running of the trust bank and manages these as a central operation. NHS Professionals pays its staff NHS terms and conditions, and these staff may have a permanent post in the NHS. The difference in costs is essentially the difference between bank over-heads compared with the NHS Professionals commission rates. £13.51

Nursing Agency Nurses can decide to work for nursing agencies which are private companies that supply temporary nurses to trusts. Agency nurses may also have a permanent post in the NHS or other healthcare provider. The commission rate charged by the agencies is the main reason for the cost differentials. £19.11 (or £16 if agency is on a framework agreement)ⁱⁱ

^Notes^{:
i) Cost to employ a D Grade Nurse for one hour in a permanent
post, through a nursing bank, through NHS Professionals, and through
an Agency in 2005. (Figure 17 in the C&AG's Report). ii)
Since 2001, The NHS Purchasing and Supplies Agency has operated
a number of regional framework contracts aimed at improving the
quality and reducing variations in cost of staff supplied by Nursing
Agencies.}

2. In 2000, the NHS Plan identified that the NHS needed to recruit an additional 20,000 nurses by 2004 to meet its needs. As a result of national and local initiatives for example increasing the number of training places and recruiting overseas, between 2000 and 2005 the NHS increased the size of its permanent nursing workforce by 55,000 whole time equivalents (from 267,000 to 322,000).[5] Despite this increase in numbers, the expenditure on temporary nurses fell only slightly as a percentage of total expenditure on the nursing workforce—from 10% in 1999-00 to 9.4% in 2004-05. The NHS has been more successful in reducing its expenditure on agency nursing staff, however, from a peak of 7% in 2001-02 to 3% in 2004-05.[6]

3. The Department was not surprised that the significant increase in numbers of nurses had not made a bigger inroad into demand for temporary cover. The increased levels of nursing staff were used to increase capacity within the NHS system by, for example, reducing waiting times and improving services for cancer and coronary heart disease patients. Increased staffing levels also led to a need for increased cover for extra numbers of temporary absences.[7] Nonetheless, the Department estimate that the level of expenditure on temporary nurses has now fallen to 8.5% in 2005-06, and that the provisional figures for 2006-07 suggests a continuation of this downward trend.[8]

4. The National Audit Office calculated that the average cost of employing a permanent D Grade nurse for one hour was £14.84 compared with, £13.83 for a bank nurse, £13.51 for an NHS Professionals' nurse and £19.11 for an agency nurse although nurses employed by an agency on a framework agreement are likely to cost around £16 an hour (Figure 1).[9] Agency staff can be up to 29% more expensive than equivalent permanent nursing staff, the NHS has focussed on reducing expenditure on agency staff (from £330 million in 2003-04 to £240 million in 2004-05). This reduction was therefore a main contributory factor in the fall in total expenditure on temporary nurses (from £830 million in 2003-04, to £790 million in 2004-05).[10] This fall has continued in 2005-06 and 2006-07. Indeed for trust facing deficits, a reduction in temporary staff is a relatively straightforward and convenient way of reducing expenditure.[11]

5. In 2004-05, the NHS employed a total of 404,000 nurses by headcount and 322,000 whole-time equivalent nurses.[12] The Department, however, do not have any exact figures on the number of temporary nurses working in the NHS as the picture is complex. For example, permanent nurses can also work extra hours for a bank or an agency. Nevertheless, the Department estimated that the number of full time equivalent temporary nurses is likely to be around 37,000. The Department's workforce survey shows that in September 2004, there were some 26,000 full time equivalent nurses that also work as bank nurses, suggesting that 11,000 full time equivalent nurses were working solely as agency nurses.[13]

6. Figure 2 sets out the Department's estimates of the total NHS expenditure on temporary nursing staff in each of the last 10 years, sub-divided into agency and bank spending, together with estimates of the numbers of shifts covered. These show that activity and expenditure rose year on year for the first 7 years, with an increasing proportion spent on agency staff. Since 2002-03 the trend has started to reverse, however, largely because of reductions in the use of agency staff (Figure 2).[14] The Department's estimates are higher than the agreed figures in the Comptroller and Auditor General's report as the report focussed only on acute and foundation trusts.[15]

Figure 2. Department of Health's estimate of the number of shifts worked and the estimated expenditure on all temporary nursing staff employed across the NHS

Source: Department of Health[16]

7. In 2005-06, 2.6% of nurses were employed by commercial agencies.[17] The Department stated that its aim was not to eliminate the use of agency nurses, but rather to ensure that it has a cost-effective and good-quality temporary workforce. It noted that there was a role for agency nurses to play and that it would be content for the level of usage to remain at around 2%.[18] However, the Department believed that as they are more expensive to employ, agency staff should only be used when there is no alternative option, such as in cases where there is a lack of availability of nurses with a specific expertise.[19]

8. Demand for temporary nurses is driven by factors such as staff vacancies, sickness and poor planning of annual leave.[20] In June 2005, the Healthcare Commission estimated that £141 million could be saved by cutting nursing staffs' sickness absence rates by 30% from 7.5% (6.8 days) to 5.25%.[21] Sickness absence within the NHS overall has been declining over the last eight years, but by a relatively small margin from 4.9% to 4.5%. The Department has been working with NHS Employers to encourage the adoption of good practice to reduce sickness absence levels still further, with a specific focus on tackling the cost of long-term sickness absence (mainly back problems and stress).[22]

9. The National Audit Office report showed that there are wide variations in the use of temporary nursing staff between trusts. These range from less than 1% to 29%.[23] There are also wide variations within and between regions.[24] The Department acknowledged these variations and suggested that they are caused by factors such as poor management, inadequate planning, and specific recruitment difficulties encountered by specialised organisations. It did not believe that it should set a target, but would not normally expect NHS organisations' usage of temporary nursing staff to exceed 15%, while usage of between 6-7% might be reasonable in rural areas.[25] Strategic Health Authorities have been monitoring organisations with temporary nurse levels above 20%.[26]

10. The use of temporary nurses is lower in remote locations and the associated costs are not as high because the staff tend to be drawn from the local bank and are paid at the normal NHS rate, rather than at higher agency rates.[27] The proportion of expenditure on temporary nursing as a percentage of total expenditure on nursing staff is higher in London and the South of England.[28] The Department attributes this higher expenditure to the fact that there is a more transient workforce and more alternative employers in these areas.[29] The Department did not expect its new system of payment for hospitals based on the number of patients treated (Payment by Results) to lead to a variance in staffing or a sudden rise in the use of temporary staff because most of the distribution of work would come through planned activity, or emergencies, which are relatively constant.[30]

11. The Department accepted that the use of temporary nurses was being reduced in certain trusts in response to financial difficulties within the NHS as it was seen as a relatively straightforward and convenient way of decreasing expenditure. Nonetheless, reducing the use of temporary nurses would not on its own address the issue of deficits. The causes of deficits are complex and the extent of using temporary nurses is not necessarily linked to deficits.[31] The Department consider that reductions in the level of use of and expenditure on temporary nurses since 2005 were not solely a direct response to financial troubles within the NHS, and that its work to reduce temporary nursing preceded the current financial difficulties.[32] Moreover, it had been working with the highest spending trusts to exchange information on best practice prior to the start of the National Audit Office's investigation.[33]

12. There is a risk that NHS reconfiguration might distort the use of temporary staff. In running an organisation locally, trust management has to take into account what the medium and long-term position of the organisation might be. There might be some circumstances in which the trust needed to increase the number of temporary nursing staff on a temporary basis to maintain services in the short term during reconfiguration. There is no national policy on this issue and local managers and clinicians have to make judgments based on their local circumstances. If it makes sense and is safe for patients then the Department would certainly condone it but not if it was done in an unplanned way or in any way that affected the care of individual patients.[34]

3 C&AG's Report, para 1.1; Figure 3 Back

4 C&AG's Report, para 9; Qq 75-76, 171 Back

5 C&AG's Report, para 2.7 and Qq 31-32 Back

6 C&AG's Report, para 1.7; Q 31 Back

7 Q 9 Back

8 Q 4 Back

9 C&AG's Report, para 3.5, Figure 17; Qq 149-152 Back

10 C&AG's Report, paras 1.7-1.8, 3.5, Figure 17; Qq 34, 104-105, 170 Back

11 C&AGs Report, para 1.16; Qq 2-7, 71-72 Back

12 NHS Workforce Survey 2005, Information Centre, April 2006 Back

13 Qq 157-174 and note to Q 174 Back

14 Ev 18-20 Back