Supplementary memorandum from the Chief
Executive, NHS Department of Health
"NHS PAY MODERNISATION IN ENGLAND: AGENDA
FOR CHANGE": DELIVERY OF AT LEAST £1.3 BILLION NET SAVINGS
OVER THE FIRST FIVE YEARS
Thank you for giving me the opportunity to provide
further information relating to whether we delivered "at
least £1.3 billion" net savings in the first five years
of Agenda for Change.
The £1.3 billion savings, as were to come
from:
— gains from increased productivity;
— gains from increased staff resources
("participation rates"), for example because this would
reduce the need to use expensive agency staff;
— a reduction in pay drift from its historical
average of 1.6%. Pay drift is the rate at which average earnings
increase above the rate of the annual pay award; and
As I said at the hearing, it is difficult to
separate out the savings that could be attributed to one programme
when a range of other initiatives were also being introduced at
the same time. In the event, the approach to measuring savings
was overtaken and subsumed in the cross Government efficiency
programme (Gershon), the priority being to deliver savings, not
assign them to different programmes.
The methodology used to assess the extent to
which savings were being delivered, was set out in our Productive
Time programme, part of our contribution to the cross Government
efficiency programme.
As was explained by Clare Chapman, Director
General, Workforce At DH, Productive Time involved the integrated
impact of the following three workstreams:
— the new workforce contracts, of which
Agenda for Change was one;
— process redesign which aimed, for example,
to encourage a reduction in variation in length of stay for common
surgical procedures; and
— the introduction of new technology. I
referred in the hearing, for example, to the handheld computers
that community nurses use to record their visits to patients,
saving administration time and paperwork.
The Productive Time programme, which was published
in our Departmental Autumn Report 2008, shows that we have exceeded
our target of delivering £2.9 billion of annual savings by
March 2008, building cumulatively over the four years of the Productive
Time programme to achieve nearly £3.1 billion.
In the attached paper, I include examples of
how the introduction of the Agenda for Change contract has contributed
to delivering savings and provide an assessment of the extent
of those savings.
In addition, the NAO report identified that
other savings contributing to this £1.3 billion figure include
"a reduction in the likelihood of equal pay claims".
Neither we here, nor the NAO in their report, have sought to estimate
the value of this reduction, due to the uncertain outcome of ongoing
legal action. However, it is worth noting that the NAO reported
"There is a widespread view in the Department and amongst
NHS Employers and other commentators that Agenda for Change has
made it easier to show that NHS pay is fair and equitable".
I would also like to take this opportunity to
remind you that we are continuing our work to improve measures
for quality that should more fully reflect the gains I believe
we have made over the past years.
The Office for National Statistics (ONS) include
a partial measure of quality in their estimates of NHS productivity,
but this is crude and almost certainly understates the gains we
have made. Nonetheless their most recent article did conclude
that NHS quality, on their narrow measure, was increasing by 0.5%
a year from 2001 to 2005. This quality improvement has a value
of around £370 million a year. The Agenda for Change "share"
of this quality improvement (based on Agenda for Change spend
as a proportion of total NHS spend) would be around 36% or £133
million a year.
I explained that we have commissioned work from
York University to improve the quality measure. The York study
is a three part research project that will first refresh and update
the output measure, then improve the measurement of inputs before
going on to suggest improvements to the quality adjustment. The
report expected at the end of this month reports on the second
stage. Once Ministers have had the opportunity to consider their
work, I will provide you with a copy.[4]
In conclusion, my assessment of the savings
attributable to the five years of the Agenda for Change contract,
is within a range of between £1.1 billion and £2.2 billion.
25 March 2009
Annex
Q.109: Did we deliver "at least £1.3
billion" net savings over the first five years of Agenda
for Change?
1. INTRODUCTION
The Productive Time programme, part of the Department
of Health's contribution to the Gershon cross Government efficiency
programme, has been used to assess the impact of Agenda for Change,
providing the most appropriate measurements available.
The "Productive Time" programme covers
two of the four contributors to the savings set out in paragraph
2.20 on page 18—"(i) gains in increased productivity"
and "(ii) gains from increased staff resources". In
terms of the effect of Agenda for Change on the pay bill, of which
"(iii) reduction in pay drift" is a part, the NAO report
concluded that the effect of Agenda for Change was more or less
neutral. One of the NAO's scenarios gave a saving (£604 million
over five years), and the other a cost (£186 million over
five years)—the details are set out in Figure 5 on page
18 of the report.
Finally, a partial measure for "(iv) higher
quality care" has been included in the calculations but will
need to be revised in due course once the York work on quality
measures has been concluded.
2. PRODUCTIVE
TIME
The Productive Time programme ran from April
2004 to March 2008 so broadly mirrors the Agenda for Change period
the PAC is interested in.
Three main areas of opportunity for savings
in productive time were identified:
— IT (the National Programme for IT, "Connecting
for Health").
— Process Improvement (the NHS Institute
for Innovation and Improvement's High Impact Changes and subsequent
developments of this work).
— Pay Modernisation (Agenda for Change,
Consultant Contract and GP Contract).
DH recognised that the measurable outcomes overlapped
across the three programmes. Within the NHS, it was anticipated
that changes would be planned and managed in an integrated way
with these three programmes acting as enablers to organisational
improvement. Out of this thinking, the Integrated Service Improvement
Programme (ISIP) was developed. This was referred to in the hearing.
This is the key reason efficiencies were not
monitored separately to pay reform. The NAO endorsed this approach
in their first study of Gershon efficiency in 2005.
This rationale is documented in Appendix 1 pages
23-37 of the Efficiency Technical Note (ETN), which accompanied
the published Productive Time Measurement Templates. The templates,
where Agenda for Change was identified as having contributed to
delivering efficiency savings, have been used as a basis for calculating
the contract's contribution over the period of the Productive
Time programme (see section 4 below).
The ETN can be found on the DH website at:
http://www.dh.gov.uk/en/Publicationsandstatistics/Publications/PublicationsPolicyAndGuidance/DH_081430
The savings from our Productive Time programme
were published in our Autumn Performance Report 2008 and can be
found in Chapter 4: "Value for Money" at:
www.dh.gov.uk/en/Publicationsandstatistics/Publications/PublicationsPolicyAndGuidance/DH_091854
3. PRODUCTIVE
TIME EXAMPLES
Below I set out some examples of how the NHS
has delivered productive time improvements through the use of
the Agenda for Change contract. The following show how employers
have improved service delivery by using Agenda for Change.
(i) Reduction in length of stay for
elective in-patients
Aintree University Hospitals NHS Foundation
Trust has adopted a partnership approach between management and
staff, to create new roles, made easier by the Agenda for Change
job evaluation process. The establishment of a breast link nurse
in cancer services has supported patients returning home, improving
productivity by reducing length of stay (190 bed days in 17 weeks)
and patient experience.
(ii) Reduction in emergency bed days
Dartford and Gravesham NHS Trust improved its
stroke service by using the NHS Knowledge and Skills Framework
to strengthen staff competencies. Agenda for Change enabled the
service to be redesigned and a new role to be created. The introduction
of the Stroke Pathway Nurse means that patients are now treated
on a dedicated rehabilitation ward, with better therapeutic input.
Care has become more consistent, resources used more effectively
and length of stay, bed occupancy and incidence of healthcare
associated infection all reduced.
(iii) Reduction in "did not attends"
Waiting times for the audiology service provided
by Central Manchester PCT have been reduced to zero. Using the
NHS KSF, staff have been trained to decide which audiology tests
to apply, improving the efficiency with which diagnosis is reached.
Agenda for Change out of hours arrangements have enabled an extended
working day and longer working week. New roles have been created
using the Agenda for Change job evaluation process. Assistants
set up rooms allowing audiologists to concentrate on serving patients,
improving skill mix.
(iv) Reduction in staff sickness
The National Blood Service used Agenda for Change
to standardise working practices across the country, its harmonised
terms and conditions providing the basis for reviewing regional
differences. The NHS KSF and Agenda for Change job evaluation
supported the introduction of new and extended roles to support
service redesign. Outcomes included "round the clock"
working, where needed; reduced medical input; reduced courier
costs; and improved staff morale reflected in reduced sickness
absence.
(v) Reduction in Cancelled Operations
Preoperative assessment can be carried out by
telephone for fit patients having minor procedures. Hospitals
that assess six weeks before admission have reduced postponement
rates to 5% through better skill mix. Many hospitals use the NHS
KSF to ensure nurses with the appropriate clinical expertise and
experience have the skills to undertake telephone pre operative
assessment. If consultants do pre operative assessment, they often
do them too near to the procedure date, increasing the chance
of cancellation.
(vi) Reduction in Use of agency Staff
Avon and Wiltshire Mental Health Partnership
NHS Trust has been using Agenda for Change job evaluation and
the NHS KSF to tackle recruitment and retention issues in nursing
by creating new roles including associate mental health practitioners,
community mental health workers and advanced practitioners. These
new posts are designed to attract a wider range of applications.
Partnership working with trade unions ensures that staff are able
to develop, progress and move into other posts over time. This
initiative has reduced the reliance on agency staff.
(vii) Better skill mix—introduction
of Emergency Care Practitioners
Agenda for Change helps support new roles which
improve efficiency and develop careers eg Emergency Care Practitioners
(ECPs).
About 900 ECPs are employed by ambulance trusts,
supporting urgent and emergency care. They are able to work independently,
treating at the scene adding value to services delivered in the
community, out of hours and primary care.
Agenda for Change supported recommendations
in "Taking Healthcare to the Patient: Transforming NHS
Ambulance Services" (2005) offering a career structure
up to ECP.
Since then, Agenda for Change has enabled a
better skill mix to provide a greater range of mobile healthcare
including a new role of Emergency Care Assistant (ECA) and increased
use of Emergency Care Practitioners (ECPs).
These changes help to develop a career structure
in the ambulance service that more closely mirrors that of the
wider NHS, with an emphasis on a range of roles that local ambulance
trusts can draw on to respond to local demand.
4. ATTRIBUTION
OF PRODUCTIVE
TIME AND
QUALITY SAVINGS
TO AGENDA
FOR CHANGE
STAFF
The following tables look at the key deliverables
of the Productive Time programme and attributes them first to
the Agenda For Change workforce and second to the Agenda For Change
contract.
Table 1 estimates, in the penultimate column,
what proportion of the realised efficiency saving is attributable
to Agenda for Change staff. The % estimates follow the following
logic:
— the reduction in length of stay reflects
the efforts of staff working in hospital (Agenda For Change is
75% of hospital staff costs);
— the reduction in emergency bed days reflects
the efforts of all staff, hospital, community and primary care
(Agenda For Change is 67% NHS staff costs); and
— the reduction in Did Not Attends is a
whole system effect, not simply attributable to staff effort (Agenda
For Change is 36% of total NHS spending).
Table 1
ATTRIBUTION OF PRODUCTIVE TIME AND QUALITY
SAVINGS TO AGENDA FOR CHANGE STAFF
| Key Performance Indicator
| Start point (April 2004) | End Point (Mar 2008)
| Cumulative savings over the period April 2004 to Mar 2008 (£million)
| Estimated contribution from AfC staff
| Cumulative Savings attributable to AfC staff (£ million over the period April 2004 to March 2008)
|
| Reduction in length of stay for elective in- patients
| 3 days | 2.5 days | 2,000
| 75% | 1,500 |
| Reduction in emergency bed days | 33,508,608
| 28,293,911 | 2,900 | 67%
| 1,950 |
| Reduction in Did not attends | 11.52%
| 10.60% | 90 | 36%
| 30 |
| Reduction in cancelled operations | 1.19%
| 0.91% | 35 | 36%
| 10 |
| Reduction in staff sickness | 4.71%
| 4.50% | 200 | 75%
| 150 |
| Reduction in use of agency staff | 5.2% of paybill
| 3.1% of paybill | 300 | 75%
| 225 |
| Better skill mix eg introduction of Emergency Care Practitioners (ECPs)
| 0 ECPs | 900 ECPs | 80
| 100% | 80 |
| Quality | £370pa | £370pa
| 1,480 | 36% | 500
|
| Total | | |
| | 4,445 |
| Rounded Down | |
| | | 4,400
|
| Notes: | |
| | |
|
(i) Figures rounded down. Those up to a 100, to the nearest
five, those above a 100, to nearest 50.
(ii) For length of stay, reduction in staff sickness and reduction
in agency, the proportion ascribed to staff on Agenda for Change
is based on their percentage of the overall Hospital and Community
Services (HCHS) paybill, 75%.
(iii) For emergency bed days, given the influence of GPs,
their paybill is added to HCHS, reducing the influence of staff
on Agenda for Change to 67%.
(iv) For DNAs, cancelled operations and quality, all of which
have a "system wide" impact, the influence of staff
on Agenda for Change is less still and assessed as the Agenda
for Change paybill percentage of overall NHS spend, 36%.
(v) For better skill mix, the impact is adjudged to be 100%.
(vi) The figures above except for quality are cumulative over
the 4 year period of the productive time programme.
(vii) Quality is an annual figure based on the ONS assessment
of 0.5% pa (£370 million per annu,) as a proportion of NHS
expenditure from 2001 to 2005. This has been extrapolated for
the Productive Time period.
Table 2, which provides a range within which it is estimated
that the new Agenda for Change contract itself has delivered Productive
Time efficiency savings, anticipating that some may have been
delivered anyway ie without the introduction of Agenda for Change.
The number and range of options illustrates the difficulty
of allocating efficiency gains to one particular programme at
a time when the focus of activity in the NHS was improving efficiency,
not attributing it to different modernisation programmes.
Table 2
ATTRIBUTION OF PRODUCTIVE TIME AND QUALITY SAVINGS TO
THE AGENDA FOR CHANGE CONTRACT
| Key Performance Indicator | Cumulative Savings attributable to AfC staff (£ million over the period April 2004 to March 2008)
| Cumulative Savings attributable to AfC contract (£ million over the period April 2004 to March 2008) [50%]
| Cumulative Savings attributable to AfC contract (£ million over the period April 2004 to March 2008) [33%]
| Cumulative Savings attributable to AfC contract (£ million over the period April 2004 to March 2008) [25%]
|
| Reduction in length of stay for elective in-patients
| 1,500 | 750 | 495
| 375 |
| Reduction in emergency bed days | 1,950
| 950 | 640 | 480
|
| Reduction in Did not attends | 30
| 16 | 10 | 8
|
| Reduction in cancelled operations | 10
| 6 | 4 | 3 |
| Reduction in staff sickness | 150
| 75 | 50 | 35
|
| Reduction in use of agency staff | 225
| 115 | 75 | 55
|
| Better skill mix eg introduction of Emergency Care Practitioners (ECPs)
| 80 | 20 | 13
| 10 |
| Quality | 500 | 250
| 165 | 125 |
| Total | 4,445 | 2,205
| 1,450 | 1,100 |
| Rounded Down | 4,400
| 2,200 | 1,450
| 1,100 |
This methodology produces an estimated contribution from
the Agenda for Change contract to efficiency savings of between
£1.1 billion and £2.2 billion over the period April
2004 to March 2008 based on a range of assumptions that the Agenda
for Change contract might have delivered between a quarter and
a half of the benefits attributed to Agenda for Change staff themselves.
5. CONCLUSION
At this time, therefore, DH considers that between £1.1
billion to £2.2 billion might be attributed to the introduction
of the Agenda for Change contract over its first five years from
increased productivity, increased staff resources and improved
quality. Although the methodology used here does not define the
impact that Agenda for Change has made on the ground, we believe
that on a number of reasonable assumptions it illustrates the
likely scale of effect.
The quality contribution will be reassessed once DH has seen
the report from York University.
Finally, one of the most important aspects of Agenda for
Change is its ability to provide fair pay based on rigorous job
evaluation. There was an estimate included in the business case
to HMT of savings from fewer equal pay cases which was part of
the "at least" £1.3 billion. DH is not in a position
at this time, to assess the extent of any such savings given ongoing
legal proceedings in which a number of key issues relating to
Agenda for Change and preceding pay arrangements are being considered.
At the moment, it is also unclear how long the legal process will
take as that will depend on how the parties react to the Judgment
expected at the end of this month.
4
http://www.york.ac.uk/inst/che/pdf/rp47.pdf Back
| 
