1 Performance on productivity
1. In 2000, the Department of Health (the Department)
published the NHS plan, a ten-year vision for reforming the NHS.
The plan set out to increase funding to improve the quality of
care and outlined expectations that the NHS should improve its
efficiency and productivity. Between 2000-01 and 2010-11, NHS
funding will have increased by 70% to £102 billion, an average
real term increase of 4.5% a year. Over 40% of NHS expenditure
is on hospital services. While there have been improvements in
the NHS - such as better paid staff, improved facilities, shorter
hospital waiting times and better outcomes for patients with cancer
and coronary heart disease - productivity has fallen.[2]
2. Office for National Statistics (ONS) figures show
that overall NHS productivity fell 0.2% a year and hospital productivity
fell by around 1.4% a year from 2000 to 2008. Productivity is
the ratio between the volume of resources going into the NHS (inputs)
and the quantity of healthcare provided (outputs), adjusted for
relative costs and some aspects of quality.[3]
If inputs rise faster than outputs, then productivity goes down.
In 2002, the Department told Treasury that it would improve annual
productivity by between 1% and 2% a year in return for above inflation
pay awards.[4] Productivity
may fall at the start of a period of expansion as inputs in the
form of staff and equipment can be increased rapidly, while increases
in outputs tend to lag behind. However, we have now had ten-years
of almost continuous decline.[5]
The Department sees future improvements in productivity coming
from, for example, lowering the tariff for services, staff pay
freezes, reduced management costs and treating more patients as
day cases.[6]
3. The Department believes the ONS productivity measure
is too narrow and does not reflect quality improvements made in
the period, such as increases in the amount of face-to-face contact
time between clinicians and their patients.[7]
The Department has previously told this Committee that it was
working with the ONS to agree an NHS productivity measure that
reflected, more fairly, improvements in quality, but this work
has yet to be completed.[8]
4. In November 2009, the NHS Chief Executive announced
that the NHS and Department would need to deliver between £15
billion and £20 billion of efficiency savings per year by
2013-14.[9] The Kings Fund
estimates that this will require year-on-year productivity gains
of around 6%.[10] The
Department pointed to how, in some areas, the reform agenda complements
the delivery of savings; for example, by reducing management costs
associated with Strategic Health Authorities and Primary Care
Trusts, and in the requirement for hospitals to improve their
performance before becoming Foundation Trusts.[11]
However, a more devolved NHS will make it more challenging for
the Department to drive improvements from the centre and the Department
told us that, overall, the risks to delivering savings had increased
in light of the planned reforms.[12]
2 Q 1; C&AG's report, paragraph 1.1, 1.6 Back
3
C&AG's report, paragraph 1.7 Back
4
Qq 6, 41 Back
5
Qq 6, 8-9 Back
6
Qq 63 - 64 Back
7
Qq 1-4, 11, 44 Back
8
Public Accounts Committee, NHS Pay Modernisation in England:
Agenda for Change, 29th Report of Session, HC (2008-09)
310. Back
9
C&AG's report, paragraph 1.3; The NHS has since amended these
figures, which now stand at efficiency savings of up to £20
billion by the end of 2014-15. Back
10
Appleby J, Crawford R, Emmerson C, How Cold Will It Be? Prospects
for NHS funding: 2011 - 2017, 2009. Back
11
Q 145 Back
12
Q 144 Back
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