Conclusions and Recommendations
1. The savings required across the NHS will
be difficult to achieve solely by continuing with the same approach
used in recent years.
The NHS has typically achieved efficiency savings of 1%-2% against
a target of 4% set by Monitor and NHS England. These savings were
achieved partly through wage freezes. NHS England, Monitor, and
other NHS bodies recognise that radical change is needed to the
way healthcare is provided, including making better use of community
and primary care services to reduce pressure on hospitals. 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 national oversight bodies also lack
the detailed and accurate cost data from local NHS bodies needed
to monitor and identify cost savings achieved and whether they
are sustainable in the longer term.
Recommendations: NHS England and Monitor
should collect consistent and detailed cost data across the NHS
to use to set efficiency savings targets for NHS bodies and to
assess whether changes to service provision, including new models
of care, are achieving measurable and sustainable savings in practice.
2. More effective collaboration between local
health bodies is needed to achieve better value for money. The
different payment mechanisms and financial incentives for local
health bodies are not aligned to encourage the sort of integration
required to implement the proposed new models of care. For example,
community care services tend to use block contracts where payments
are not based on the number of patients handled, whereas acute
services are paid on the basis of activity using 'payment by results'
tariffs. This creates a financial disincentive for acute hospitals
to give up activity, and for community services to take on additional
activity. NHS England and Monitor are consulting on changes to
the way healthcare is paid for. However, 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.
Recommendations: NHS England, Monitor and
the NHS Trust Development Authority should require all local health
economies to submit integrated strategic and operational plans
that outline how they will implement locally the proposed new
models of care. NHS England and Monitor should implement proposals
for changing payment for healthcare, to incentivise the integration
of services between local organisations by 2015-16.
3. The current system of paying for emergency
admissions hinders, rather than helps, secure the financial sustainability
of NHS bodies. Although emergency admissions
to hospitals have increased significantly in recent years Acute
trusts are only paid 30% of normal prices for all emergency admissions
above 2008-09 levels. This payment method was designed to discourage
unnecessary admissions on the basis that commissioners would invest
the remaining 70% of tariff income in ways that would improve
patient care outside hospital and reduce inappropriate hospital
admissions. However, for many acute providers these tariff arrangements
do not cover the cost of admitting emergency patients, and therefore
intensify the already difficult financial challenges the acute
hospital sector faces. While NHS England and Monitor plan to change
these arrangements they have been slow to act having identified
this issue in 2013.
Recommendation: 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 including updating the 2008-09 baseline,
taking into account the impact on patient care and the finances
of organisations in deficit.
4. The Department is not making the most of
cost saving opportunities. In 2013-14,
the NHS spent £2.6 billion on temporary staff, who can be
significantly more expensive than permanent employees, compared
with £2.1 billion in 2012-13. There are claims that some
consultants are choosing to work on an agency basis to make more
money at a substantial cost to the NHS, with typical charges of
£1,760 per day. Despite the NHS being the dominant employer
of temporary medical staff the Department has not made best use
of its position to reduce the costs involved. Some agencies do
not participate in the Department's framework contract which limits
local NHS bodies' ability to achieve value for money when hiring
agency staff, particularly those needed to fill high vacancy rates
in emergency departments. There is scope to make savings in the
amount paid under private finance initiative schemes, which cost
the NHS some £1.8 billion a year, as there are some examples
where refinancing or buying out existing schemes could provide
better value for money in the long run. There are also opportunities
to release funds tied up in surplus capital assets that could
be used for upfront investment in new models of care. For example,
there are some £1.5 billion worth of unused land and premises
in London alone.
Recommendations: The Department should:
· require
NHS bodies to use agency staff within a national framework contract
unless they can demonstrate clear value for money benefits from
local negotiation, and benchmark the cost of agency staff within
and outside the national framework;
· support
evaluation of alternative financing or operating options for costly
private finance initiative schemes where there is a clear opportunity
for improving value for money;
· accelerate
the disposal of surplus capital assets to release cash for upfront
investment in new models of care;
· Examine
the obligations it places on consultants who are trained at taxpayers'
expense and then choose to work as temporary staff at extra cost
to the NHS.
5. There are still 93 NHS trusts that have
not yet achieved foundation trust status and a significant number
are unlikely to do so.
The Government's intention is that all NHS trusts should become
foundation trusts. Monitor, which licences foundation trusts,
tests applicants for evidence of strong governance, long-term
financial viability and ability to provide quality services. The
NHS Trust Development Authority is reviewing how long it will
take for the remaining 93 NHS trusts to apply to Monitor for assessment,
by assessing their clinical and financial sustainability. The
NHS Trust Development Authority believed that there was a significant
number of trusts that would need at least four years, and that
these trusts would need to address significant financial challenges
before they could produce a financially viable plan.
Recommendation: The NHS Trust Development
Authority should set out how, and by when, it will put forward
to Monitor each of the remaining 93 NHS trusts for assessment
for foundation trust status. It should prioritise its efforts
on working with the minority of NHS trusts that will not achieve
foundation trust status in their own right.
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