- The new NHS funding settlement and the forthcoming long-term plan offer an opportunity to address systemic operational and financial pressures in the provider sector and transform the way healthcare is delivered. How far trusts can drive efficiency will be a crucial factor in determining how much the new money will result in an improved offer to the public.
- Trusts have consistently delivered impressive efficiency savings in each year since the beginning of austerity in 2010/11. Providers delivered almost £7bn of recurrent efficiency savings in the past three years alone (NHS Providers, 2015, 2016, 2017, 2018), on top of the £20bn 'Nicholson challenge'delivered from 2010 to 2015. The NHS already performs well on length of stay, administration spend and drugs compared with other health systems internationally. These are significant achievements which should be celebrated.
- However, trust leaders across ambulance, community, mental health and hospitals are clear that they have now largely exhausted the 'easily realisable' savings from within their own organisations. They are increasingly reliant on non-recurrent savings or on more ambitious, longer-term transformation plans which require central support and upfront investment, as well as productive partnerships in local systems.
- There are three main categories of efficiency: cost reduction schemes, productivity improvements and system efficiencies. There should be an acknowledgement that, for each of these categories, the scale of the opportunity and time required to realise efficiencies will vary significantly and are dependent on local context. Trust leaders are also clear that some efficiency activity leads to improvements in care quality and as opposed to the release of cashable savings. This needs to be taken into account more effectively in national assumptions on efficiency.
- Since 2010/11, the assumption has been that the rate of savings will accelerate if trusts are given a stretching efficiency requirement through a real terms deflation of payments to providers. To some extent the provider sector has responded well to this and achieved unprecedented levels of efficiencies. However, the evidence since 2014/15 demonstrates that an over ambitious efficiency requirement simply leads to a larger provider sector deficit. Using an ambitious efficiency requirement to make the NHS budget balance is inherently risky.
- Trusts believe that better system working, integrating services and addressing workforce challenges offer the greatest opportunity to improve quality of care and patient experience, as well as reduce costs and use resources more efficiently. Trusts are committed to pursuing these approaches, but need adequate time to implement and deliver on ambitious local system-wide efficiency programmes. Trusts believe this work could be accelerated if there was a better balance between, on the one hand, support for longer-term transformation and, on the other, frameworks that encourage short-termism, such as the cost improvement programme (CIP) and control total regimes.
- While trust leaders can see efficiency opportunities both within their organisations and, to a greater extent, at a system level, they are less confident that they can continue to make efficiencies at the current rate. They are therefore looking to the long-term plan to set a stretching, yet deliverable, efficiency requirement of the sector. This requirement should be based on realistic assumptions and be accompanied by a framework setting out the potential areas of savings and the support trusts can expect from peers and national bodies.
- Trusts welcome the support offered by NHS Improvement and embrace the value of programmes such as Lord Carter’s efficiency and productivity work, Getting it right first time (GIRFT) and Model Hospital. They are, however, more sceptical about some of the bold extrapolations these programmes have made about the size and speed of efficiency savings that can be realised. Trusts told us that they would like more support, rather than punitive action, from the central bodies.
- Overall, trusts recognise their responsibility to plan for and deliver a stretching efficiency ask within their trusts and local systems. Trust leaders believe that a stretching efficiency requirement is more likely to be delivered if:
a) national system leaders, trusts and local systems work in partnership to agree a realistic efficiency requirement and timeframes for delivery rather than have these centrally imposed, top down, from the national system level
b) national system leaders do more to help trusts and local systems identify and share learning from across the country about where efficiencies can be delivered
c) national system leaders are realistic about the extra support that trusts and local systems will need to realise the transformational savings and local system focused savings that must now form the focus of efficiency and productivity activity
d) any efficiency delivery assumptions explicitly match the capacity and capability available on the frontline given the ambitious list of other priorities trusts are expected to deliver.