Audit Commission defines NHS management costs

BMJ 1995; 310 doi: (Published 10 June 1995) Cite this as: BMJ 1995;310:1485

About pounds sterling900m was spent on senior management in NHS trusts in England and Wales in 1993-4—about 4% of the trusts' revenue. When other administrative and clerical posts are added the percentage rises to 10.5%. These figures, published last week by the Audit Commission, do not show whether management costs in trusts have risen since the NHS reforms.

A Price on their Heads: Measuring Management Costs in NHS Trusts does, however, provide a standard definition of senior management costs. This is based on the work that managers do rather than their grades, and it includes the cost of sessions paid to clinical directors for their management responsibilities. This definition will, claims the report, allow future changes in management costs to be assessed. In the meantime, the Audit Commission has used it to assess variations in costs between trusts and hopes that trusts will use the report to assess their own costs in relation to those of others of a similar size.

Average expenditure on senior management for each trust in 1993-4 was pounds sterling2.1m. The overall variation was from pounds sterling0.5m to pounds sterling6m, and most of that was accounted for by the size of the trust. The Audit Commission found no evidence that the type of trust (acute or otherwise) or the use of middle managers to substitute for senior managers explained the variation. The report concludes, however, that whatever the causes of above or below average expenditure “they appear to be manifested through the number of managers rather than their salary levels.”

The commission warns politicians that, without more information, reducing management expenditure “is a dangerous game, however popular it might make the player.”

The NHS Trust Federation last week endorsed the Audit Commission's method of defining management costs and said that trusts should use it to provide a concise statement on management costs in their annual reports. The federation also wants to see these costs linked to performance measures and recommends research into the costs and performance of other health care systems, especially in western Europe and North America.—JANE SMITH, BMJ

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