NHS must start reconfiguring services if it is to meet savings challenge, says National Audit Office

BMJ 2012; 345 doi: (Published 13 December 2012) Cite this as: BMJ 2012;345:e8480
  1. Gareth Iacobucci
  1. 1BMJ

The NHS in England has made a positive start towards meeting the government’s target of £20bn (€25bn; $32bn) in efficiency savings by 2014-15, but progress may stall unless attention is urgently shifted to transformation of services, auditors have warned.

The National Audit Office said that the NHS had delivered efficiency savings of £5.8bn in 2011-12, against a target of £5.9bn, by concentrating on the “easiest savings” borne from reducing national tariff prices by 1.5% and freezing staff pay for two years.

But its new report said that the NHS would struggle to repeat these savings for the remainder of the government’s quality, innovation, productivity, and prevention (QIPP) drive unless it turned its attention to service reconfiguration.1

The efficiency drive, dubbed the “Nicholson challenge” after its architect, David Nicholson, the NHS’s chief executive,2 requires the health service to achieve £20bn savings across four financial years up to 2014-15.

The report said that reducing the demand for acute hospital services through greater integration and the expansion of community based care was the key to future savings, but it warned that the health service had not made enough progress on these challenges so far. It said that the challenge was compounded by a lack of understanding of the effect of demand management schemes and the nature of savings made to date.

In addition to staff pay freezes, the report said that savings had been achieved through cuts in back office costs and the use of temporary staff, but it added that energies would have to be focused elsewhere in future years, as up to £520m worth of savings in 2011-12 were one offs.

It said, “Understandably, the NHS has started by making the easiest savings first . . . but it is not clear what level of savings is sustainable over time.

“There is broad consensus that changing how health services are provided is key to a financially sustainable NHS. [But] evidence indicates that the NHS has taken limited action to date to transform services.”

The auditors acknowledged that there were barriers to service transformation, including that “changes take time to implement and may initially cost, rather than save money.”

But the report said that the Department of Health and the NHS should give more thought to how current financial incentive schemes such as Payment by Results for acute care and block contracts for community care, which “do not always encourage NHS providers to undertake service transformation,” could be used to drive service changes.

The health department could also achieve its ambitions by seeking a clearer understanding of the effects of demand management, producing better evidence on the benefits of service transformation, and improving the reliability of data through better guidance to the NHS on how to measure and report efficiency savings, it added.

Amyas Morse, head of the National Audit Office, said, “The NHS has made a good start in making substantial efficiency savings in the first year of the four year period when it needs to achieve savings of up to £20bn. To build on these savings and keep pace with the growing demand for healthcare, it will need to change the way health services are provided and to do so more quickly.”

John Appleby, chief economist at the healthcare think tank the King’s Fund, said, “Major reconfigurations of services are needed to improve the quality of care and increase financial sustainability, yet the decision making process remains complex and is often undermined by resistance to change, even when a strong clinical and financial case has been made. As the report points out, achieving the remainder of the productivity gains needed is to some extent predicated on delivering changes to services, so significant political courage will be needed in the second half of this parliament to see these changes through.”

The NHS Confederation’s chief executive, Mike Farrar, said, “NHS leaders are ready and willing to work together to change services, but we will need to ensure that the public understands how essential changes are and that politicians are able and willing to clearly articulate the need for change rather than shying away from difficult decisions.”


Cite this as: BMJ 2012;345:e8480