Reality of the NHS budget squeeze
BMJ 2011; 343 doi: https://doi.org/10.1136/bmj.d8027 (Published 12 December 2011) Cite this as: BMJ 2011;343:d8027
Drastic reform of clinical services is the only way the NHS can avoid being overwhelmed by falls in real funding and rising demand. According to the Department of Health, this means finding £20bn (€23bn; $31bn) of productivity gains by 2015.
What became known as the Nicholson challenge was first articulated in the 2008-9 annual report of NHS chief executive, David Nicholson. It was already clear that the banking crisis would trigger sharp cuts in public spending, and Sir David knew he had to get the NHS to confront the reality that it would have to make huge changes to the way it worked if it was to avoid its second financial crisis in a decade and cope with rising demand from an ageing population.
So he called on the NHS to prepare for “unprecedented” efficiency savings of £15-20bn between 2011 and 2014, since stretched to 2015. Quality, innovation, productivity, and prevention (QIPP) were to be the levers.
The £20bn is a slippery concept. It is not a cash cut but an estimate of the additional value the NHS needs to squeeze out of its resources if it is to continue to meet demand as spending flatlines. As the Commons’ health select committee pointed out last December in a report on spending, exactly how this is supposed to translate into practical changes has never been made clear. “We do not believe that the government is providing a clear enough narrative on its vision of how these savings are to be made,” the committee said.
Sir David told the committee that about £8bn would come through cuts in administration and management costs. This includes keeping down pay, cutting managers and back office staff, and cutting some of the Department of Health’s budgets.
Another £8bn is coming from cuts to tariff payments. For example, hospitals are being paid less for many operations, forcing them to carry out the procedures more efficiently if they are to avoid working at a loss.
The final £4bn will come from redesigning services. This includes high profile and contentious changes such as reducing the number of trusts providing children’s heart surgery, and the closure of some emergency departments.
The government says the £20bn amounts to 4% savings each year up to 2014-15, although the Commons’ health select committee heard in October that many organisations needed to deliver 6% to stay out of trouble. The health secretary, Andrew Lansley, has admitted that hospital trusts generally need to save more than 4%. No health system in the world has achieved productivity increases of that magnitude for that many years.
While the changes to tariff cut revenue, there are some incentives to raise quality. For example, the tariff now encourages hospitals to take greater responsibility for rehabilitation after discharge—although if acute trusts expand community activity, it hits existing community providers.
Slow to change
The NHS is unsuited to rapid change. Its huge fixed costs tied up in hospitals are difficult to liberate, professional boundaries are entrenched, there is intense public and political opposition to major changes in local services, acute care is often poorly aligned with primary and social care, and the service has a lamentable record when it comes to saving money through investment in information technology.
The pressures of all this are starting to show. The number of organisations failing to meet their referral to treatment target has jumped, with orthopaedics a particular concern. The four hour wait targets are slipping in some emergency departments. The regulator, Monitor, has raised its financial risk ratings on several foundation trusts. Add in the legacy of private finance initiatives and other pressures such as fuel costs, and around 20 acute trusts are now seen as unviable. And all this with at least three years of “efficiency gains” to go.
According to the NHS Confederation, 82% of its members are confident of maintaining financial stability this year, often supported by using reserves, but there are widespread concerns about future years. In a survey published in July, most said they believe access to care will decline while local authority budget cuts will lead to more people needing NHS services. Forty two per cent said the financial situation was “the worst they had ever experienced.” Over half were cutting staff.
The pace of service reconfigurations is slow but acceptance of the need for them is growing. Even some politicians—including Mr Lansley—are reluctantly falling into line. One striking example of how what the public often sees as “cuts” can improve services is the merging of the Burnley and Blackburn emergency departments on the Blackburn site with the creation of a cardiac centre; outcomes from heart attacks have improved by 15%.1
Management costs, especially for commissioning, are taking a heavy toll. Mr Lansley has repeatedly referred to management as bureaucracy, so the less the better. But Sir David admitted in June that management levels in commissioning bodies were “absolutely close to what I would regard the minimum to run the system.”
The Department of Health gives the impression it can accurately monitor productivity. It has assured the health select committee the QIPP programme is “on track.” In truth it has no accurate way of measuring overall productivity or what this really means in terms of services provided for patients. This can only be judged locally. So to assess how the Nicholson challenge is affecting clinical services, let’s examine two areas—Devon and Newcastle.
Devon’s response
Two of the biggest aims of the productivity drive have been to move care from hospitals into the community and to curb emergency admissions. The NHS operating framework for 2010-11 stamped on the escalating cost of emergency care by paying hospitals only 30% of the tariff for emergency activity above their 2008-9 levels. Healthcare trusts in Devon have responded in different ways.
The North Devon Healthcare NHS Trust, which is applying to become a foundation, is an unusual hybrid of an acute hospital (in Barnstaple) plus 17 community hospitals across Exeter and east and mid-Devon; 12 were acquired this April under the transforming community services programme, which separated primary care trusts from the provision of services. Almost half its 4400 staff work in the community hospitals. There are 340 beds at Barnstaple and a similar number in the community. Over the next five years it needs to save £55m—about 5% a year—to get into surplus to survive as a foundation trust. It aims to do this without any cuts to services or clinical staff.
Central to its drive to keep patients out of hospital is the “virtual ward.” As medical director, Alison Diamond, explains: “It is led by primary care but the multidisciplinary team is employed by the hospital. It identifies patients at high risk of being admitted to hospital and then looks at what options there are across health, voluntary sector and social care, and allied health professionals—physiotherapists, occupational therapists, community matrons—to keep them in the community.”
Patients are identified by obvious indicators such as multiple medical conditions. “We provide a list for GPs of the top 100 patients who are at risk of admission. From those they pick the ones who would benefit from the multidisciplinary team approach. Once they are referred to the virtual ward a case management plan is put together and while that plan is active they are in the ward. Once they are stabilised or need less input they might be moved into ‘outpatient,’ which means they might have a phone call every so often to check how they are, or they are discharged back to the normal care of the GP.”
The virtual ward has been running for three years and three practices that were in from the beginning have been benchmarked against three outside the scheme. While there has been no significant rise in emergency admissions for the participating practices, admissions for those outside rose 13%, according to a preliminary evaluation. As well as preventing admissions, the virtual ward aims to cut length of stay. It is reducing bed days for those who are admitted by around 200 a month.
A second change at North Devon to cut emergency admissions is how it responds to GPs who are unsure if they have a surgical emergency. Instead of patients going to the emergency department, being seen by a junior doctor, admitted for observation, and often as not sent home by a consultant after a wasted night, GPs can now refer them to an emergency surgery clinic for an immediate consultant opinion.
The handling of patients who do arrive in the emergency department is being standardised and speeded up. They have adopted an emergency hub approach, with a range of senior specialists on call. “That is a real challenge to the way not that the emergency department has worked but the way the other specialties have worked, “ says Dr Diamond.
Outpatient visits are being cut through GPs emailing consultants for an opinion. Consultants reply within three to five days. The potential savings in cost and patient and consultant time are huge. It is being piloted in paediatrics as well as urology, where, Dr Diamond explains, “there was a lot of concern that there were people drifting through the system who didn’t really need to be seen.”
All these changes depend on the skills, mix, time management, and attitudes of the consultants. There is no money to recruit more, so posts are being examined as consultants retire to ensure the replacement complements the new arrangements. Part of this will involve strengthening the emergency team.
“A lot of consultants’ work is based on the number of beds they have, and I can see that is changing,” says Dr Diamond. “Take care of the elderly—consultants are potentially a very ambulatory resource who can give care closer to the patient. And that will be the challenge—identifying the specialties where it is appropriate to change the way they work.”
The rest of the clinical workforce is also being reshaped: “Over the next four to five years there will be huge changes. It is about creating a . . . multidisciplinary team able to cope with people out in the community. People’s specialism might be physio but they will have to be generic workers and flexible, so if a patient needs an assessment for falls then the physio will also have to provide a very basic assessment of other needs. It is certainly part of our plans to develop a flexible workforce. It proves a challenge because traditionally people have a very fixed idea of their role.”
The largest hospital trust in the south west is Plymouth Hospitals, a teaching trust which includes a Ministry of Defence unit. It is having a tougher time than North Devon. Its application for foundation status was put on hold in 2009 with problems including breaches of the hygiene code. Then in February the Care Quality Commission made a series of safety recommendations after six “never events” within six months in its operating theatres.
It has recently closed 45 beds, leaving it with around 900, and has had 53 compulsory redundancies since April among 6000 staff. It says the bed closures follow productivity improvements such as cutting average length of stay 6% last year and getting bed days for electives down 11%.
Its consultants are doing more weekend working, and diabetes and respiratory consultants are moving many of their services into the community. Discharge support has also been expanded.
The primary care trust, NHS Devon, has been working with GPs to cut hospital referrals by using two referral management centres. Such centres are not universally popular with GPs, who can resent the perceived weakening of relationships with both patients and specialists and the loss of clinical autonomy.
According to Andrew Sant, vice chairman of the Devon Local Medical Committee and a Plymouth GP, the one in his city is “ok without being fabulous.” It has cut outpatient referrals by 12%, and he believes most of this is for the right reasons.
“Some of these are low priority treatments such as removal of warts or some skin lesions; some are foot problems which are referred to a chiropodist. Some of it is about low value surgical procedures where other choices would be better—for example, hysterectomies on women with heavy periods: there are so many other choices now that hysterectomies should be the last resort.”
The GPs are also pushing for changes in the way the county’s four acute hospitals handle cases, Dr Sant says, notably by trying to cut consultant to consultant referrals that sideline GPs’ skills.
“They can be an income generator . . . If you’re a hospital and you’re seeing a 12% reduction in your first outpatient tariff you could fill those slots with consultant to consultant referrals of much easier patients. That’s slightly cynical, but we are seeing a reduction in GP referrals but not a lot of reduction in hospital activity across the patch. So when you talk about the Nicholson challenge the GPs have been politic in stepping up to the challenge in reducing admissions but sometimes hospitals haven’t.”
Despite the scale and speed of the hospital changes there is no strong evidence of any fall in quality, although sometimes haste to manage the numbers trumps common sense: “Someone had a patient discharged at 11.30 on a Friday evening who was 93,” Dr Sant says.
Devon is best known in NHS circles for Torbay Care Trust, an integrated health and adult social care organisation serving 140 000 people.
Medical director, John Lowes, cites overhauling the community management of diabetes as one of its successes, with fewer amputations. Patients who have a fractured neck of femur are also getting a better service thanks to better coordination: “The ambulance calls the trauma coordinator and they can go straight to theatre from the emergency department rather than through a ward,” Dr Lowes explains. It can cut the hospital stay by three to four days and delivers better mobility.
The trust has cut bank nurses, managers, and administrators and closed a 28 bed ward. Dr Lowes admits the administration cuts—portrayed by Mr Lansley as an easy savings target— are “starting to hurt.” But he has no doubt about need to change: “If you don’t face up to this challenge the NHS is going nowhere.”
Newcastle
Like in Devon, some Newcastle services are cutting while others are maintaining headcount. Northumberland Tyne and Wear NHS Trust has told the Royal College of Nursing it is looking at cutting 300 posts over the next two years. Newcastle Hospitals NHS Foundation Trust is not looking at either voluntary severance or a vacancy freeze.
Guy Pilkington, GP chair of the Newcastle Bridges clinical commissioning group, says “people have been thrown together” through a combination of the Nicholson challenge and the health service reforms.
“We are attempting to work with the hospital management. There is going to be less activity in hospitals so nobody thinks it will be easy. We do know that fewer people are going in with emergencies in Newcastle so you are at the beginning of an impact there.”
The Freeman Hospital, part of the Newcastle Hospitals trust, is adopting similar tactics to North Devon. GPs can get consultant advice by a dedicated phoneline 8 am to 8 pm weekdays, and rapid access clinics have been established for diabetic foot care, heart failure, and ear, nose, and throat to cut emergency admissions.
Musculoskeletal services are now the biggest outpatient operation; nine GP clinics are offering services in an intermediate clinic with the focus on physiotherapists but backed up by an outreach consultant. Whitley Bay GP George Rae says: “A lot of the weight is taken off the hospital admissions system. About 95% of patients are seen within two weeks and a huge number within 48 hours.”
Is quality slipping under the pressure to save money? Dr Pilkington says: “To date it would be difficult to find evidence that services have declined. There is huge potential in saving resources with long term conditions and avoiding unplanned hospital care. It should be ok.”
Notes
Cite this as: BMJ 2011;343:d8027
Footnotes
Competing interests: The author has completed the ICJME unified disclosure form at www.icmje.org/coi_disclosure.pdf (available on request from the corresponding author) and declares no support from any organisation for the submitted work; no financial relationships with any organisation that might have an interest in the submitted work in the previous three years; and no other relationships or activities that could appear to have influenced the submitted work.
Provenance and peer review: Commissioned; not externally peer reviewed.