Respondents felt that, over the next five years, the biggest gains could come from making their local systems work more efficiently, with 61% of survey respondents (NHS Providers, 2018) ranking this as the top contributor to future savings.
This chapter details the types of improvements that could be made when trusts act collectively with other partners in their systems. These are sometimes known as 'allocative' efficiencies. Often, the financial gains may not be shared equally between those partners – a key barrier to these savings being realised is that it takes time for relationships between providers to develop to the point where there is enough trust between them to share financial risk and reward.
Respondents gave a number of examples where opportunities for future efficiency gains at a system level included:
- integration of out of hospital care providers (GPs, community and social care)
- pooling budgets (to get better value from collective resource)
- reduced bureaucracy and regulatory burdens across the system
- new workforce roles and staffing models
- further improvements in clinical pathways
- consolidating commissioning functions
- effective working with partner organisations
- prevention and community investment
- digitisation and online technology
- further estate rationalisation projects
- avoidance of unnecessary hospital admissions.
A key barrier to these savings being realised is that it takes time for relationships between providers to develop to the point where there is enough trust between them to share financial risk and reward.
Trusts tell us the progress on system efficiencies could be accelerated through the development of system level incentives. To date there has been a focus on trust-specific control totals and trust-specific CIPs. There is currently no equivalently firm mechanism for holding systems to account on their ability to collectively use resource better and some trusts tell us that current incentives do just the opposite.
Holding providers and commissioners to account separately for their own efficiency targets (in the case of CCGs, via the quality, innovation, productivity and prevention (QIPP) programme) can sometimes thwart system working. Two mental health trusts told us that CCG QIPP savings led to annual cuts in their core funding, which reduced their inpatient capacity, in turn escalating costs as patients had to be sent to other, more expensive, providers out of area. Adding this operational and financial pressure made progress on transformation all but impossible. Expanding community mental health services was the only way they felt acute beds could be sustainably cut – but this would present double running costs that trusts were unable to fund on their own. When service redesign efficiencies were achieved, they tended to count towards CCGs’ QIPP requirements, rather than the trust’s CIP – despite the trust being instrumental in realising them.
Growing and shrinking
As an illustration of how trusts’ individual requirements can be counter-productive from a system point of view, several acute trusts have told us they have made efficiency gains through increasing activity levels. One trust leader told us: "It is easier to grow your way out of a problem than cut your way out of it." The gains can materialise in two main ways: through doing more procedures without increasing overheads, giving a notional decrease in average costs per procedure that can count towards a CIP or by increasing profitable work which is paid for by activity. One finance director told us it was much easier to engage staff in a discussion about how to do a lot more work for little extra resource than it is to engage staff in a discussion about cuts and removing headcount.
Holding providers and commissioners to account separately for their own efficiency targets (in the case of CCGs, via the quality, innovation, productivity and prevention (QIPP) programme) can sometimes thwart system working.
However, this cannot be the answer for the entire sector. At a time of financial constraint and endemic provider side deficits, not all trusts can grow their way out of difficulty at once, nor would it be of benefit to patients as we move towards a new model of delivering care which is carried out in the community and in people’s homes.
Other trusts have told us they have had to shrink their way out of financial problems - one community provider saved £500,000 by withdrawing from contracts which it was losing money on. However, while this is possible in the community sector, where services are tendered routinely and commissioners may have several bidders to choose from, it is not necessarily an option for acute care.
Trusts have also told us that the pressure they are under to meet their control totals has forced them to challenge commissioners more on coding and costing to ensure they receive all the income they can. Again, while this makes sense for individual organisations, it is perverse at a system level, and demonstrates the tension between the national policies of developing sustainability and transformation partnerships and individual control totals for trusts.
Reforming the accountabilities of trusts and commissioners to better reward providers for long-term system efficiencies could produce a shift away from short-term, transactional savings towards transformation. This would also deliver a more efficient system and more joined up, integrated care for patients.
At a time of financial constraint and endemic provider side deficits, not all trusts can grow their way out of difficulty at once, nor would it be of benefit to patients as we move towards a new model of delivering care which is carried out in the community and in people’s homes.
Integrated working
Providers hope that a move towards integrated system working could remove wasted effort such as arguments with CCGs about coding and costing, and, particularly in the community sector, bidding for tenders. One provider said: "Taking out the purchaser/provider split is the one structural change that could make a difference."
There is general agreement among providers that closer working between hospital care, community care, social care and GP services offers the greatest opportunity to improve patient experience and ensure people are treated in the most appropriate setting. However, there are many ways to achieve this. Some believe that bringing acute and GP services into a single organisation, under a single integrated management structure, is needed, while others emphasise the importance of improving working relationships and IT.
Genuine system working almost always requires frontline professionals to begin working more closely together than they have in the past – often in mixed teams and across organisational boundaries. For example, an ambulance trust told us that at present, once paramedics have reached a patient who has fallen at home, there are currently few options available other than conveying them to hospital. This begins a pathway that too often leads to delayed discharges while the patient waits for home assessments after their inpatient treatment has finished. A better solution may be for community teams to work with ambulance staff during the initial call out to begin treatment at home, and immediately assess and begin to improve their housing.
There is general agreement among providers that closer working between hospital care, community care, social care and GP services offers the greatest opportunity to improve patient experience and ensure people are treated in the most appropriate setting.
Integration does not only mean collaboration with neighbouring trusts, it also means working with other agencies. This could involve mental health trusts working with local housing associations to ensure security of accommodation for patients, as losing this can exacerbate mental ill health. Or it could involve working jointly with ambulance and police services to triage patients who are picked up on the street needing care.
Although there is a widespread belief that much greater integration will improve patient care and reduce costs, we were struck by two things. One was that it was a belief, rather than a plan with a clearly evidenced savings target. The other was a simultaneous acknowledgement that demand for care is not going to go down.
One high-performing integrated acute and community trust finance director told us: "I don’t think that, whatever we do in the rest of the system we will slow growth in demand for acute services. I cannot envisage a set of circumstances where there will be a sustainable reduction. We see growth in demand consistent with an ageing population." People with experience running new care model vanguards are also cautious about the financial savings available. One finance director said: "The teams are running better. There are fewer hospital admissions – but cost savings have not been realised."
The assumption that better care will necessarily cost less because it is the right thing to do will be tested in the coming years as more systems become more collaborative. A 2018 long-read from The King’s Fund stated that "integrated care and population health should not be expected to save money but have the potential to enable resources to be used more effectively." While there is a potential improvement in value, that will not necessarily lead to cash releasing savings. (The King’s Fund, 2018)
The assumption that better care will necessarily cost less because it is the right thing to do will be tested in the coming years as more systems become more collaborative.
Pathway redesign enabled by technology
Our survey found that trust leaders believe technology and digital innovation should be one of the top three priorities for the forthcoming NHS long-term plan, alongside workforce and improved out of hospital care.
There are trusts that still barely use an electronic patient record and are overly reliant on paper notes. However, this is not the norm and these organisations are working to tackle the issue – although the impact shifting to digital often has on ordinary trust operations should not be overestimated.
More commonly, interviewees highlighted the improvements technology could bring through automating back office functions and reducing stationery costs. Another repeated theme in both the survey and our interviews was how investment in the right technology could support much better system working across organisations.
One acute trust in the south has established a virtual fracture clinic, enabling new patients to be assessed ahead of their appointments – this has led to the cancellation of more than three quarters of new patient appointments in favour of GP-led self management. This has freed up consultant time to use for urgent referrals from elsewhere in the trust.
We also heard of plans to enhance links between paramedics and consultants, to improve treatment when the patient is first reached and in the ambulance, and to ensure only patients who need acute care are brought to hospital.
Our survey found that trust leaders believe technology and digital innovation should be one of the top three priorities for the forthcoming NHS long term plan, alongside workforce and improved out of hospital care.
Other trusts were keen to improve the interoperability of their patient record systems, so a single record to be amended by GPs or consultants in any of the trusts a patient visits during their treatment. We also heard from one trust that was working closely with a neighbour on digital collaboration through the Global Digital Exemplars programme, this had enabled them to share imaging more effectively, which had reduced duplication when patients pass from one organisation to another.
Trust mergers, groups and scale
While it is easy to assume that there are too many providers and that merging them into larger organisations will take out duplication and so reduce costs, it should be noted that the vast majority of NHS spend goes on frontline services rather than the back office – even the trusts with the highest back office costs only spend 11% of turnover on administrative functions. (Department of Health, 2016). Removing the costs of running two boards and two sets of back office support functions may be desirable, but a merger will not on its own affect the cost of providing services to patients, which accounts for the overwhelming majority of the spend (NHS Improvement, 2017).
Similarly, while a move to a group model may improve consistency and deliver some economies of scale, the primary focus of much of this work is on eliminated unwarranted variation in quality and making better use of the collective workforce.
The finance director of a relatively small, but successful, integrated acute and community provider told us that his organisation was viable, but because it focused on efficiency at the level of individual units, such as wards or operating theatres, rather than focusing on questions of organisational form. He argued that whether a hospital is efficient or not depends on how efficient its individual wards were and it could not become more efficient simply by increasing the number of wards or theatres it runs, for example by taking over another trust. Their argument was that energy is better focused on making each unit more efficient than on organisational mergers. His trust, he said, had efficient wards partly because they incorporated very few individual single rooms – although this did have an impact on patient experience and, sometimes, infection control.
Similarly, while a move to a group model may improve consistency and deliver some economies of scale, the primary focus of much of this work is on eliminated unwarranted variation in quality and making better use of the collective workforce.
Outpatients
It has become increasingly clear during 2018 that there is appetite among national policy makers for reform of traditional consultant-led outpatient services. NHS England chief executive Simon Stevens described it as an "obsolescent" model for managing long-term conditions, while NHS Improvement chief executive Ian Dalton signalled an intention to begin a “major transformation” in outpatient services.
Next year could see changes to the payment system for outpatient services to incentivise a move away from face to face meetings between patients and consultants.
There is appetite among trusts to adopt more cost efficient ways of providing outpatient services. One survey respondent told us that they would transform outpatients if they had enough project management capacity. Another said they wanted to see redesigning outpatients as a priority in the forthcoming five and ten-year plans for the NHS.
We also spoke to a finance director in a specialist provider who was working with commissioners to change the outpatient model, even though their organisation had done well financially from episodic payments for the service in its current form. The finance director acknowledged that the management of long-term conditions should involve fewer trips to hospital. However, they also pointed out that the consultant-led model, while expensive, was popular with patients who placed great value on the continuity of care and access to expertise it offered.
Next year could see changes to the payment system for outpatient services to incentivise a move away from face to face meetings between patients and consultants.
The Nuffield Trust (HSJ, 2018) has recently described three types of mistake in previous attempts to reform outpatient services - attempts to reduce referral rates did not tackle fixed costs on the provider side, moving the services to less expensive facilities simply reallocates the same overheads to other services and policy has relied too much on blanket assumptions, rather than seeing outpatients as many services. Most relevantly for the efficiency debate, the Nuffield Trust has cautioned against assuming that improving services will necessarily release money to be redeployed. While there is “undoubtedly scope for major change in outpatients, which will make the experience better for patients and staff”, it is "much more doubtful that this will produce major cash savings". They describe a set of local pathway improvements example specialist doctors running teaching and discussion sessions with GPs, and setting up virtual clinics.
If outpatient reform is expected to save money, national leaders need to be realistic about how long this will take to deliver and be careful about assuming a single approach is uniformly applicable.
Pathology
It is 10 years since Lord Carter completed his first independent review on pathology, which recommended scale provision by standalone providers such as joint ventures or outsource companies. The review estimated potential savings of between £250m and £500m a year. It stated: "We have studied the evidence before us and listened carefully to what we have been told. This is not another 'false dawn': we believe our proposals will enable pathology services to meet the needs and demands of health care provision for the future by strengthening the delivery of high quality, efficient, effective and responsive pathology services. Our confidence stems from the clear consensus we have found about the barriers to progress and the steps needed to overcome them."
However, reform was not rapid. As with the Five year forward view, some pilots were launched but detailed guidance and a model implementation plan, describing the route from the existing service configuration to an optimal one, was lacking. Procurements for pathology networks were slow to come to market, partly due to the complexity of the service redesign and tender processes involved.
If outpatient reform is expected to save money, national leaders need to be realistic about how long this will take to deliver and be careful about assuming a single approach is uniformly applicable.
One finance director we interviewed told us his trust scaled up its pathology facilities so they could bid for new work, only to find fewer contracts than expected came to market, leaving it with a lab that is not running at full capacity even today. This, along with other examples of joint ventures set up that did not deliver the expected benefits, demonstrates the distance between savings estimated and savings delivered, and shows that aspiration does not always guarantee success.
Between Lord Carter’s 2008 review of pathology and his wider 2016 review of operational productivity in hospitals, there was some consolidation of pathology services, and some adoption of outsource provision. In the 2016 review Lord Carter again found that some of the most efficient and high quality pathology services were provided across several trusts at scale, and estimated £200m could be saved if best practice was adopted across the service. In 2017, NHS Improvement published recommendations for pathology networks covering the entire country, along with savings targets for each network. Trusts were required to begin setting up the networks or detail how they would bring about equivalent savings.
Why has it taken so long to establish widespread scale working in pathology? There was an initial focus on organisational form and an emphasis on commercial tender processes which proved to be distracting and time-consuming. The complexity of this approach – and the risks it introduced which crystallised in the failure of The Pathology Partnership – confirmed suspicions that the initiative was not worth the effort or the risk.
The collaboration necessary for partnership working on pathology is still not well established in many areas, after many years of national policy encouraging competition between trusts. Interviewees repeatedly told us that, as with new models of care, collaboration on pathology can only work where relationships at all organisational levels are mature. Trust takes time to develop – especially where providers have separate clinical cultures. Providers are responsibly bearing in mind the impact of changes to pathology on other services. They will not rush into change without considering the overall effect on local services.
The lesson for national and local leaders is that there must be an acknowledgement that change takes time and that potential benefits are not the same as cash in the bank: they are always balanced by risks. Evidence that change is necessary does not negate the need for full engagement with clinical staff. A detailed implementation plan setting out how change will be managed and where savings can be made is essential. Also, experience tells us that savings tend not to materialise as fast as projections initially suggest.