Grant Thornton - Targets in sight: Approaches to delivering NHS cost improvements

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This review, based on a survey of NHS finance directors, outlines their experience of CIPS to date and how they expect their CIPS to progress over the next three years.

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Grant Thornton - Targets in sight: Approaches to delivering NHS cost improvements

  1. 1. Targets in sight:Approaches to deliveringNHS cost improvementsCIPs surveySummer 2012
  2. 2. ContentsForeword 1Introduction 2CIP delivery and future plans 3The drivers behind CIPs in 2012/13 4Rating the ways to reach CIP targets 5Can outsourcing of corporate services deliver savings? 7Opportunities for outsourcing clinical support services 9How CIP schemes have been received 10Hitting long-term financial targets 11Making a success of CIPs 12Using rewards to drive CIPs 13The goals of successful CIPs 14Additional benefits from CIPs 15About us 16Contact us 18
  3. 3. ForewordStrategic thought gets more done with lessWhen trusts set their financial targets, they look at their expected income forplanned activity and the current costs of delivering those services. The mechanismfor closing the gap between costs and income has traditionally been the costimprovement programme.During times of growth, additional income for activity above In overall terms, the NHS cannot grow its way out of theplanned levels was often a key contributor to this gap-closing current financial challenge. But we examine how individualexercise. But in an era of flat real-terms increases, this simply organisations see the role of income generation in meetingisn’t an option – at least not when you consider the NHS as their own ‘cost’ improvements. We also examine the appetitea whole. to think more strategically in the quest to do more (and Cost improvements also get progressively harder. better) with less.The simple improvements have often been made in previous What is completely clear is that the NHS faces anyears – bearing down on use of agency staff, for example. unprecedented financial challenge in the coming years.And given the current difficult financial environment is likely While some organisations have delivered more than 5%to be with us for some time, non-recurrent measures such as efficiencies in the past, estimates suggest that the wholevacancy freezes are not only unsustainable, but add to the service will need to match this performance. For somecost improvements needed in future years. areas the challenge will be even greater. Added to the current financial context is the quality Success will depend upon finance professionals workingagenda. As the NHS looks to improve efficiency, it must at alongside clinical colleagues and other support services. Butleast maintain patient safety and outcomes and, wherever as different localities rise to their own CIP challenges, it willpossible, look to improve them. No one – frontline or back be vital to understand different approaches to the deliveryoffice – would argue otherwise. And while higher quality can of these CIPs and, where appropriate, to share good practice.be lower cost by getting things right first time and avoidingunnecessary interventions and duplication, it is not always Keith Wood Chairman, HFMA Financial Management and Research Committeeso straightforward. The survey undertaken for this report on cost Bill Uptonimprovement programmes underlines many of these Partner, Head of Healthcare, Grant Thorntonpoints. It seeks to identify the areas that contributed to Clive Mellororganisations’ most recent CIPs and the expected make-up Associate Director, Healthcare Advisory, Grant Thorntonof future savings plans. Approaches to delivering NHS cost improvements 1
  4. 4. IntroductionMeeting the CIP challengeAs the requirement for savings continues in the NHS, every trust is feelingthe pressure. The requirement demands ever greater efforts from all healthcareorganisations to meet the ambitious £20 billion savings target, and the drive fornew savings and efficiencies to meet this target will become harder over theforthcoming years.During July 2012, the HFMA and Grant Thornton The results of this survey are presented in this reportconducted a survey of NHS trust finance directors to with analysis from Grant Thornton and additionalask them about their CIPs, their experience to date, commentary on their CIPs contributed by NHS trustand how they expected their CIPs to progress over the directors and senior finance staff interviewed for this report.next three years. We believe it will provide valuable assistance to In addition to asking how their CIPs were structured, finance directors in supporting trust boards to deliver onour survey asked finance directors to rate the relative this difficult challenge, and will help to throw light on theimportance of individual components of their schemes, progress being made across the whole sector.how different corporate and clinical services were providedat their trust and how their CIPs – and the individualcomponents of their CIPs – had impacted their trust inrecent years. In total we received 34 responses from directorsand senior finance staff, representing 14% of providerorganisations in the NHS. This included respondents fromacute, mental health, community, ambulance and integratedtrusts, including both NHS trusts and foundation trusts(referred to as ‘trusts’ throughout this report). Not alldirectors answered every question, meaning the overallsample size changes for some questions.2 Approaches to delivering NHS cost improvements
  5. 5. CIP delivery and future plansRecent performance on CIPs and the next three yearsTo put the survey in context, consideration must be given to organisations’ trackrecord in delivering CIPs in previous years and the projections for the next threeyears. In 2011/12, trusts set average CIP plans of 5.1% of income. By the year’s end,they delivered on average 4.8%; 91% of the target by value.This corresponds closely to the figures in the May 2012 The received wisdom is that 5% is the maximum costKing’s Fund publication ‘How is the NHS performing’. improvement that can be delivered in the NHS withinThat report indicated that the average savings achieved anyone year. However trusts in the survey planned anamounted to 4.7% of turnover, compared with plans of average cost improvement of 5.1% in 2011/12 and actually5.1% – a shortfall of around 10% compared with plan. achieved 4.8%. This average masks a number of organisations The largest savings, as would be expected, over this with planned CIPs that were substantially higher. The fullperiod came from pay. While organisations focus on reducing range stretched from 3% to 7.8%. The organisation withnon-staff costs first if possible, it is simply not sustainable the highest planned CIP successfully achieved its plan.to expect continual savings without reviewing employee/ On average, the trusts in the sample missed their plannedworkforce levels. Staff costs typically account for around level of improvement by less than 10%. In total 15 out of70% of trust expenditure and CIP plans indicate 54% of 32 trusts fell short of their CIP target in 2011/12, with onesavings in 2011/12 were in pay. Respondents to our survey organisation only achieving 64% of its planned level.highlighted that many of their savings were achieved through Moving forward, the 5.1% CIP target planned forsuch means as procurement and outsourcing reviews, 2012/13 is the same as that of 2011/12. This target reducesbut acknowledged that staffing was a prime factor in for the next two years, with 4.9% planned for 2013/14 andongoing savings. 4.7% for 2014/15. This is broadly in line with Monitor’s A large proportion (62%) of respondents recorded Acute Assessor case financial assumptions of 5.0% inincome growth in 2011/12 as contributing to their achieved 2013/14 and 2014/15, although their downside case is 5.5%CIPs, although in nearly half of these cases, the contribution for both years. This is clearly at the challenging end ofwas 15% or less. This income growth related both to efficiency improvement and recent experience suggests manydemographic growth and the transfer of services from other will struggle to deliver their CIPs in full. Management andNHS organisations. Consolidation of services and the monitoring of CIP delivery will be crucial in underpinningcreation of local hubs are clearly contributing to this, and the service’s response to the current financial challenges.specialisation in particular areas appears to be driving Finance directors also recognise that they need to achievefurther savings in the future. this 5% alongside the improvement of services, maintaining quality and patient safety. Respondents to our survey highlighted that many of their savings through such means as procurement and outsourcing reviews, but acknowledged that staffing was a prime factor in ongoing savings. Approaches to delivering NHS cost improvements 3
  6. 6. The drivers behind CIPs in 2012/13Expenditure controls and service/pathway redesign emerge as the leadingcontributors to next year’s targetsWhich of the following will make the biggest contributionto your cost improvement programme in 2012/13?50% Searching every savings route40% “In CIP terms, we’re on year three of what has already been 5% each year. And we have to continue that30% potentially for another two or three years. It becomes a 49 case of what do we do next? Where do we go to make20% 30 further savings? It becomes more difficult the further10% 3 3 3 you go.0% 6 0 I don’t think we’re doing anything particularly unique, er or n ls n ing th s rtn ect though in comparison with others I think our project ice sig tio ing ro ow ur da nt s rv de gr ct co e se oli re tru at management looks more robust. In terms of actual ideas ice ns re riv ed pa ay es rv co itu /p ar hw tr Se nd it’s been about skill mix, workforce productivity, back Sh ing d us at an pe /p rc Tr Ex er ou ice office savings, streamlining management structures rg tsrv Me OuSe and procurement.We asked respondents to rate the approaches that are driving With our Private Finance Inititative (PFI), we’re in a 35-yeartheir CIPs over this financial year. Service and pathway contract, but we had a break where we could test valueredesign emerged as the leading factor, with nearly 50% for money on the soft facilities management contract andnaming this as making the single biggest CIP contribution in that has delivered savings as well.2012/13. This suggests there is a recognition that the saving There is some service and pathway redesign aroundtargets won’t be achieved by simply squeezing harder on A&E, diagnostics and outpatients that is additional toexpenditure budgets. Instead new pathways will be needed. the savings on procurement, drugs, bank and agency.These pathways will need to be centred on patient needs and We are also pushing the quality agenda, ensuring that weexpectations, delivered in the optimum location and eliminate maximise best practice and CQUIN payments.duplication and unnecessary interventions and tests. While most trusts identify service redesign as key to Our key message is that high quality care costs less. Avoiding duplication, minimising errors and waste deliversdelivering their CIP, in many cases this is still a work in improvements in patient quality, and costs less.”progress. Those trusts that had begun implementing plansreported considerable improvements. Trusts who had yet to Amy Whitakerimplement may need to make project management resources Assistant Director of Finance, University Hospitalavailable to ensure service redesign ideas are converted into of South Manchester NHS Foundation Trustrobust deliverable plans. Expenditure controls generally, however, remain highlysignificant, with a third of directors suggesting this will be thesingle biggest component of their current year CIPs. Manyrespondents named procurement as a key source of savings. While most trusts identify service redesign as key to delivering their CIP, our discussions indicated little evidence of worked-up plans.4 Approaches to delivering NHS cost improvements
  7. 7. Rating the ways to reach CIP targetsWhile headcount and pay remain crucial factors, service redesign andpartnerships emerge as key to long-term achievementHow important are the following measures in achieving your long-term cips?35 2 330 3 3 5 6 4 6 5 4 825 14 10 6 11 13 2220 14 13 16 1215 29 13 27 11 1410 10 19 5 14 145 12 11 8 8 3 5 50 3 at y rv ps em ive rv on nm m tru tion nis e pa n rs t ing n s er fro en se hi se dati ice sig tio ion s t s t s ag ct be en en ole da ice ice st al ers ion em an effe ra ov s rv de or rag m ific oli wh oli l g cie ne iss oc tn se ur nu re ec ns of ons ss ve r l par tm e ge ra poli oc m ga of se Mor sp co ice e ro in a m c rc pr e ing ot tive rv ce rer co d d om fo ed an an ion Se rk rc ea c ed Inc ov nt wi effe he wo ou er er ct Cl as ov pr ac of du rg rg ts in Im pr Ou re Me Me Re th ion Im Mo ct du Re Major contribution Modest contribution Minor contribution No contributionWhen asked to rate the contribution of specific measures However mergers and consolidation of specific servicesto achieving CIP targets over the long term, reduction in are seen as having a significant role. This reinforcesworkforce numbers and pay across the organisation remain other findings in the survey relating to the importance ofsignificant for most trusts. Some 27 out of 33 respondents partnerships. The survey highlighted the need for closersaid that headcount reduction would be making a major partnership working with community, acute, generalcontribution, while 29 said that reduction in average pay practice, mental health, local authority and the voluntarywould make a major or modest contribution. sector. Working collaboratively and streamlining services in These reductions would be expected given that pay partnership with other trusts are viewed as key to drivingcosts account for approximately 70% of costs on average at new efficiencies and savings. Interestingly, there was littleprovider trusts. Reductions in average pay relate mainly to evidence of partnering with the private sector.changes in the skill mix of staff as changes are made to the The survey confirms the importance of serviceway services are delivered. redesign in meeting long-term CIP targets. Some 88% of Only 18% of trusts saw trust mergers as making a finance directors expect service redesign to make a majorsignificant contribution to long-term CIP achievement. contribution to plans. This underlines a recognition in theIn fact, 67% saw trust mergers as making no contribution finance community that the NHS will need to revise patientat all, suggesting that most trusts were not considering pathways – rather than squeezing greater efficiency outformal mergers as a solution to delivering their financial of existing ways of working – to meet the scale of thesavings target. challenge ahead. Approaches to delivering NHS cost improvements 5
  8. 8. Rating the ways to reach CIP targets In many cases this will involve clinically-led Reconfiguring services redesign programmes. There could be a role for innovative approaches. For example this “We don’t use beds in the same way. If we close a ward we can save could involve greater use (at scale) of telehealth, a million pounds, initially when we closed down two dementia wards providing more holistic support and reducing the majority of the money went into creating new services, so there the need for ‘traditional’ appointments and was an expansion. Of the couple of million pounds that we took out avoiding inpatient stays. Recently integrated we probably got one and a half million pounds reinvested. So we acute and community trusts (and mental health actually treat more people now than we ever did in a bed, and it’s and community trusts) could also provide better for them. opportunities to move support into community With the acute services element, we’re going to be doing exactly the settings, delivering more patient-focused services same – we call it the acute care reconfiguration. So we’ll ask how that could reduce costs in whole system terms. many beds do we really need, where are we going to have them, what buildings don’t we need? That’s something that all organisations, “While most trusts identify service redesign as key certainly mental health, will be looking at. to delivering their CIP, our survey discussions and work with trusts indicate a lack of worked up plans. In terms of IAPT (Improving Access to Psychological Therapies) team We believe trusts must make project management services, lots of organisations up and down the country have just resources available to ensure service redesign ideas absorbed this into secondary care. What this trust has done is to are converted into robust deliverable plans.” work with the GPs to have our IAPT services sat in their surgeries. We do the same with other areas such as consultants, who will go Clive Mellor, Healthcare Advisory Associate out to the GPs surgery and meet with people, as do our community Director, Grant Thornton mental health team. We don’t need as many bases. It’s taking infrastructure out rather than people. Obviously once you’ve disposed of the buildings that is a one-off saving. To do something more innovative than that is going to be what we have to face. One example is community working with iPads/Androids, so people don’t have to come to their desk to use their computer; they have the enablement for mobile working. Our younger mental health clientele are very computer literate so you can probably dial them four times a day rather than get in your car, go and visit them and come back. So you have more contact with them. That’s what we’re tending to spread out at the moment. The other working relationships we have are with people like the Alzheimer’s Society, and with MIND, and we’re going to be doing more of that – they do some of the basic care stuff, possibly a lot better than we can. We would be contracting with them for those services. They are cheaper as a result of them not having the significant bureaucracy and associated costs as a statutory service, therefore, savings can be made. The third sector is happy, we are happy, and many people are significantly better off.” Mick Rodgers Deputy Chief Executive/Executive Director of Finance, Sheffield Health & Social Care NHS Foundation Trust6 Approaches to delivering NHS cost improvements
  9. 9. Can outsourcing of corporateservices deliver savings?Outsourcing of corporate services is often seen as a possible source of savings.Yet after analysis of the costs, many trusts appear unconvinced of the benefitsHow are the following corporate services currently provided (in-house or by third party)?3530 4 5 2 5 6 925 9 620 715 31 31 27 27 2610 22 19 1650 ce HR t &T e g oll t en or nc kin yr an IM sp em na ar Pa Fin an te rp ur Tr ain oc Ca Pr sm te ta Es In-house Private sector Other public sector/other NHS body Third sectorGiven the priority of focusing resources on frontline implementation were seen as prohibitive. In particular someactivities, interest remains high in the potential to drive value trusts viewed an in-house HR team as essential because of thefrom corporate services. However the survey highlights that importance of workforce reduction in meeting the currentNHS trusts have mixed views on the role of outsourcing financial challenges.in these areas. While 40% of respondents had outsourced “Considering outsourcing in an environment where nothingpayroll and 48% had outsourced transport, there was only else is going to change is to miss its real potential. Successfullimited outsourcing in other areas. There seems to have been leaders in back office transformation use outsourcing to radicallylittle appetite to date from many trusts to outsource functions change how their departments work and recognise they are stillsuch as finance and human resources. accountable for how well the overall service supports the wider The reasons behind this retention of services are varied. organisation. Control is not lost, rather efforts are focused onWhile some of the estates services would be restricted in integrating the requirements of the organisation and the serviceoutsourcing terms due to established PFI contracts, several provider. This is as much about changing the way departmentalrespondents interviewed for this report stated that despite managers and internal customers operate as it is about managingongoing reviews of opportunities there was simply not the relationship with the service provider.”enough savings to be made in these services. Bill Upton, Head of Healthcare, Grant Thornton In interviews, several finance directors suggest that mostfunctions have already been assessed for possible outsourcingor formally market tested. Market testing had often led tothe retention of services by the in-house provider, with costand efficiency often cited as the reasons for selection. In somecases the costs of transfer, including redundancies and system Approaches to delivering NHS cost improvements 7
  10. 10. Can outsourcing of corporate services deliver savings? Procurement and services savings “Better procurement has generated in the region of 8-10% of savings for the last two years. This has been achieved by investing in an internal team, focusing particularly on category management. As a large teaching hospital, we have the ability to generate significant savings on our own and in collaboration with other trusts locally. The trust does not currently have a large number of outsourced services and has ‘in-sourced’ a number of services, including laundry and catering, following the merger of the predecessor organisations in 2006 to utilise spare capacity and ensure a consistent service across both campuses. However, we continue to measure the efficiency of all of all our support service functions and where appropriate will undertake market testing to ensure the best value is achieved.” David Shannon Assistant Director of Finance, Nottingham University Hospital NHS Trust8 Approaches to delivering NHS cost improvements
  11. 11. Opportunities for outsourcingclinical support servicesOther public sector and NHS bodies remain the central partners in clinicalsupport services such as pathology, radiology and pharmacyHow are the following clinical support services currently provided (in-house or by third party)?3530 2 5 1025 5 7 72015 29 25 2410 23 22 2150 y g y g g gy ac log rin rin nin olo m te rte ea dio ar th Ca Cl Po Ra Pa Ph In-house Private sector Other public sector/other NHS body Third sectorAs our responses show, clinical support services are still Comments from our respondents indicate that there is,overwhelmingly provided in-house, with services such as however, some on-going activity in relation to outsourcing,pharmacy being 93% in-house. However, pathology and especially in the areas of pathology and radiology. Awayradiology are showing greater reliance on other NHS bodies from the survey we can see this in the south sector of Greaterto provide services. Manchester, for instance, where there is a review to combine This reliance perhaps reflects the general CIP drive pathology services with savings expected from the earlytowards efficiencies through better partnerships, creating models. In addition, trusts in Leicester and Nottinghamspecialist hubs and reducing duplication of services locally. have drawn up plans to combine their pathology into the Portering and cleaning are services where trusts (30% largest department of its kind in the East Midlands. Eitherof the sample) have turned to external providers. Catering public sector alone or a mixture of public and private sectorfollows behind with 5 from 32 trusts having outsourced this organisations, there are increasing examples of organisationsto a private company. Portering, cleaning and catering were coming together to offer substantial savings in terms ofalso provided by the third sector in one case each. centralising facilities and improving efficiency. Comments from our respondents indicate that there is activity in relation to outsourcing, especially in the areas of pathology and radiology. Approaches to delivering NHS cost improvements 9
  12. 12. How CIP schemes havebeen receivedCIPs can be key drivers of improvement in all areas if done correctly,and our survey finds that trusts have largely avoided any negative impactWhat impact have cips had on the following areas in the last two years3530 325 14 19 19 1920 25 2715 3010 17 11 14 135 8 60 3 2 cy es ce ty e rs ale nc fe be ien om an or rie Sa um rn fm fic tc pe ve ou fn Ef af ex Go ty/ af St nt St ali tie Qu Pa Positive Neutral NegativeNearly 60% of respondents said CIPs had led to reductions A number of respondents identified that they had robustin staff numbers, and this is reflected in a negative impact procedures for ensuring savings do not have a negativeon staff morale identified by four out of 10 directors taking impact on quality, through such means as risk assessmentspart. The fact that 40% said it had not had an impact on staff at the earliest possible phase of proposal. These findingsnumbers is surprising. It should however be noted that half reflect earlier work by the HFMA on clinical engagement inof the finance directors said CIPs had not impacted on staff provider organisations, which also identified safeguards tomorale and two finance directors actually reported ensure service quality was not reduced by cost improvement.an improvement in staff morale as a result of CIPs. As CIPs progress the integrity of these procedures will The relatively positive picture on staff morale suggests become increasingly important.staff may respond well to seeing an improvement inefficiency and reduction in waste, with services being morestreamlined and focused on patient needs and expectations. CIPs were understandably seen as having a positiveimpact on efficiency. However finance directors were spliton the impact of CIPs on quality and outcomes with 42%reporting a positive impact and 58% reporting a neutralimpact. Some trusts indicated that they had rejected ordeferred high-risk schemes.10 Approaches to delivering NHS cost improvements
  13. 13. Hitting long-term financial targetsWhen asked about hitting targets over the next three years, confidence fromrespondents fallsHow likely is it that your trust will achieve its Our survey asked respondents to rate the likelihood offinancial targets? their trust achieving their financial targets over the next35 three financial years. The results show a clear deterioration in confidence in 2013/14 and 2014/15. While 97% thought30 that hitting the 2012/13 targets was very likely or likely, this25 reduces to 30% for 2014/15, with the remainder indicating 16 achievement of targets was only ‘possible’. 2120 21 This is likely to reflect two issues. First, there is greater uncertainty about the financial context for 2013/14 and15 2014/15. Finance directors simply do not know what tariff10 prices and efficiency requirements will be set at. Nor do 14 they know the business rules that will be put in place – for5 11 8 example around marginal rates for emergency work under payment by results or possible readmissions penalties.0 2 2 Secondly, the introduction of new commissioners in the 3 4 5 form of clinical commissioning groups will also add to /1 /1 /1 12 13 14 20 20 20 this uncertainty. Very likely Likely Possible However the fall-off in confidence beyond the current Unlikely Very unlikely Don’t know year is also likely to reflect the fact that CIP schemes are expected to become more difficult as time moves on. Easier opportunities for savings are likely to have been realised leaving trusts to deliver on some of the longer term, transformational projects. Respondents mention a number of specific concerns around medium term targets. In particular there are concerns about a loss of education funding and cuts to local authority budgets, with a knock-on impact on the NHS. Approaches to delivering NHS cost improvements 11
  14. 14. Making a success of CIPsTrusts identify good board awareness and support for CIP schemes but someconcerns over manpower levels and capability to make partnerships workThe following are key components of successful cips. how would you rate them in your trust?35 2 330 2 4 5 6 7 825 9 16 1720 17 14 20 18 2215 2410 21 16 14 13 135 9 8 60 he ss/ sk ity st f pla n/ po ity tiv – rtn ith al t o ity t ac ity or cy tio ac an ac pa w es ills f ns r ity s sc ne af nic en we ac er pp nd ual al ion ap m cap en iga m or re cli em ap su s a ta q tc loc orat ing it t f awa – tc g nt f m t s’ en en ga Da en er b rtm rtm co n o pp rd En lla ion em – su Boa Co io pa pa st iss or ag at co de de ific m an m ce ce m nt Co an an Ide ct oje Fin Fin Pr Good Average PoorThe survey identified some of the key components for The sample was split in identifying clinical engagementsuccessful CIPs and asked finance directors to rate their in their organisations as either good or average. Perhaps theown organisations in these areas. Some 73% of respondents greatest concern was around collaboration with partners,said their organisations had good board awareness and considering the importance of partnership working tosupport for schemes. Board level buy-in to CIPs is seen as the achievement of better integrated services. One in fivea vital foundation for achievement of targets. Trusts largely respondents said this was poor in their organisations whilesuggested that they had the skills within their finance a further 55% rated collaboration as only average, reflectingdepartments to deliver on CIPs. Some 64% of respondents the difficulty in enabling effective partnership working.said finance department skills were good. However there Less than half the sample rated project managementwas slightly more concern about actual numbers of staff capacity as good. Those organisations with average or poorwithin finance departments to support delivery of the arrangements in place will need to address this if they areimprovement agenda. to continue to deliver CIPs successfully going forward.12 Approaches to delivering NHS cost improvements
  15. 15. Using rewards to drive CIPsA variety of divisional incentive schemes are in place across trusts to helpachieve targetsOur survey asked finance directors whether their trusts had trusts deliver their overall financial plan. For some to retainincentive schemes in place to help drive their CIP targets. surpluses, for example, while other divisions fail to hit targetsOf our 34 trusts, nine have some form of scheme in place, is clearly problematic, so future surplus schemes in particulareach with a very specific and varied profile. may need to be linked to overall CIP achievement. A creative Some trusts allow greater access to capital for divisions approach to structuring these schemes is required to balancethat generate surpluses, while others maintain reserves that the needs of incentivising individual service lines and meetingcan be accessed by divisions proposing proven ‘spend to the ongoing CIP targets.save’ schemes. Likewise, there are also trusts that have the “Incentives are useful but need to be structured on anavailability of transformation funds for such things as affordable basis.”service developments rather than awarding preferred Bill Upton, Head of Healthcare, Grant Thorntonaccess to capital. Respondents also identify CQUIN and Best PracticeTariff funds being reinvested in the division, alongside otherswho simply allow surpluses to be retained, either in full oras a percentage. A number of trusts are now discussing theimplementation of incentive schemes and it is clear that suchincentives may become a valuable tool in driving furthersavings across the sector. The benefits of incentives are clear,but the difficulty is that these may only be affordable if A number of trusts are now discussing the implementation of divisional incentive schemes, and it is clear that such incentives may become a valuable tool in driving further savings across the sector. Approaches to delivering NHS cost improvements 13
  16. 16. The goals of successful CIPsThe highest quality care can be the lowest cost care if care is delivered ‘rightfirst time’ and duplication and waste are eliminated. But how do clinical staffview efforts to improve costs?What do you think your clinical staff see as the main goalof your cip programme? (clinical staff = doctors, nurses andother frontline staff) CIP impact and clinical engagement To reduce costs “We’re making sure we look at everything, every To reduce costs and improve quality To reduce costs without 25 opportunity. We’ve had ideas from everywhere within the reducing quality trust, and even from outside organisations. There isn’t a pound of expenditure that won’t be looked at three 53 times over the next couple of years in terms of whether 22 it is being spent wisely. I don’t think there’s anything novel, however the only thing I would say in terms of our performance management framework is that it has allowed us to drive some additional costs out at the sameOur survey included two key questions about the overall time as managing quality, performance and workforcegoals of CIPs and the benefits they bring. While overall the targets. If we didn’t have that framework in place I thinkresponses were positive – from both the points of view of we may have compromised performance or quality on thefinancial directors (see page 15) and how those directors back of savings. We’ve been able to sustain performance – improved performance, actually – as well as managingbelieve their clinical staff feel – more needs to be done about key quality metrics.communicating the goals and reasons for CIPs. This was shown in a question asking what finance In terms of CIP impact on staff morale, there is alwaysdirectors believed their clinical staff saw as the main goal of concern that the focus remains on finance and savingsthe CIP programme. Over half (53%) thought that clinical and this of course impacts on a broad number of our staff. I have no qualitative evidence that there is a directstaff saw the CIP goal as reducing costs without reducing impact of CIP on staff morale, however.quality – a neutral stance. However, 25% thought thatclinical staff viewed CIPs as purely a cost-reduction exercise. Clinical engagement is an absolutely critical issue. It’s Changing traditional mindsets is, as our respondents both the medical staff and broader clinical workforce.commented, a long process. Some remarked that professional We have to develop initiatives for savings that have fullbodies greet their CIP schemes with scepticism, and that support from the clinicians delivering the services and make sure in communicating the challenge cliniciansmore work needs to be done to convince staff that efficiency see the importance to them of supporting the savingscan be delivered while maintaining, or improving, standards. programme.”This implies that work needs to be done at the national levelto help both staff and professional bodies understand the role Karl Simkinsof CIPs. Engagement of clinical staff is key to successfully Director of Finance,delivering on CIPs, and where this is failing, there may be Royal Cornwall Hospitals NHS Trusta direct effect on the long-term sustainability of schemes.High quality services are built on a foundation of robustfinances. But it is also the case that trusts that focus on “Those trusts that have a major focus on continual improvementscontinual improvements in quality appear significantly in quality appear significantly more successful at deliveringmore successful at delivering ongoing financial savings. on-going financial savings.”The engagement of clinical staff in this process is vital. Bill Upton, Head of Healthcare, Grant Thornton14 Approaches to delivering NHS cost improvements
  17. 17. Additional benefits from CIPsCIPs enable improved clinical engagement and the opportunity to improveboth clinical pathways and qualityApart from reducing costs, what are the additional A number of trusts use transformation change schemesbenefits of cips? that stand alongside or replace CIPs. These schemes,100% according to respondents, create more excitement and90% engagement in their organisations as they place savings as80% part of the process of delivering a modern, efficient and70% successful trust.60% One director said a balanced approach was needed on50% quality and cost improvement. While he accepted that higher 9740% 88 quality could mean lower cost, this would not be the case in 72 all circumstances. He suggested that a simplistic adherence to30% 66 this mantra in all cases risked turning clinicians off.20%10%0% 0 Engaging clinical teams and improving data quality wa to al y to ior s on qu to s fit ys f s ty pa unity e nity af nic nit itie ’s ocu ne ali st cli rtu pr rtu be t th ion to f vie or ge ppo im ppo pr No re Opp ov “We have a good relationship with clinical staff: we have six nis us O O w ga ps at or Hel ga clinical business units (CBUs) and six clinical directors. All en the CIPs are generated at CBU level so we have full clinicalWe also asked finance directors what they saw as the involvement. Something else we’ve had for over a year nowadditional benefits derived from undertaking CIPs, apart is a quality steering group, led by the medical and nursingfrom reducing costs and meeting financial targets. Most directors and involving the clinical directors and otherrespondents agree that CIPs provide opportunities, as well clinicians, that oversees the process of developing CIPas challenges. plans, with a particular emphasis on the quality aspect. Directors were almost unanimous in identifying the Data quality is not a significant issue, but an area we canopportunity to review pathways as a key benefit. Changed always improve on. What we’re doing at the moment withpathways can deliver better services for patients – potentially the quality steering group is to take existing performancedelivering services more proactively to avoid inpatient indicators and group them in a clearer fashion so you canepisodes or delivering different components of care on the see what impact CIPs are having on quality.same day in the same location to provide greater convenience. You’ll get a quality set of indicators that we can take to theThe need to find cost improvements can provide an impetus trust board, CBUs, or distribute on a team basis to showto challenge the status quo and look for opportunities to what’s happening with regards to these indicators. Wedeliver improvements in both quality and value. It may be can say what’s normal, what’s good or poor, we can seethat pathways, once reviewed, remain unchanged or merely if there’s something happening in regard to quality that wetweaked. But the act of reviewing can help clinical-financial might need to investigate further.engagement, which is likely to pay off in other service areas At the moment we have many performance indicators.and projects. We’ve got about 270 that we currently monitor, whether Given that some respondents have expressed concern that’s through Monitor, or the NHS Performance Frameworkover clinical staff viewing CIPs as simply cost cutting, it is or the local commissioner frameworks. So what would beheartening to see that 88% rate the opportunity to engage helpful is a more concise group of quality indicators.”with clinical staff as a key benefit. From comments made in David Sprosonour survey, it is clear that the majority of trusts have made Head of Finance & Performance, Mersey Care NHS Trustthis engagement successfully as they bring clinical staff intothe very process of proposing and assessing schemes. Approaches to delivering NHS cost improvements 15
  18. 18. About usGrant Thornton HFMAGrant Thornton UK LLP is a leading financial and business The HFMA is the representative body for finance staffadviser to the public and private sectors. The firm has in healthcare and – for the past 60 years – has providedover 200 partners and nearly 4,000 staff operating from 27 independent and objective advice to its members and theclient-facing offices throughout the UK. Our key industry wider healthcare community. We are a charitable organisationspecialisms include the health sector, where we have clients that promotes best practice and innovation in financialranging from NHS trusts and foundation trusts to SHAs, management and governance across the UK health economycommissioning bodies and social enterprises. We also through our local and national networks. We also analysesupply consultancy services to Monitor and the and respond to national policy and aim to exert influence inDepartment of Health. shaping the wider healthcare agenda. We have a particular We have a specialist team dedicated to providing robust interest in promoting the highest professional standards infinancial and operational support to our clients, enabling financial management and governance.them to focus facing significant challenges in implementingpolicies and delivering improved patient care. Ourcommitment to the sector is recognised by winning the‘HealthInvestor Advisor of the Year’ award in 2009 and 2010and the LIFT ‘Best Advisor Award’ in 2008 and 2010. We are a corporate partner of the Healthcare FinancialManagement Association, regularly contributing to HFMAconferences and training activities, and speaking on issuesimpact the sector at both a national and regional level. Our services to health sector clients include value-addedassurance, advice on board governance and the developmentof Board Reporting Frameworks, and acting as independentReporting Accountants for FT applicants. Grant Thorntonalso provides a wide range of other financial advisory servicesincluding advice in relation to estates projects and other majorcapital investment, business case development, joint ventures,performance and turnaround services, organisational andoperational efficiency support, taxation services, specialistcorporate finance and due diligence expertise.16 Approaches to delivering NHS cost improvements
  19. 19. Contact usFor further information on this report and CIPs please contact Bill or Clive, or your regional contact listed below:Head of Healthcare Report authorBill Upton Clive MellorT 020 7728 3453 T 020 7865 2444E bill.upton@uk.gt.com E clive.p.mellor@uk.gt.comLondon South of EnglandPaul Hughes John GoldingT 020 7728 2256 T 0117 305 7802E paul.hughes@uk.gt.com E john.golding@uk.gt.comMidlands & East North of EnglandJon Roberts Paul DeverillT 0121 232 5410 T 0113 200 1551E jon.roberts@uk.gt.com E paul.deverill@uk.gt.com© 2012 Grant Thornton UK LLP. All rights reserved.‘Grant Thornton’ means Grant Thornton UK LLP, a limited liability partnership.Grant Thornton UK LLP is a member firm within Grant Thornton International Ltd (‘Grant Thornton International’).Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered by themember firms independently. This publication has been prepared only as a guide. No responsibility can be acceptedby us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication.www.grant-thornton.co.ukEPI927

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