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• Report: Department of Health: progress in making NHS efficiency savings (HTML)
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• Public Accounts Committee

The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts, today said:

“The NHS has achieved its financial savings target, but this has in large part come from freezing wages.

“We are concerned that other savings are being achieved by rationing patients’ access to certain treatments. These include cataract surgery and hip and knee replacements. These procedures are described as being ‘of low clinical value’, but people waiting for these operations suffer pain and a poorer quality of life.

“Furthermore, the finances of some trusts are fragile, and there is a risk they may resort to simple cost-cutting rather than finding genuine efficiency savings.

 “As the Francis report on the Mid-Staffordshire NHS Trust showed, financial pressures may already be causing some hospital trusts to cut staff with damaging effects on the quality and safety of care.

 “The NHS must fundamentally change the way that healthcare is provided to secure the level of savings needed in the future, for example by moving services out of hospitals and into the community. 

“We are not satisfied that the Department and the NHS Commissioning Board is doing enough to help the NHS transform services. In replying to us they should set out a clear plan for delivering the level of savings required from service transformation, including how they intend to use financial incentives to encourage NHS bodies to work together.

“Local people are understandably resistant when proposals are made to close their local hospital or reduce the range of services it provides. It is down to the Department to make a clear case for change from the patient’s point of view, demonstrating the benefits in terms of the quality and safety of care as well as cost savings.

“Unless this is done urgently, the Department will continue to face resistance to change and the NHS will struggle to deliver the savings it needs.

“Although the Department reported that the NHS made savings in 2011-12 of £5.8 billion, virtually all of that year’s forecast of £5.9 billion, that data is not fully reliable. Only 60% of the savings it claimed to have made during 2011-12 could be substantiated using national data.”

Margaret Hodge was speaking as the Committee published its 39th Report of this Session which, on the basis of evidence from the Department of Health, examined progress in making NHS efficiency savings.

Estimated savings

The Department of Health (the Department) has estimated that the NHS needs to make efficiency savings of up to £20 billion in the four years to 2014-15. This should allow the NHS to keep pace with the growing demand for healthcare and live within its tighter means. The Department reported that the NHS made savings of £5.8 billion in 2011-12, virtually all of that year’s forecast of £5.9 billion. The Department expects that by the end of 2012-13 the savings made will total £12.4 billion.

The NHS appears to have made a positive start but we cannot be fully confident in the savings figures reported. At local level primary care trusts measure and report savings in different ways. For example, the often significant costs associated with generating savings are not consistently taken into account in reporting the savings achieved. Using national data the Department can substantiate only £3.4 billion of the savings reported for 2011-12.

The NHS intends that the quality of healthcare should not suffer as it pursues efficiencies. While performance against a small number of headline indicators of quality, including waiting times and infection rates, was maintained in 2011-12, we are concerned that the need to make savings may be affecting wider areas of care quality, which are not adequately measured.

Reducing demand

The NHS is seeking to make savings by reducing the demand for health services, particularly for acute hospital care. This is not intended to restrict patients’ access to healthcare, but there are widespread concerns, from patient groups as well as professional bodies, that access to treatments such as cataract and bariatric surgery is being rationed.

Such treatments may be classed as of ‘low clinical value’ but they can make a real difference to a patient’s quality of life. Delaying treatment may also lead to greater cost in the longer term. We welcome the fact that the Department has started to work with the Royal College of Surgeons and others to define appropriate thresholds of care.

Transformation

Most of the savings to date have been achieved through freezing the pay of NHS staff and reducing the prices paid for healthcare. The more challenging, and risky, part of the efficiency drive requires transformation in the way health services are actually provided.

Over the four years to 2014-15, such transformational changes are expected to generate 20% of the total savings, but the Department expects that by the halfway stage—the end of 2012-13 - just 7% (£875 million) of savings will have been generated in this way.

Changing the way services are delivered means in some cases centralising services (as in the case of stroke care in London) or providing more community-based care, closer to people’s homes. This is expected to lead to some hospitals reducing the range of services they provide and departments, and even whole hospitals, closing.

Such change is usually contentious and what might make clinical and financial sense is often not supported by local people. The Department has not yet convinced the public or politicians of the need for major service change or demonstrated that alternative services will be in place.

The existing payment mechanisms in the NHS were designed to incentivise hospitals to carry out more activity, and do not drive service transformation.

National penalties

The Department highlighted that it has introduced national penalties to reduce emergency admissions and payments to encourage hospitals to implement best practice and thereby improve quality and efficiency. However, these measures may not be suitable in every locality and the Department has not assessed their impact.

Further information

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