NHS chief warns on productivity

The National Health Service will have “to deliver efficiencies and productivity like we have never done before,” David Flory, the health department’s director-general of finance and performance, has warned.

His stricture to NHS finance chiefs came as hospitals were told that they will only receive a basic 1.7 per cent increase in the price the NHS pays per treatment next year and no more than 1.2 per cent the year after – in spite of an average 5.5 per cent a year increase in the cash that primary care trusts are to be given to buy the care.

Hospitals and other services covered by the price list will be able to secure an additional 0.5 per cent by hitting quality standards. But the below-inflation increase in the tariff, will put huge pressure on NHS Trusts to improve productivity before much reduced spending growth after 2010.

Failure to do so would put NHS waiting times and other services under pressure.

Alan Johnson, health secretary, indicated on Monday that the NHS hoped to carry over about £1bn ($1.5bn) of its present £2bn surplus into those tough spending years. Just £800m of the existing surplus would be drawn down over the next two years, he told MPs in a statement.

Carrying over £1bn on what will by then be a £110bn budget would help “deal with the days when it rains hard,” Mr Flory said last week, as he declared that the NHS had to “get fit for the tough years” to come.

On the labour government’s published spending plans, most analysts believe the NHS will be lucky to see 1 per cent a year real growth after 2010 – a fraction of the 7 per cent increases of recent years and the 3 per cent current level.

Mr Flory said before then the NHS will have to deliver “a decent part” of the £5bn of extra efficiency savings that the Treasury is seeking from across government in 2010.

The Royal College of Nursing called for all the surplus to be used as it represented money that “could have been spent on frontline care”.

However, Mr Johnson, with an eye on the longer term, described drawing down only £800m of it as “prudent”.

He added that “substantial savings” needed to be made by driving up the quality of care so that errors and waste were reduced.

The warning that a marked increase in productivity was needed came as the health department conceded that while waiting times have been tumbling and activity rising, NHS productivity has still fallen sharply on the most recent figures.

One important reason for that is generous pay deals, which have consumed almost 30 per cent of the increase in resources.

According to the Office for National Statistics, NHS productivity fell 2.5 per cent a year between 2001 and 2005, though the health department argues that the measure does not adequately pick up quality improvements.

A memorandum to the Commons health committee also showed huge capital underspends in recent years, not least on Connecting for Health, the troubled NHS information technology programme.

With suppliers only paid when systems work, the IT programme underspent by £1.2bn between 2005 and 2007.

The NHS underspent by more than £2bn more generally on capital over the same period, with NHS organisations unable to achieve big increases in spending that had been envisaged.


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