The NHS England’s Five Year Forward View (FYFV) that set out plans for the NHS from 2015 to 2020 estimated that the NHS would need an extra £30 billion by 2020 to deal with growth in healthcare need, the emergence of new treatments, and so on. Of this figure, the FYFV suggested that the government should provide £8 billion, while £22 billion could be found from within the NHS through further ‘efficiency’ measures’. In effect NHS England was demanding ‘productivity gains’ of 2-3% each year between 2015 and 2020 (see http://www.england.nhs.uk/wp-content/uploads/2014/10/5yfv-web.pdf). This is highly ambitious compared with the kind of efficiencies achieved by the wider UK economy or the health care systems of other countries. These ‘efficiencies’ may also bring safety risks in a service where every ounce of fat has already been cut.
Of the £22 billion that the Five Year Forward View expects the NHS to achieve through ‘efficiency savings’, these are to be found, for example, by
- restructuring the NHS (again) through introducing new models of care that share similarities with Accountable Care Organisations (ACOs) found, for instance, in the US. ACOs aim to reduce costs by bringing in economies of scale and introducing higher thresholds for treating patients, although the evidence for reduced costs is mixed;
- restructuring the NHS workforce through bringing in new, more ‘flexible’ roles carried out by less qualified, cheaper staff, and weaker rules about pay and conditions (such as a significant reduction in real term salaries for many staff); and
- reducing red tape and reduced waste.
A report by the Centre for Health and Public Interest(CHPI), published in May 2017, assessed seven key assumptions on which the plans for achieving the efficiency savings were based and found them to be unrealistic. Key findings are that:
- The vast majority of this year’s up-front funding earmarked for transforming NHS services (£1.8bn out of £2.1bn) has instead been spent on reducing hospital deficits. This leaves only £300 million available for the NHS to invest in achieving its efficiency targets.
- Last year hospitals were only able to find recurrent cost savings of 2.8% and yet average targets of 4% and 4.2% have been set for this year and next. NHS Improvement has admitted that targets of 4% in previous years were unrealistic.
- A 1% pay cap on NHS staff wages will be hard to maintain with national average earnings expected to grow by 2.9% a year and inflation at 1.9% a year. A 0.9% real wage cut amidst 6% staff shortages is unlikely to hold.
- Social care is expecting a funding shortfall of £3.5bn by 2020/21. Less social care provision will mean longer stays in hospital for older people who are well enough to leave and higher costs being passed onto the NHS. (https://chpi.org.uk/publications/analyses/the-five-year-forward-view-do-the-numbers-add-up/)
Efficiency savings are to be ensured by a carrot-and-stick approach: in 2016 NHS England directed that the NHS in England will be divided into 44 new ‘local health systems’ or ‘footprints’ and that each will produce a ‘Sustainability and Transformation Plan‘ (STP). Each footprint will show in its STP how it will transform the way it plans and delivers health and care services in line with the FYFV. But most importantly, each ‘footprint’ is expected to show how it will cut expenditure and stay within budget through, for example,
- moderating ‘demand’ (reducing patients’ use of services),
- increasing productivity (cutting the budgets for service providers, reducing the pay bill, reducing the number of hospital beds etc), and
- generating income (potentially from private patients or selling land).
The Health Secretary has made it clear that Trusts must balance their books or their governing boards could be removed. An extra £1.8 billion ‘transformation fund” for the NHS that George Osborne announced for 2016-17 is only available to NHS trusts that promise to meet a huge range of demands, including moving to seven-day services (https://www.opendemocracy.net/ournhs/colin-leys/sustainability-and-transformation-plans-kill-or-cure-for-nhs). It’s feared that even if footprints can meet NHS England’s demands, much of the funding they might receive will have to go on reversing financial deficits. (See also our page on Sustainability and Transformation Plans)