Trusts risk unwanted legacy with short-term savings

“Five years ago when I was looking at cost improvement programmes [for acute trusts] of 5 per cent I knew 3.5 per cent would be through income increases and 1.5 per cent from cost-reduction. Now I look at it all as cost reduction,” so said NHS Trust Development Authority chief executive David Flory to HSJ last month.

It seems that a significant number of trust chief executives disagree.

Last year income generation accounted for 11 per cent of trust cost improvement programmes, this year it is 17 per cent.

‘The evidence of savings from most mergers is thin on the ground − especially for those whose genesis lies in convenience’

This flies in the face of the accepted logic that work in the acute sector should be slowly reducing as more care is moved into the community. Given increasing reductions in the tariff, the scale of activity is likely to be larger than indicated.

For many trusts the secret of sustainability is still linked to admission. As one consultant involved in a trust’s CIP said to HSJ: “When I arrive at a hospital, if I can get a parking space within two or three minutes it means it is not doing enough activity to be viable”.

Thinking long-term

But before we damn trusts for pursuing a model of acute care dominance (or indeed question if moving care into the community does save money), it is important to understand the context in which cost improvement programmes are set.

Many trusts will have spent the last three years chopping away at the “easiest” savings − those that do not directly impact clinical care. But with much of the back-office cuts made, it seems the appetite for reductions in their biggest area of expenditure − the cost of the workforce − is reducing. The post-Francis world of increased scrutiny is protecting many clinical services. For most this will be appropriate, but not for all.

The increased emphasis on “non-pay” savings and income generation will accelerate trusts into the search for critical mass through mergers. Bigger trusts have, in theory, more land to sell and further back-office efficiencies to make. However, the evidence of savings from most mergers is thin on the ground − especially for those whose genesis lies in convenience rather than the long-term needs of a health economy.

In south London, and elsewhere, the NHS is having to deal with the consequences of consolidations driven by short-term measures. Trusts, along with their commissioners and the new system managers, must be careful not to leave the same legacy.