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Hitting the target

Will the NHS have to return to slash and burn tactics to avoid financial Armageddon in 2011?

A dartboard with 'quality', 'innovation', 'productivity' and 'prevention' forming target areasPolitical uncertainty, particularly in light of the (at the time of writing) upcoming general election, is a major concern for NHS senior managers. But the number one issue to consider in 2010 is not related to political upheaval or impending policy shifts: it is the potential impending financial meltdown currently facing the NHS.

With projected deficits for this year alone already coming in at £50m from individual Trusts, the big question is just how senior managers plan to address these pressures and manage the financial situation. Will they revert to 1980s-style "slash and burn" tactics, drastically cutting down the number of outpatient appointments available, removing beds from hospitals and reducing the provision of slots for surgery? Or will a positive response to the Quality, Innovation, Productivity and Prevention (QIPP) agenda be enough to increase efficiency and achieve more effective management of resources?

Crisis point
Senior managers are warning that the NHS is currently facing the greatest financial pressure it has experienced since its inception. Indeed, a study conducted jointly by healthcare thinktank The King's Fund and the Institute for Fiscal Studies forecasts a funding gap of between £20bn and £40bn by 2017, which will happen if funding for the NHS does not increase or receives a real-term freeze that constitutes an increase, but only to the extent that it keeps pace with inflation.

NHS Trusts have been asked by the Secretary of State not to second-guess the government on financial projections. With the next round of funding announcements for 2011 yet to be made, organisations are making their plans based on an anticipated gain of 0.7 per cent, estimated by the Institute of Fiscal Studies to represent a decline of 2.3 per cent in real terms.

It is little surprise that, working on this basis, a number of Trusts are already predicting multi-million pound deficits. How are these organisations planning to address the shortfall?

It is clear that, after years of investment, the NHS must now retrench alongside other public services. The response and strategies put in place this year will, however, have long-term implications for both the level and the quality of care it is able to provide.

Coping with the cuts
The jobs and services that must be cut this year because of budgetary constraints are unlikely to be reintroduced until financial pressures ease. The financial recovery will be a long and arduous process, which is likely to occur over the course of several years. This represents very real implications for the quality and timeliness of patient care if services are cut.

According to the scenario planning that has been released by some PCTs, it would nevertheless appear that drastic cuts are under consideration, including a huge reduction in the number of outpatient appointments. The potential outcome of such strategies has been termed by some an "NHS Armageddon".

QIPP agenda
It remains questionable whether this "slash and burn" approach to cost reduction could even be delivered in today's NHS. The world has moved on significantly since the early 1980s and the health expectations of the British people have kept pace, thanks to the strong focus on quality targets, the reduction in waiting lists and the introduction of patient rights under the NHS constitution. It is unlikely that the electorate would permit a wholesale reduction in the quality and breadth of NHS services to take place; an alternative approach to cost-cutting is, therefore, required.

Indeed, the belief behind the QIPP agenda is that the NHS can only survive in this financial climate, in which greater demands are being placed on it every day, if it innovates and improves. The expectation is not for wide-ranging budget cuts, but for newer and better ways of providing an adequate health service. The government itself is placing its faith in this strategy, putting central funding and leadership in place and maintaining a clear planning focus. There is also an expectation of personal responsibility to adhere to the QIPP recommendations. In a letter to the chief executives (CEs) of each PCT, NHS chief executive David Nicholson wrote of QIPP: "Meeting the challenges is central to the role of every NHS leader and every NHS board. In short, this is your day job."

The impact of QIPP
CEs are now beginning to review ongoing strategy and budgets with quality, efficiency, improved productivity and prevention in mind.

This shift in thinking will affect every aspect of service delivery and budgetary spend: for example, prescribing decisions will be made in consideration of the need to reduce the cost of care per patient and so will now take into account factors other than the immediate medical implications. These factors will include long-term effectiveness and outcomes, such as the ability of a drug to reduce hospital admissions and improve day-to-day management of a condition in the community.

Political change
Of course, the timing of this financial crisis is unfortunate. In the run up to the general election the undecided future political landscape is certainly not helping the planning process or enabling CEs to embark on innovative strategies with confidence.

Furthermore, while many in the NHS have been working towards the need to meet a Conservative agenda, the latest polls are suggesting the possibility of a hung parliament, which could bring Liberal Democrat NHS policies into play for the first time, along with the prospect of an unpredictable mixed bag of policy.

Certainly the NHS could be set for further substantial change, with a Conservative government planning to ring-fence the public health budget, create an independent NHS board and make practice-based commissioning budgets a reality. Should the Conservative Party indeed come to power, it would bring further divergence between the various national strategies, with the Scottish and Welsh health policies following a very different political agenda — one that continues to avoid any form of market exposure.

But regardless of the outcome of the general election, the demands on the NHS will be the same: costs must be reduced and there must be an increasing focus on improving efficiency and productivity.

By this time next year, the implications of the current financial crisis on the NHS will be clear. It is reasonable to believe that a new government will be in place, and PCTs will have completed the 2011 round of budget planning. It is also likely that a programme for consolidating PCTs will be underway, with an expectation that the number of Trusts will be reduced by up to one third over the coming years.

The implications for prescribing practices will also have become clearer, as organisations increasingly combine the recommendations of QIPP with the expected renewed drive for the adoption of generics wherever possible. In addition to this, the growing differences across England, Wales, Scotland and Northern Ireland, particularly in key strategic areas such as commissioning, will become even more apparent.

2010 looks set to be a year of further, very significant, change, with PCTs certain to be required to juggle extremely tough financial targets with the need to drive up both efficiency and innovation. Will it be Armageddon? It's still too soon to say. But there is no doubt that it is during this year that the target will come sharply into focus: the pharmaceutical industry will know exactly what goals it must achieve if it is to avoid simply becoming yet another victim of the financial squeeze.

The Authors
Mike Sobanja is chief executive of NHS Alliance
Andy Etheridge is commercial director of Cegedim Dendrite

To comment on this article, email

12th May 2010


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