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DH – Leading the nation’s health and care
Improving operational efficiency in
NHS providers
Non-Executive Directors’ Network
17
thNovember 2015
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Interim report – June 2015
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£5bn opportunity – tighter grip of resources
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Workforce is the biggest cost = biggest opportunity for
improving productivity
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Variances between trusts – the NHS can be up with the
world’s best but inconsistency and a need for relentless
attention to costs
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Greater savings to be had in improving workflow within
and in and out of hospitals
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Advocated ATI now termed Adjusted Treatment Cost
(ATC). This metric could be applied to any combination
of inputs to enable both comparison between trusts and
to create baselines for future improvement
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Detailed analysis with 22 trusts
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Advocated a model hospital to allow trusts to compare
themselves against best practice
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Final report by the end of the calendar year
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Health systems all over the world, be they ‘for profit’ or ‘not for profit’, have adopted a
common set of metrics to monitor and improve the performance of their individual hospitals
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Hospitals in the US have been operating such metrics (Adjusted Admissions) for 50 years
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There is clear evidence that by adopting such an approach efficiency improves significantly
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By examining methodologies around the world, we have now developed a metric for NHS
providers, and with the enthusiastic support of 22 diverse providers, we are confident this
metric can help and support trusts with their cost improvement
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We are terming the
metric the ‘Adjusted
Treatment Cost’ (ATC)
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Accept it wont be
perfect from day one –
but has been
externally validated
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The most important
thing is how the metric
is used………….
Extract from Maryland Health Services Cost Review Commission Annual Report to the Governor Fiscal Year 20064
Application of ATC
ATC
Ideal
Apply to real-time variable cost data:
• Workforce
• Drugs
• Clinical supplies
Enabling trusts to monitor daily/
weekly/monthly/yearly and compare
with peers
Meantime
1. Accounts data (annual snapshot)
2. Reference cost data
3. Any other national data we can
get our hands on e.g.
• Workforce ESR data
• Pharmacy systems
• ERIC Estates data
• Procurement systems
Vision is to enable trusts to have a dashboard of real-time indicators they
can use to keep a relentless focus on their costs
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Initial focus….
Source NHS Accounts 2013-14
Influenceable Non-Pay £18bn
Split between pharma, everyday consumables and medtech is guess as £7.2bn is accounted for by ‘’inventories consumed’
Pay £45.3bn Non-Pay £26.2bn NHS Providers £72bn
£8.2bn is non-influenceable e.g. depreciation, impairments, interest charges etc
Pharmacy £6bn Everyday consumables Medical technologies Common Goods/Services Property/Estates £2bn £3bn £4bn £3bn 0 2 4 6 8
Purchase of Healthcare from non-NHS… Consultancy Establishment Transport Premises Clinical Negligence Costs Education, Training & Conferences Clinical Supplies & Services General Supplies & Services Impairment of Receivables Inventories Consumed Dividends Payable on PDC Rental under operating lease Interest Charges R&D Expenditure Depreciation Amortisation Impairments and Reversals Provisions Provided for In Year Non-cash exp from move in pension liability Provisions Change in Discount Rate Other Inter Company Eliminations
Best Guess
Source NHS Accounts 2013-14
Started with accounts data but realised we
needed more granular data to examine
cost differences line by line….
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• With excellent support and commitment 22 trusts have
been working with us to test and validate the metrics and
to understand why there are differences between them
• The 22 providedline-by-line detailed data to help us
understand the variation between them across the five
key areas of cost:
• Workforce data • Procurement data • Pharmacy data • Estates data
• Clinical specialty data
• Leeds Teaching Hospitals NHS Trust • Imperial College Healthcare NHS Trust
• Central Manchester University Hospitals NHS FT • University College London Hospitals NHS FT • Cambridge University Hospitals NHS FT • Royal Free London NHS FT
• Mid Yorkshire Hospitals NHS Trust • Portsmouth Hospitals NHS Trust • Northumbria Healthcare NHS FT • Plymouth Hospitals NHS Trust • East Sussex Healthcare NHS Trust • Buckinghamshire Healthcare NHS Trust • Bolton NHS Foundation Trust
• Mid Essex Hospital Services NHS Trust
• University Hospitals of Morecambe Bay NHS FT • Ipswich Hospital NHS Trust
• Salisbury NHS FT
• North Cumbria University Hospitals NHS Trust • Hinchingbrooke Healthcare NHS Trust
• University Hospitals Birmingham NHS FT • Salford Royal NHS FT
• Countess of Chester Hospital NHS FT
SHOW DASHBOARDS HERE
• We developed ‘dashboards’ to help the 22 understand
their relative position to their peers
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Workforce
• For 1 month (February 2015) we collected every ward’s
nursing roster, hours worked and split of staff by substantive, bank and agency. Over 600 wards.
• For 2 trusts (Portsmouth and Chester) we undertook deep
dive on all staff groups including medics, management and other staff groups.
• In addition to this we gathered workforce policies on
flexible staffing, rostering and “specialling” patients.
Estates
• We mined the ERIC database to get a picture for each
NHS Provider
• We did a deep dive in three NHS providers on their soft
FM.
• In addition we talked to each trust to understand their
estate and property issues and drivers of cost
Pharmacy
• We mined 3 datasets – Define, Pharmex and IMS and
the Pharmacy workforce survey to get a full understanding of costs (medicines and staff)
• In addition we talked to each trust to gain an insight of
capability
• Extracting information from the NHS Benchmarking
pharmacy survey – workforce, structure, medicines management and compounding
Procurement
• We collected all Accounts Payable and Purchase Order
data from all 22 for the last 2 years
• In addition we talked to each trust to gain an insight of
capability
• Collected information on procurement team – structure,
numbers, span of responsibility
Clinical
• We mined Prof Tim Briggs GIRFT data collection on
orthopaedic services, and now have dashboards for each trust
• We gathered data on pathology and radiology services to
enable ATC comparison
• We applied ATC to clinical specialty costs
AND WE ESTABLISHED ‘EFFICIENCY
COLLABORATIVES IN EACH OF
THESE AREAS TO STUDY THE DATA
AND DEVELOP OUR APPROACH TO
THE MODEL HOSPITAL
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National Averages Trust A Trust B 52 weeks x 37.5 hours 1950 hours 1950 hours 1950 hours Annual Leave 300 hours 300 hours 300 hours Maternity 68.25 hours 57 hours 95.5 hours Sickness 68.25 hours 70 hours 48.75 hours Training 48.75 hours 30 hours 30 hours Assumed Availability 1,464.75 1,493 hours 1,475.75
Productive Time Qualifie d Unqualified RCN 65% 35% State of California 60% 40% NICE (assumed) 80% 20% Skill mix Roster management
Investigating variation in workforce management practices:
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Long term training / workforce planning
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Productive time / contact time
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Skill mix
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Rotas
Required vs Actual Nursing Hours Per Patient Day
Initial focus on nurses
but also looking at
clinicians and
management costs…
1% improvement in workforce
productivity = £400m savings
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Secretary of State’s expectations
“So what are we going to do about this? Well I talked last year about a compact
with you to try and find these efficiency savings. And our plan is that shortly Patrick
Carter will publish his plans for a model hospital - what the best practice is in
procurement, and how we can get the best prices as we should be as the biggest
purchaser of health care products in the world as our NHS is.
Then by September, he will share with you a sum of money that he estimates you
could save in your trusts if you adopt these practices. And then we will spend
between September and December working through that sum of money with you
so that by December it is an agreed sum of money.
And then I’m afraid from January the hard bit starts which is actually implementing
that change in practice, but it will be done on the basis of transparency of data,
and I hope this will help you to release a lot of extra savings”
Jeremy Hunt, NHS Confed speech June 2015
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ATC savings calculation for all acute trusts
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Using ATC we have calculated a
potential savings opportunity for each
acute trust and compared it with their
total operating expenses, current CIP
plans and surplus/deficit
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The total savings opportunity for all
acute providers is c£4.96bn
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84 trusts account for c£4bn with
teaching hospitals having greatest
opportunity (needs closer scrutiny)
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For most trusts the saving is greater
than current CIP (e.g. 25 trusts with
highest savings account for c£2bn
whereas current CIPs plans are
c£850m)
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For 82 trusts the savings figure is 50%+
higher than current CIPs plans
Specialty Count in Top 10 Obstetrics and Gynaecology 111
General Medicine 101
Trauma and Orthopaedics 92
General Surgery 86
Emergency Medicine 81
Paediatrics (Medical and Surgical) 80
Cancer Services 79
Pathology 79
Intensive and Critical care 75
Community Nursing (including Health Visitors and
Midwifery) 62
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73% of opportunity appears to be in 10 specialties
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Savings range from 5 – 20% of OpEx
£0 £20,000,000 £40,000,000 £60,000,000 £80,000,000 £100,000,000 £120,000,000 £140,000,000 £160,000,000 £180,000,000 1 7 13 19 25 31 37 43 49 55 61 67 73 79 85 91 97 1 03 1 09 1 15 1 21 1 27 1 33 1 39 1 45 1 51
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ATC savings calculation
DH – Leading the nation’s health and care
• Calculated using Reference Cost data
• Identified where trusts appear to be spending more than the national
average for the types of activity provided
• Based on assumption trusts can bring costs down to the national average
in areas where they appear to be spending more than the average,
without increasing costs in areas where they appear to be spending less
than the national average
• Trusts can ‘drill down’ into the proposed savings in a number of ways to
determine where potential efficiency opportunities enabling trust
management to prioritise attention
But trusts want to go even deeper, want to know what good looks like
and want to know what actions they need to take to make savings –
this is where the ‘model hospital’ comes in………
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Introduction
to the Model Hospital
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Leading international hospital systems have
clear consistent approach to measuring
productivity and efficiency performance.
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This is often built around a broad but limited
set of key indicators, built into regular local
reporting processes.
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These indicators are tailored to be appropriate
to the level of the organisation, and run from
‘ward to board’
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As well as having clear consistent measures,
our engagement with the cohort of 22 has
highlighted that leadership teams want to know
‘what good looks like’ in terms of operational
productivity in different parts of their
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Board Level Productivity and Efficiency Dashboard
We are considering a consistent set of key board-level efficiency indicators that
can be used across the acute provider sector, drawn from existing data sources
and using the ATC where appropriate. We think that these indicators broadly fit
into 3 categories; patients, people, and finance
Overall Hospital Efficiency
Total Adjusted Treatment Cost (ATC)
Patient-focused
‘Getting it right first
time’
Potential Board-level
indicators
Average length of stay
Readmission rates
Litigation rates
People-focused
‘Getting the most from our
workforce
’Potential Board-level indicators
Medic ATCs
FTEs per Adjusted Occupied Bed
Sickness & absence rates
Agency cost ratios
Nursing Hours Per Patient Day
Finance-focused
‘Getting the best value for
money’
Potential Board-level
indicators
Drugs ATC
Clinical Supplies ATC
Estates Costs/m2
Administration ATC
Clinical support services
Pathology ATC
Radiology ATC
14 Ambulance Services Cancer Services Cardiology Cardiothoracic Surgery Community
Services General Surgery General Medicine Gastroenterology & Hepatology Emergency Medicine
ENT Dental Services
Geriatric Medicine Critical Care Obsteterics & Gynaecology Ophthalmology, Orthoptics & Optometry Paediatrics Respiratory Medicine Renal Medicine Rehabilitation Radiotherapy Radiology Psychiatry & Mental Health Services Trauma & Orthopaedics Urology
Pathology Radiology Pharmacy Theatres
Pathology Radiology Pharmacy Theatres
Estates &
Facilities
Finance
IT Services
Procurement
Human
Resources
Trust Board &
Goverance
Beyond the board
The Model Hospital will include metrics that drill down through the organisation, eventually covering all
the main specialities, corporate services and clinical services
.
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Cascading metrics
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Dashboard example 2
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October to December 2015
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Letter to each trust 22
ndSeptember
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Further letters to 32 commenced 12th October
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Letters contain:
• Graphic summary of ACT performance
• Suggested savings number
• Savings number broken down into top 10 specialties
• Workforce ATCs and Non-pay ATCs
• Explanation of ATC calculation
• Description of the model hospital and the handful of priority metrics
• A factsheet for confirmation/completion
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Visits to trusts throughout October/November to discuss
opportunities
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Visits undertaken so far: Chester, Leeds, Manchester,
Salford, Wolverhampton
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Everyday medical consumables
(nursing decisions)
Global best practice:
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6-9000 lines
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90%+ compliance
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Any changes 85% compliance
within 30 days
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Price variance 1-2%
Current NHS practice:
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500,000 lines
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Variable compliance
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Takes an age to change
something
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Price variance up to 35%
Hip replacement fixation method – NEQOS dashboard
Patients 65+ years. HES Apr 2013 – Mar 2014 data (HES 2013/14 data is provisional) (updated from original report)
Procurement is a problem
• No common way across trusts of analysing either AP or PO data
• No common chart of accounts or common way of managing non-pay spend • No capability to analyse invoices at line level
• Only 50% of net non-pay is covered by POs
• Only 50% of PO spend can be matched at item level due to poor data • Only 15% of trusts have accurate inventory data
• Average price variation across trusts +/- 10% across all items analysed
Findings from Health Logistics data
• AP data and PO data is incomplete and not compatible with accounts
info
• Can’t determine volumes used and pricing information is sketchy and
often doesn’t cover rebates
• This means we can’t get a consistent procurement dataset to apply ATI
• All of this begs the question how trusts manage non-pay if they don’t
know what and how much they are buying to deliver care?
Consequences:
• Highly fragmented and expensive
• Significant price variation
• Failure to aggregate
• Paucity of data
• Weak contract with DHL
• Weak inventory management, systems
and controls
• Significant cost of sales forces
influencing choice
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But there’s always one……….
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Emerging issues
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Emerging issues
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Non-pay reporting
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Impact of DTOCs and cancellations on productivity
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Ring-fencing of elective care
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Hard decisions about service lines
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Scope for shared services
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Need for support (OD)
– How to run own strategic and operational workshop
– How to develop specific metrics
– How to develop own operational management process
– Role of NHSI
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Assessment of ‘use of resources’ by CQC
“We are working with the Carter review team (reviewing operational productivity in NHS providers), Monitor, the NHS Trust Development Authority and the Department of Health to design a practical assessment approach to enable pilot assessments to start from April 2016. Our initial focus would be on the more technical aspects of economical and efficient service delivery. As data and analysis methods evolve, including the Carter review being completed, we would look to include wider analysis in the assessment”
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