We need NHS managers to tackle the first financial crisis since 1987

20 October, 2010 | By Alastair McLellan

Today the government’s spending review will be announced and the implications for the NHS will start to become clear.

Whatever the detail, two things will remain unchanged; the scale of the financial challenge facing the service and the potential lack of management capacity to deal with it. The grimness and immediacy of the upcoming financial crunch is set out by Professor Nick Bosanquet.

He suggests that the NHS’s financial chickens may come home to roost roughly one year from now. Even if he is a little out on the timing, the reasons he identifies for the crunch make it a case of if, not when, the crisis will arise.

According to Professor Bosanquet the last time the NHS faced such a challenge was in 1987. He does not draw the link, but it is a fact that one significant change since that time was the widespread introduction of general management into the NHS.

Now we are supposedly entering the post-general management age, when numbers and responsibilities will reduce.

But are we all in danger of accepting this “wisdom” at face value and arguing the toss over tactics rather than strategy? Could it be that, ironically, as managers become threatened their value might begin to be understood and appreciated more widely - as, for example, recent statements by the British Medical Association have suggested.

Work by PA Consulting analysed management costs at US charities - which are required by law to report them. These costs typically ranged from 4-8 per cent.

PA’s work was cleverly extrapolated by Steven Toft, a director at the Crucible Consultancy. He makes the salient point that charities are under even greater pressure than public sector organisations to keep costs low. Despite that, UK charities spend 5-13 per cent of expenditure on management costs.

And NHS management spend? Well, however you slice it, the figure does not get much higher than 3 per cent.

This fact should give all interested in saving the NHS from the fate described by Professor Bosanquet pause for thought. A pause in which they might ask themselves the question: “Is the NHS under-, not overmanaged?”

Readers' comments (8)

Anonymous | 20-Oct-2010 3:56 pm
The charity versus NHS comparison is probably starker than the comparisons quoted above. The estimate of NHS managers of 3% is ALL managers not just those in the commissioning side (who decide how and where to spend money) so includes the people in hospitals who run the services. The White paper target plans for less than 1% of the commissioning budget to go into management. Charities spend extra on running and operating actual projects on top of the 4-8% on deciding how to allocate their money.

Whatever way you look at the numbers the NHS looks undermanaged.
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Anonymous | 20-Oct-2010 11:04 pm
I suppose you'll not be interested in the report of the Select Committee showing 14% costs of admin (and their dismay at the degree of obfuscation used by DH in trying to hide these figures), or the Q&A session where admin was estimated to be 25% of staff budgets?

http://www.publications.parliament.uk/pa/cm200910/cmselect/cmhealth/268/26803.htm

http://www.publications.parliament.uk/pa/cm200910/cmselect/cmhealth/517/10032502.htm
(Q 88+)
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Anonymous | 21-Oct-2010 8:05 am
The difference between charities and the NHS is that charities have less to gain by mislabeling / dividing up administration from management - they accept like most of the publicthat the two 'terms' are interchangeable . In contrast, the NHS has become very adept at hiding management positions under 'administration' or even 'clinician' (where possible for nurse management positions). Anonymous from 11:04 PM highlights well how different terms can be used to encompass the same group of people.

I do however agree that the recent 'manager bashing' approach is too simplistic and their role has been undervalued. Unfortunately this is partly due to the proliferation of posts which seemingly add little value to the service which serves to devalue those posts that clearly do.
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Anonymous | 21-Oct-2010 11:53 am
The author of response 2 might want to actually read the report from the health select committee before quoting the 14% number. And then I'd suggest the debate following Calum Paton's BMJ editorial where he quoted the number (
http://www.bmj.com/content/340/bmj.c1979.extract/reply#bmj_el_235064
). In short the 14% is not a very relevant number in this debate and is quoted by people who don't like commissioning or management because it is the biggest bad number they can find.

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Anonymous | 21-Oct-2010 10:41 pm
@ Anon 1153 am.
The HSC report was mainly about commissioning, and perhaps looks at costs of the purchaser provider spilt more than total management costs as a proportion of NHS costs. But that just makes it worse: if (as para 182, copied below, suggests) 14% of total NHS costs are spent just on managing the PP split, then NHS management in toto costs even more than that.

14% clearly isn't the "biggest bad number" one could find- assuming DH allow relevant information to see the light of day.

And Prof Patons contribution of 7th April to the bmj thread made me smile- thanks for pointing out the link.

"Para 182. The current health system with the purchaser/provider split is expensive to run with high administrative and management costs. As we have seen in chapter 2, we have tried rather unsuccessfully over the years to extract information about these costs from the Department and have received a variety of figures ranging from 3-8%; academic research has concluded that the costs are much higher amounting to 20-25% of total staff costs or 14% of the total cost of the NHS, i.e. the staggering sum of £13 bn per year. "

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Anonymous | 22-Oct-2010 11:14 am
In my experience of dealing with Health Service managers there were a few good ones some reasonable ones and a host of overpromoted poor ones who were usually under qualified (in management terms) Doctors Nurses etc. What the NHS urgently needs are Good managers not those jumped up from the professions and small companies.
Also we need managers to understand they are dealing with professional people who have to be taken with the process not threatened by the manager. Gps will always confound manager aspirations if they do not understand and agree. It is not enough to blandly say 'this is a must do'

DOI Retired GP and underqualified manger
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Anonymous | 22-Oct-2010 11:18 am
http://www.nghealthcareeurope.com/news/should-we-be-proud-of-the-nhs/

Here it says 14%

Smoke and Mirrors!!
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Anonymous | 25-Oct-2010 2:00 pm
The last contributor merely restates at second hand yet another report quoting the Health Select Committee number of 14%.

The contributor on the 21st who quotes the paragraph from the report also doesn't add any extra authority to the debate as the quote exposes the lack of reliable sources and the desire to quote the largest number. 14% is the worst number they could find. And the underlying stats clash badly with other numbers we have. The Kings Fund, for example, quotes the number of staff classed as management as 3.6% of all NHS staff. We know that the whole of the old SHA and PCT structure (which still includes a big chunk which isn't commissioning) consumes only about 2-3% of the NHS budget. Whatever hospitals do it still seems hard to make the admin overhead of commissioning add up to 25% of staff and 14% of the budget.

What is even less obvious is how much management we ought to have for the system to run well. DH clearly doesn't know, the Select Committee clearly doesn't know and a group of people inherently hostile to managers don't seem likely to come up with a sensible estimate when they can't recognise how dubious the 14% estimate is.

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