McKinsey cost-saving proposals focus on waste in acute sector
NHS hospitals in England are rife with waste and inefficiency, consultants McKinsey and Company have told the Department of Health in a confidential report, seen by HSJ.
It says up to £2.4bn could be saved if hospitals with the lowest levels of staff productivity pulled themselves up to nearer the average performance. The management consultants argue that doctors and nurses in the worst 10 per cent of trusts deal with less than a fifth of the volume of patients that those in the best 10 per cent handle.
It’s not always clear from this sort of analysis how you make these savings cashable. If you shut a ward you still have the overheads because you still have to pay for the building
NHS Confederation policy director Nigel Edwards
As well as staff productivity, the report identifies inefficiencies in the patient pathway. For example, it sets out how around 40 per cent of patients in a typical hospital do not need to be there at any one time. The biggest causes were delays in the patient receiving hospital tests or therapies, and a lack of more suitable care facilities in the patients’ own home or community.
It says up to £200m could be saved a year if unnecessary diagnostics were cut and another £600m if new and follow-up outpatient appointments were limited. That analysis is based on cutting up to 13 per cent - or just under 4 million - of the 29 million follow-up outpatient appointments every year.
A further £700m could also be found if procedures with “limited clinical benefit” - such as tonsillectomies, varicose vein removal and some hysterectomies - were decommissioned.
NHS Confederation policy director Nigel Edwards said the report represented a “top down” approach, which was often a good starting point for analysis, but warned it was beset with “dangers”.
He said: “It’s not always clear from this sort of analysis how you make these savings cashable. If you shut a ward you still have the overheads because you still have to pay for the building.”
However, the McKinsey analysts suggest up to £8.3bn of acute trust estates could also be “freed up”. Some trusts’ annual income exceeds their fixed assets value by as much as four times, but McKinsey has found many are not making economic use of all their assets and so their annual income does not even cover the value of their assets.
McKinsey has also recommended NHS trusts with private finance initiative buildings should renegotiate their interest rate charges - taking advantage of the fall in rates from 5.5 per cent in 2008 to 0.5 per cent this year. It says that up to £200m could be saved a year if trusts did this.