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DH is told 137,000 NHS posts must go in next five years

The Department of Health has been told the NHS in England will need to slash its workforce by 137,000 if it is to achieve its planned £20bn savings by 2014, HSJ can exclusively reveal.

This would mean the NHS losing 10 per cent of its workforce. The estimate was given to the DH in a confidential report commissioned from the consultancy firm McKinsey and Company, and seen by HSJ.

Although the DH has said the report was “purely advice and does not constitute government policy”, it bears the department’s logo and has been disseminated among senior NHS managers.

Proposed cuts

30,800 non-clinical posts, saving £600m

£3bn - saving potential of increasing staff productivity in NHS hospitals

£1.9bn - savings projected by cutting external contracts and supply costs such as waste and food

£1.3bn - saved by cutting unneeded appointments and procedures

£8.3bn - estimated value of hospital estates which could be freed up and sold

The McKinsey report makes clear the cuts will need to be felt as much among clinical staff as administrators.

Based on its analysis of different staff group efficiencies, it says the cut required to full time equivalents for an NHS hospital with a clinical staff of 300 would be: two consultants, one registrar, 10 nurses, 10 healthcare assistants, three allied health professionals and eight non-clinical staff.

The report recommends a range of “potential actions in the next six months” that should be considered. These include: a recruitment freeze starting in the next two years; a reduction in medical school places starting in October, to avoid oversupply in five years; and an early retirement programme “to be implemented in the next two years” to encourage older GPs and community nurses to make way for “new blood/talent”.

The consultants also recommend that plans to increase staffing levels and investment, such as those set out in the national stroke strategy and the children’s service strategy, should be “reviewed”.

It says up to £600m could be saved by acute providers if those with above average ratios of non-clinical to clinical staff cut their administrators down to nearer the average level. Their £600m calculation was based on losing 30,800 non-clinical staff on an average salary of £20,000.

The analysis was presented to the DH in March this year and was shared with senior managers at strategic health authority level - several weeks before NHS chief executive David Nicholson said publicly the NHS should be planning to make up to £20bn in savings by 2013-14. Although some of the findings have been cited outside senior management circles the full analysis has been on restricted access.

The analysis sets out how up to £8.8bn of new recurrent annual spending could be cut from the NHS by 2013-14. It says the biggest chunk - up to £3bn - could be saved by increasing staff productivity in NHS hospitals. The second biggest saving is in non-acute staff productivity (up to £1.9bn) and in driving down costs of external supplies and contractors such as waste and food (up to a total of £1.9bn in savings).

McKinsey’s breakdown of the types of NHS organisation the savings are likely to come from reveals that acute providers will be hardest hit, with cuts equivalent to up to 38 per cent of their 2008-09 spending by 2013-14.

The smallest savings would fall on primary care, where spending would reduce by up to 13 per cent. Community care budgets could be cut by up to 28 per cent.

HSJ asked the DH whether the report - which earlier this year McKinsey won a competitive contract to write - concurred with the department’s own analysis and policy.

In response health minister Mike O’Brien played down its significance. He said: “Advisers advise but minsters will decide after taking a range of advice.”

He added: “The McKinsey work… is not in any sense an NHS plan of action. They are just making some suggestions which will be looked at with many other ideas.”

NHS Confederation policy director Nigel Edwards said some proposals looked at odds with current policy: “We’ve just spent a fortune on stopping GPs retiring. Isn’t the rest of the strategy to shift care out of hospitals and into primary care?”

He added that early retirement plans would take a long time to yield any savings, unless McKinsey was recommending the DH “reneges” on the NHS pension scheme.

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Readers' comments (40)

  • It's just as well someone has started a public discussion. "Efficiency" just won't do it in terms of the £20 billion. Some things are going to have to be shut, stopped or reduced.

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  • I think that you have to first ask who wrote the report? The accountancy consultancy McKinsey.

    Accountants always abstract performance and actually are very poor at understanding where and how improvements in service can quickly equal a reduction in cost.

    Accountants always go for the option that says we will have to lose x number of jobs. This sort of tick-box mentality is the thinking that got us into the financial crisis in the first place. Isn't it time for a spot of new thinking to solve new problems instead of old thinking to solve the old problems?

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  • It would be interesting to know how much we have spent with McKinsey and other such consultants. Are there not people within the DOH and SHA's who can do this sort of work (now that would be efficient)?
    I think all NHS people should get an input into where these savings can be made.
    Being Finance person the places to save are really quite easy:-
    Consolidate London PCTs Commissioners / Public Health / Boards. After consolidation you would be able to do away with the SHA(who are basically are glorified bankers who hold the money and not very well!). Probably by the end of this we actually might be able to keep front line services, instead of CEO's in their comfy chairs.
    Here's another:-
    Why do we need different HR policies and procedures for each PCT / Trust across the country. Can't we have one set for the NHS with appendix's for Local agreements. How much time / man power would that save.
    I think the problem with the NHS is that no one is prepared to make the big decision of this swathe management within the DOH and SHA.
    I am becoming tired of Politics and tick boxes within the NHS, can't we just get this NHS re-centered to patients.
    If there is an MP reading this, I can show you how to save £20b across the Public sector. I would stake my life on it but not sure I would go to acute hospital in the near future!
    I think it maybe time to fill my private health forms in. Now how funny is that!

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  • How much did this report cost? Can HSJ find out? Not only will it be, no doubt, a horrendous amount, but now the Government has said that it's not going to implement its findings! So - we pay for a report that states the bleedin' obvious, nothing happens and it's shelved. Meanwhile the taxpayer picks up the tab for yet another huge McKinsey tome.

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  • Before getting rid of staff how about each organisation look at where horrendous amounts of waste is in terms of duplication - each organisation tries to reinvent the wheel and people who are in their comfort zones continue to do what they feel comfortable with. This is a great opportunity to rethink the way things are done.

    Getting better at performance managing people would be a good starting point too and it would certainly help when getting rid of incompetent people (there are plenty of those around).

    Getting rid of highly paid firms who tell you what you already know whould be the first on my list - just ban the lot. Perfectly capable staff are ignored and these 'consultants' pick their brains and put it in a nice report and it's left to the staff to deliver it anyway.

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  • Which MPs have links with McKinsey in a "consultative" or non executive manner? Why else would the government commission a team of expensive accountants to state the obviuos....although not that obviuos. Many of the Governmements "initiatives" e.g. Access, NHS direct, Walk in Centres, the comissioning/provider divide, sure start, perverse incentives, frequent and contrary changes in directives are responsible for the waste of so much money.
    Management in the NHS seems unable to manage and certainly rarely engages with clinicians leading to expensive and inefficient planning and spending, coupled with the added expense of rectifying harms done.

    We neeed a new Government who hopefully will have the balls to fire the flotsam and jetsam that passes for management within the NHS, from DoH down through SHA's PCTs and acute trusts

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  • In any event, the way the payment by results regime is being handled nationally, the Trusts will be able to mitigate any efficiency targets by improving their coding and counting, generating more internal referrals, etc, and using PBR and tariff changes to best effect, and effectively pass the problem back to PCTs.

    So if I were a consultant I wouldn't worry too much.

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  • Please , please, lets have early retirement for GPs. I would suggest 55 and above. On the same sort of terms as are normally handed out to failing chief executives of course.
    I would grab it with both hands. I am absolutely fed up with the constant political interference and magaerail incopetence which prevents me from being an efficient and effective doctor.

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  • Sorry. I got so excited that my typos are even worse than usual!!

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  • McKinsey realy makes sense doesn't it? Lets get rid of the senior clinicianns in the NHS. The ones who really understand the patients and the medicine, but who are not so easy to push around. The ones who are generaly the most cost effective and efficient; the ones who still have a sense of ding a professional job; the ones who have survived the machinations of those who constantly strive to deprofessionalise by constantly dumbing down the service with their tick box approach and forms in triplicate.

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  • Anyone from within the NHS, either at Service or management level, who's ever had the misfortune to "work" with McKinsey's in the past should be in the least surprised at the outcome - I'm surprised they didn't just recommend handing the whole management of the Service over to Google with delivery by suitable local private contractors.

    When is someone within the DoH or the Treasury going to have the brains, or even better the courage, to commission a review based on an extensive CBA study with "Quality of Outcomes" rather than "thru put of units at minimal cost" as the main driver?

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  • Jon Harvey

    Many years ago, I read a book by Edgar Schein (Process Consultation Volume 2: Lessons for managers and consultants - which is still available) and it changed my approach to consultancy. In it he describes three models of consultancy: The purchase of information or expertise, the doctor-patient model and process consultation.

    I am increasingly worried that clients purchase either of the first two models when in fact they would find far greater value for money from procuring the third. As a consequence far too much of our money (as taxpayers or customers) is wasted on generating fat consultants' reports. This McKinsey report is yet another (high profile) example....

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  • Since the NHS spends most on pay, it's clear that the main way to reduce recurring expenditure is to reduce the head-count.

    It is also a truism that there is always scope for increased efficiency - but that the tricky part is doing this in a rational way [rather than an across-the-board percentage reduction that is anything but 'efficient'].

    The key is clinical engagement - insightful clinicians can identify many activities that happen in their departments that are a waste of time. There has been little incentive to realise these savings though, with the suspicion being that the money is really going to subsidise X specialism 'who we all know never controls their costs" [or so it seems].

    Service Line Management offers some hope for both clinical engagement and financial efficiency. Can it be implemented quickly enough though? As a general rule all change in a large organisation takes longer to implement than you think. There are few short-cuts to understanding the actual costs within service lines - and at the same time service leaders need management skills. That's going to take investment.

    WCC has promised much - and now is the time to deliver. The reality of commissioners talking directly to Service Leaders as 'adults to adults', of commissioners engaging with clinicians, remains to be tested in most of the country. If the culture is right, it might unlock a lot of potential for efficiencies and quality improvements.

    Finally - is it possible that the report has been leaked to provide an apocalyptic vision so that, if in fact the reality is only, say, a 3% reduction in workforce then that 3% suddenly looks like quite a cheery number?

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  • I think many of the above commentators make good points. How often do we need external bodies to come in and tell operational staff the things we already know.
    Perhaps the time has come for the NHS to stop being a political football and to run the NHS as a business where patients (our customers) are the central point of focus and not targets or balancing the financial bottom line, they will naturally follow when good business practice is utilised.
    I have always wondered why it is called the NHS when actually in the main we have hundreds of similar organisations re-inventing the same wheel?
    Perhaps a more joined up big business approach to corporate systems, rather than corporate systems at individual trust level, may be more effective and efficient.
    I also question the amount of quangos set up under Labour and when a cost benefit analysis is undertaken against organistaions such as the NPSA what benefit has the tax payer gained for their hard earned buck!
    I guess in ten, twenty or even more years the same discussions will be going on as no-one has the guts to remedy this politically driven poorly managed (at the very top) institution. Perhaps it is time to swop the NHS to community care as happened with mental institutions some years ago??
    Lets hope it improves before I retire.

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  • The sharp reality (and it doesn't need expensive management consultants to see it) is that, over the next few years, spending is going to be tighter and demand for NHS services is going to grow, mainly because of the increasing older population.

    This will force some genuine efficiencies and also some real service cuts. Both will mean less NHS staff; but that is not good Political news just before a general election. So expect to see things fudged and unkeepable promises made.

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  • Before swallowing the McKinsey prescription, it is surely preferable to get into shape by downsizing a bloated back office - not least the contracting of vastly expensive outside consultants - and to concentrate on the core business of making sick people better.
    It is self evident that large savings have to be made, but, in the name of sanity, let's start by pruning the battalions of overpaid, 'wheeze a week' functionaries rather than those on the front line.
    From where I stand, as chair of a patient group, it seems that the Health Service continues to pinch pennies at the frontllne, whilst squandering squillions on ever more bureaucratic micro management
    David Gorrod

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  • Davd Gorrod's comments on the McKinsey Report were ascribed to me by mistake.
    However, I agree wholeheartedly with his comments
    Zuffar Haq

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  • Its not true that 'most' NHS spending is staff costs - but looking at 2006/7 pay review body data it appears to be well over 40%.

    It is therefore very difficult to see how £20bn efficiency savings from a £100bn-odd budget cannot include staff savings.

    After all what is 'efficiency' if not doing more with less resources?

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  • I joined the NHS as National Admin Trainee 39 years ago today. It seems after all these years that NHS manager bashing by the un or ill-informed is still one of our favourite blood sports. If you guys want to be taken seriously then provide concrete examples of bad management please, not some McCarthyite smears. I know Goebbels said that if you repeat something often enough it must be true, but look what happened to him.

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  • I'll suggest some people who should be first to go:

    - most of the people earning £500 / day plus for the non-jobs advertised on HSJjobs most days
    - most of the people who are commissioning these jobs
    - the idiots in HR in each trust who continue to be surprised by the annual changeover in August for junior doctors, and consequently fail to issue contracts, rotas, pre-employment documentation etc in a timely fashion
    - the idiots in IT who also continue to be surprised by the annual changeover in August for junior doctors, and consequently no user accounts or passwords are available meaning that for most of the first fortnight in August each year, no blood results or imaging can be viewed by any junior doctor
    - the idiots who spend thousands of pounds of taxpayer money each month on "web consultancy", "communications", "branding", "marketing" and other such activities that have absolutely nothing to do with the diagnosis and treatment of illness
    - the faceless idiots in trust administration who are always "having a coffee break", "on lunch", "in a meeting", "on annual leave", "only work part time" etc etc who are never available when trust employees actually need to speak to them

    How about that to start with.

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