Exclusive: Hospitals aim to save £2.35bn on costs in 2012-13

Figures collected from 133 acute non-specialist trusts show the average cost improvement programme (CIP) target across the sector is 5.3 per cent of turnover in 2012-13.

Forty-three per cent of the planned savings, £1bn, come from pay budgets. Pay accounts for roughly 70 per cent of trusts’ costs.

The combined non-pay target was £724m, with trusts planning to grow their income by an extra quarter of a billion pounds in 2012-13. The remaining £350m comes from currently unidentified schemes.

The figures give the first national picture of the level of savings the hospital sector is braced for this year.

• Subscriber extra: view the full figures including pay, non-pay and income information for each trust, plus an FT-only list

Foundation trusts have submitted their annual three-year plans to Monitor and the regulator’s analysis of these is due in August.

The 5.3 per cent CIP average is higher than the Department of Health’s 4 per cent efficiency target and shows trusts anticipating removing an extra £0.5bn in costs. However, the target is lower than the level Monitor urged trusts to prepare for in the April update to its financial assumptions. It proposed an “efficiency requirement” of 4.5-5.25 per cent, with commissioners’ “tariff income levers”, such as readmissions penalties, potentially adding an extra 2 per cent.

HSJ’s figures show 19 of the 133 trusts have set CIP targets of 7 per cent or more – a level experts regard as optimistic.

Finance directors told HSJ the reliance on non-pay savings could reflect difficulty in taking salary costs out of the system.

Monitor estimated that in 2011-12 staff accounted for 67 per cent of foundation trusts’ costs, but HSJ’s figures show that of £1bn in planned foundation trust savings for this year, just £477m was from pay
budgets.

James Wilson, managing director of NHS finance consultants Assista, said: “In terms of pay CIPs, all the low-hanging fruit has gone now. Any significant pay CIP would require serious organisation.”

The finance director of a district general hospital said their trust had “already done all of the easy stuff like agency spend”, while another in a large London trust said his organisation “didn’t have the same level of opportunity [in pay] now”.

A £400m-turnover teaching hospital’s finance director added: “With the spotlight increasingly focused on quality and patient satisfaction there is less scope to reduce headcount.”

All trusts which gave savings data to HSJ outlined their procedures for ensuring patient care was not compromised. These ranged from a full board sign-off on all schemes to separate assessments by the medical and nursing directors.

Many trusts told HSJ they planned to particularly push non-pay savings in procurement. Frimley Park Hospital Foundation Trust said it hoped to make more than half its £10m savings this year from non-pay measures, including £1m from drugs and £2m on procurement costs. Other trusts hoped to realise large savings from reconfiguring their estate.

Some finance directors said that trusts under pressure to provide a total in a savings plan might put schemes they had not fully worked out in the non-pay category to avoid union trouble.

King’s Fund chief economist John Appleby said the results of HSJ’s survey were similar to those in the think tank’s May monitoring report, in which 60 finance directors predicted an average CIP saving of 5.2 per cent, ranging from 2.5-8 per cent.

The report said “directors foresee increasing challenges in continuing to deliver CIPs at the level required”, adding that nearly half of panel members had missed their savings targets for 2011-12.