We might not officially be in recession, but few would doubt the inevitability of a second quarter of negative growth being confirmed by the Office for National Statistics.

A journalist caught me on the hop asking what the impact would be on the public sector and wider health economy and then bowled a googly asking for reflections on the implications for quality and safety.

My answer on quality is always the same: high-quality healthcare is more cost efficient and is best delivered at scale by centres of excellence. My answer on health in an economic downturn has taken some thought. It has not taken long for some to quip about Keynesian economics. John Maynard Keynes believed the state could stimulate economic growth and improve stability to increase aggregate demand by reducing interest rates and increasing government investment in infrastructure.

There is no doubt the global financial crisis is affecting everyone. Against popular belief, healthcare is not recession proof; the incidence of disease may not change but health-seeking behaviour and the finances of health delivery undoubtedly will. The unprecedented banking bailout will have profound implications for the national deficit and public sector allocations, yet to be fully realised.

Uncertain finances

Even though the NHS was given a three-year comprehensive spending review settlement of 4 per cent in October 2007, the NHS Management Board deferred the financial allocations for 2009 pending the pre-budget report. Coupled with this, healthcare inflation has consistently outstripped spending and the current resource allocations will only serve to highlight this gap.

Regardless of macroeconomics, certain management principles will become paramount.

First, to improve productivity. The need to monitor patient volumes, episodes and input costs has never been greater. Determining comparable benchmarks by department or contract will be important to ensure balanced and proportionate response to activity and regulation. Productivity has consistently fallen over the past decade, a trend that must be reversed.

Second, to control costs. Staffing costs account for close to 60 per cent of health spending and the future challenges will necessitate a review of senior management, departmental leadership, support and administration. Supply chain management - particularly for accounts payable and stock control - and matching agency demand to clinical productivity and programmed admissions are probably the greatest opportunity gains.

Third, there is no substitute for cash generation. This is not easy in a relatively constrained system, but I am sure every acute and foundation finance director will catch the drift. Commissioning experts maintain there is coding ambiguity in most payment by results transactions of around 5-30 per cent.

The final point will require a review of capital spending programs. Phasing capital budgets is often the easiest step. The difference for a smart organisation, or indeed government, will be to ensure we invest in systems that bring real value to health outcomes.

How should we judge success in these challenging times? Economists seem to suggest we should aim to be the last into recession, the first out, attempt to restrict unemployment and deflation. For healthcare in the UK, success must be judged by how much we improve health outcomes and reduce avoidable mortality or morbidity.

Whatever the challenge, the keys to healthcare reform will always be information, co-ordination and collaboration.

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