HSJ’s weekly email briefing on NHS finances, savings, and efforts to get the health service back in the black

Going cap in hand to the agencies

Five months into the health service’s experiment with capping agency pay rates, NHS Improvement has begun to put some numbers on how much it thinks the policy is actually saving.

According to figures released to HSJ last week, NHSI estimates that providers saved around £290m between October 2015 and February 2016, comparing actual spend with previous trends.

Which is not an insignificant number.

But let’s be clear: we have absolutely no idea whether the caps saved that amount of money.

To know whether the figure constituted an actual “saving” we would need a number of other things: for instance, detailed weekly data demonstrating that the cap was not leaving bigger holes in staffing rotas, data on activity levels, incidents, et cetera. Without a bit more information about the impact of the cap on patient safety, quality, and performance, it’s impossible to say whether that estimated £290m constitutes a saving or simply a reduction in costs.

We can, however, say with some confidence that the cap significantly curbed spending growth on agency in the last half of 2015-16.

Agency spend figures for the first 11 months of the year show that expenditure fell month-on-month from a peak of £331m in July, to £285m in January. In both January and February, expenditure was lower than in any other month of the year to that point (and in a winter period when you would have expected increased spending).

On safety and stability, NHS Improvement argues that trusts have continued to pay above capped rates where necessary to protect safety, and it has seen only “isolated service interruptions, as we have historically” since the caps’ introduction. I suspect these claims will be met with a good deal more scepticism in some parts of the health service.

Alongside the agency spend figures, the regulator has released some more data on the number of agency shifts per week paid above capped rates since their introduction. These are allowed under the “break glass” clauses to protect patient safety. The number began at around 35,000 per week in November, dropped sharply over December, and shot up above 45,000 when the cap was tightened on 1 February.

As with the spending figures, we can’t read too much into these numbers in the absence of other data. NHS Improvement argues that they show how cap breaches will shoot up with each tightening of the cap, but then settle down as the market adjusts to new pay rates.

I’m not a prize-winning economist, but I can’t see too much reason to buy that thesis yet. Although cap breaches did decline rapidly over December (which was an unusually mild one), they rose just as sharply in January. The last week in January had more breaches than the first week in December – even though the market had had nearly two extra months to “adjust” to the new pay rates by then.

After the new pay caps introduced on 1 February pushed breaches up above the 45,000 mark, they stubbornly remained up there for a month, then declined slightly for two weeks, and that’s where NHS Improvement’s time series finishes.

This isn’t much to support the hypothesis that breaches will steadily and sustainably decline after new caps are introduced.

Because the time series finishes in mid-March, we also don’t have any numbers yet on the introduction of even more stringent caps on 1 April, which the anecdotal evidence seen by HSJ suggests have been particularly taxing for trusts.

Overall, there is no doubt that getting agency spend under control is an important goal for the NHS, but the jury’s still out on what impact the cap has had.

The most compelling economic argument I’ve heard about the agency cap this week comes from the Royal College of Nursing, whose director of policy and practice Dame Donna Kinnair said: “The number of nurses being trained in the UK has reduced, for short-term financial reasons. Remedying the root causes involves workforce planning, time and money, rather than continuing to focus on managing the symptoms.

“The agency cap cannot solve deep rooted problems caused by years of underinvestment.”

Following the Money

This is the latest edition of HSJ’s new weekly email briefing on NHS finances.

Following the Money features analysis of the most pressing and novel issues in healthcare finance; tracks the story of the unprecedented squeeze on NHS finances and the efforts to pull providers back into the black; and covers anything else that matters to those concerned with the funding and finances of the health service.

You can get in touch with me, in confidence, at crispin.dowler@emap.com.