Even if the NHS achieves the highest possible savings it cannot close the £30bn funding gap predicted by 2020-21, a Monitor analysis has predicted.
NHS England’s Case for Change report, published earlier this year, said changing demographics and rising costs meant the service was likely to face a dramatic cash shortfall over this time period.
The Monitor analysis builds on this report, suggesting that, even at the top end of possible savings, the NHS could only save £18bn.
The sector regulator’s chief executive David Bennett said the NHS must “undergo radical change if it is to survive”.
Monitor has calculated that over this period there was potential to save between £6.5bn and £12.1bn by improving productivity and efficiency within existing services.
This figure dwarfs the £2.4bn-£4bn which Monitor estimated can be saved by reconfiguring services and integrating care.
The NHS could also save between £1.7bn and £1.9bn by “introducing innovative models of care to services in primary and secondary care”, the report says. It gives the Aravind Eye Centre in India as an example for the latter.
It added further saving could be made by changing how funding is allocated in the service, but did not produce figures estimating how much.
Mr Bennett said: “Over the next eight years, the health sector faces its greatest financial challenge in recent times. We are all going to have to strain every sinew to meet it.
“While there are individual things the sector can do – like be more efficient in its procurement or introducing new ways of working in hospitals – what is required is a step-change. In short, the NHS must undergo radical change if it is to survive.”
The report also said selling underused estate across the acute and mental health provider sector could raise £7.5bn, but that this would be a one-off cash injection. It said private finance initiative deals and problems “disposing of parts of estates and expected future demand” would make this difficult, however.
The report warned against extending the NHS pay freeze, saying “we do not believe this is a sustainable strategy for improving productivity”.
It said: “Periods of wage restraint are generally followed by periods of ‘catch up’ with their trend level in subsequent years. Extended wage restraint also impairs recruitment and staff retention.”
Monitor estimated the current NHS wage freeze and a subsequent expected 1 per cent cap on wages until 2014-15 would save the NHS £5bn.