- Regulator drops target that trusts should spend no more than 7 per cent of turnover on back office and administration costs
- NHS Improvement says it still expects providers to make £120m of savings in aggregate in this area over 2017-18
- Internal report says NHS Shared Business Services gave best return on investment in one area
NHS Improvement has dropped a target in the Carter efficiency review for trusts to cut their back office costs, HSJ can reveal.
The regulator confirmed last week it did not know which trusts had reduced these costs to 7 per cent or less of turnover, as Lord Carter suggested they should in February 2016.
Lord Carter’s report said hospital trusts attributed £4.3bn of workforce spending to corporate back office and operational administration costs, with an “inexplicable” variation in costs of between six and 11 per cent of turnover.
Trusts were supposed to have produced a plan by October 2016 for reducing these costs to no more than seven per cent and to have achieved those savings by the end of 2017-18.
NHSI accepted the recommendation at the time but last week said it would instead track delivery only through general savings plans produced by trusts.
The regulator, however, is not holding trusts to the 7 per cent target, and is not measuring the proportion of turnover spent on back office functions.
It said it now expected £120m in corporate and admin savings to have been achieved in trusts’ general savings plans for 2017-18.
The target was intended to push providers into outsourcing these functions or pooling them with another organisation to bring down overheads.
These functions typically include HR, payroll, finance, IT and legal services.
However, HSJ understands many trust boards are reluctant to make large numbers of administrative staff redundant.
There have been few tenders of significant size. Instread, trusts have largely opted to run mini competitions for single functions.
Director of procurement and corporate services in NHSI’s operational productivity programme directorate Paul West was appointed last year and is due to leave this summer.
Minutes of a meeting of the directorate in October, obtained under the Freedom of Information Act, said savings of £52m had been achieved during the first half of 2017-18.
The minutes said “the reliability of the data had been discussed” but that it was “broadly accurate”.
The document added: “The key barriers to progressing this work with regard to encouraging trusts’ management teams to focus on the system-wide benefits that could be delivered through consolidation were highlighted”. NHS Improvement said these barriers were often a lack of available investment, particularly for IT.
The minutes also said NHS Shared Business Services, a joint venture between the Department of Health and Social Care and private firm Sopra Steria, offered the best return on investment for outsourcing. NHSI later told HSJ this comment related to a particular service and there was no single preferred provider for trusts overall.
Managing director at NHS SBS David Morris said: “The sheer size and scale of the services we deliver on behalf of NHS organisations up and down the country, including some of our biggest and most well-known trusts, means other providers in the market simply cannot compete with our knowledge and experience of the sector, or the significant savings we are able to generate for our NHS partners.
“Benchmarking of our prices, meanwhile, places us in the lowest quartile of business service providers to the NHS when it comes to cost.”
A spokeswoman for NHS Improvement said: ”Since the publication of the Carter report in 2016, we have focused our efforts to support providers in identifying specific savings opportunities while providing high-quality, good value corporate services. In 2017-18, we identified a £120m savings opportunity in NHS providers’ corporate services and based on current indications, we expect the NHS to deliver above our ambition.
”We have clear expectations that providers continue to achieve savings by delivering better value corporate services and we are currently reviewing providers’ 2018-19 CIP plans to ensure all opportunities are identified and deliverable.”
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