feature: If the NHS were to centralise its processes, would this mean the imposition of an inflexible straitjacket, or an efficient, money-saving regime? Steve Mathieson reports

Published: 21/03/2002, Volume II2, No. 5797 Page 4 6 7

'Centralisation' is close to being a dirty word in the health service.Mention it in the context of IT and muttered warnings about Wessex, and other fiascos will surely follow. But centralisation has been creeping back in with deals with Microsoft and Novell, and the more ambitious sharedservices initiative (see box overleaf ).

Philip Hewitson, chief executive of the shared-services initiative, agrees that IT centralisation has had a bad name and dates this to the 1970s. 'When the standard payroll system was starting, it was fairly monolithic, ' he says.

But it will not be like that this time. 'The big change is the development of the internet, 'Mr Hewitson says. 'You're centralising the process, but from the point of view of the user, It is as if the process was taking place next door.'

This concept is widespread in the private sector (see box, page 7). Peter Dyke, head of health market management for British Telecom, feels much of this efficiency could be applied to the health service.

'At BT, our central IT team looks after 130,000 desktops with 250 people, ' he says. The NHS has about 10,000 IT staff and is not providing systems for that many more people.

Markus Bolton, director of health specialist software provider System C Healthcare, begs to differ.

'The products that my company has, and the way in which we implement those products, are very much more suitable for some trusts than others, ' he says.

'Trusts differ enormously in the types of services they provide, the level of existing computerisation.'

Areas such as management enthusiasm, the geographical spread of a trust and whether GPs are to be included are also relevant: System C screens potential customers for suitability. But both Mr Bolton and Mr Dyke agree there is a continuum of technology.At one end are products such as Microsoft's - global, used across many industries.

Payroll is near this commoditised end of the market.

At the other end are highly specialised systems specific to healthcare, perhaps unique to the NHS, a specialty or even a user.

Mr Bolton says that trying to centralise buying of the specialist products is dangerous.

'It is competition with other suppliers that keeps us sharp, ' he says.

He also points to the poor record of large-scale government IT procurements, such as the national air traffic control centre at Swanwick, now successfully live - five years late.

Not so, says Mr Dyke, who worked on NHSnet - a single national procurement, with no competition until it comes up for renewal.

'Back in 1998 and 1999, when it had been sitting unused for five or six years, I was on the receiving end of the kicking we received, ' he says. 'There was pressure from a very high level to fix it, and by God, we fixed it.'

He argues that single suppliers cannot neglect the health service, as the risk to their reputation in the event of problems is great.

Electronic patient record systems would be a good place for a standardised procurement, Mr Dyke says. 'More time is being wasted procuring multiple EPR systems across the country than will ever be saved by using the things.'

He agrees that doctors would find a standardised system was not a perfect fit, but says that in most industries, staff change the way they work to fit in with standard systems.

BT provides a standardised technology system, he points out, which he and other staff have to use.He says the software 'is not perfect. It is about 80 per cent perfect, but I can make that work instead of worrying about the 20 per cent.'

Mr Bolton argues that EPR can't be bought off the shelf, and feels that even some of the shared-services initiative projects are centralising areas that should remain local.

On providing shared-finance centres, he says:

'Certainly all the finance directors I've spoken to have been appalled by the idea. But they've got to do what they've got to do.'

There are possibilities providing some of the benefits of centralised procurements, while preserving trusts' independence.

Trusts in north west England have collaborated on procurement of EPR systems, under the coordination of Vic Peel, then head of the centre for health informatics at Manchester University, and independent consultant Alan Shackman.

Mr Peel, now also a consultant, says the collaboration saved the 13 trusts involved time and money in areas such as market presentations, producing documentation like business cases and legal advice.

For example, he wrote the mandatory Official Journal of the European Community notice advertising the procurement jointly for all 13 trusts.

Under such a voluntary collaboration, trusts still make the final decisions alone, but share the procurement costs. 'As long as the Treasury rules have to be followed on a single organisation basis, It is hard to see how you could move away from purchasing on a single organisation basis, 'Mr Peel says.

Even so, he says the collaboration he worked on had benefits. In terms of what is suitable for standardisation, Mr Peel - who has worked extensively on EPR - thinks their potential varies.

'At level one, you could do a lot of standardisation, ' he says, adding that this is perhaps halfway along the continuum between Microsoft/payroll and highly specialised systems.

'At level six, you go right to the far end, away from payroll. EPRs are not all the same.'

He rejects the idea that specialist clinicians should have to alter the way they work to fit in with standard systems, especially if this is seen as a costcutting measure: 'That would produce a fair number of antibodies.'

Murray Bywater, managing director of health technology analyst Silicon Bridge, says another possibility could involve standardising hardware and operating system platforms, while allowing specialist software to be chosen locally from a range.

'That could be deemed to be good for large and small suppliers, ' he says.

The standardisation in this model would apply to technologies that were not health-service specific - and fits with the Co-operative Bank's policy, which allows latitude in choice of software, in contrast to its tight centralisation elsewhere.

So the question of centralised services is not as simple as do or do not. Some areas are ripe for central control, and the government is picking lowhanging fruit such as office software and payroll.

The debate is over health-specific systems.

Theoretically, centralisation of EPRs and other clinical functionality could provide superb centralised information and big cost savings. But to bring this about, front-line staff have to support them. l Pay day: shared-services initiative There are three SSI projects, based on recommendations by consultancy KPMG.

Its original report suggested that all back-office functions, such as payroll and other routine financial functions, could go through a single national centre.

Though this will happen with payroll and human resources, current thinking is that there will be 10 to 25 finance centres.

The electronic staff record project is a£325m, 10-year project handling all 1.2 million health service staff in England and Wales, excluding GPs and their staff. It should save£40m each year by replacing a patchwork of payroll and human resources systems, most of which are several decades old and struggle to handle new work regulations.

A consortium comprising health IT specialist McKesson, software giant Oracle, implementer PricewaterhouseCoopers and hardware manufacturer IBM won this contract late last year.

The system is being tested at University Hospital Birmingham trust, which handles payroll for some 30 trusts and 60,000 staff in acute, community, ambulance and mental health trusts.The system will then be introduced at 15 more trusts by the end of this year, and in all trusts by the end of 2004.

This project is relatively uncontroversial.'It is patently bonkers for individual trusts to run their own human resources systems, ' says Michael Cross at Kable.

Furthermore, the firms chosen are well respected.The software, Oracle HRMS, is used by some of the world's biggest companies.

The shared services development project is less straightforward.This will use 10-25 centralised financial services units, but its final shape will draw on two trials in Bristol and Leeds, which together will handle 39 trusts with£4.6bn of annual spending.

These pilots will be implemented in three waves, with the trusts joining the projects this summer, at the end of this year, and in early 2003.

'One of the reasons We are piloting this is that it is radical.We have got to demonstrate this works, ' says SSI chief executive Philip Hewitson. If it is extended nationally, it could save£180m annually.

If a single centre works for payroll, why not finance? 'The NHS is a very large organisation, ' says Mr Hewitson.'By comparison with multinationals that operate shared services centres,25 is a high figure, but not as high as you might imagine.'Furthermore, he adds, the experience so far suggests that the number of centres 'may be even less than 10'.

Oracle software has been chosen for both the pilots, but Mr Hewitson denies the US software giant is taking a stranglehold.

'With the only substantial contract [payroll and HR] the final shortlist had a consortium using Oracle, the other using SAP [a rival German vendor].The interim procurements [for the two finance pilots] are just that - interim.The substantial procurement, which is just about to start, will have a number of suppliers.'

The final project, which should be tendered this spring, is the finance and ecommerce project. It is currently under Department of Health consideration.

This has the biggest potential savings, of£300m annually.Mr Hewitson says ideally it would have been done first, but is the hardest to implement.

Both shared financial centres and e-commerce projects could be outsourced completely, as opposed to payroll and HR, which will continue to be run by the NHS.Mr Hewitson says outsourcing could give NHS financial staff a taste of the private sector, as well as pulling private sector staff in.

However, he adds: 'I think the pilots will prove the worth of providing services in-house.'

Could SSI go further? 'I think it may be worth exploring further areas, ' says Mr Hewitson.But he says there are no further obvious candidates.'A lot of the areas where people talk about collaborating may not be suitable.Once you move away from the processing and provisioning of data, the shared services approach is not necessarily as appropriate.'

More information: www. doh. gov. uk/sharedservices/

Private lives: on the central line

Process centralisation is common, and becoming more common in the private sector.

In the days before computerisation, a large organisation would probably choose to do routine administration at a local level.The economies of scale from doing things centrally were small and the costs of moving paperwork to and from a central office relatively high.

Now, many routine processes are handled by computer software and the economies of scale from doing things centrally are huge: most of the costs in an automated system come from building a system, not from the unit costs involved in processing each transaction.At the same time, the costs of sending data over long distances have fallen enormously, due to the internet.

Initially, companies commissioned their own systems for areas such as accounting and payroll.

Increasingly, in another move towards centralisation, they are buying off-the-shelf systems from large software firms.This means the costs of writing, testing and updating the software are spread across thousands of organisations.

It is possible to go further again, by 'outsourcing'- handing over responsibility for a system's installation and maintenance to a third party.

This involves managers having to set service-level agreements, generally with penalties for non-performance.

Examples from January alone include HSBC, which signed a multi-million pound contract with Dimension Data to run the bank's network in 78 countries, and British Telecom, which is paying Unisys $40m over five years to manage its 6 million '1571' customer voice mailboxes.

A specific outsourcing model is Application Service Provider.Organisations buy access to software running on remote hardware run by the ASP.

This means users do not have to worry about dealing with multiple suppliers or maintaining software and hardware - just their network links to the ASP.

The argument is that centralising and outsourcing allow company staff and managers to concentrate on what they do best (to talk the jargon, to concentrate on their 'key competencies').

Smiles better: co-operative ventures

Keith Girling, IT director of the Co-operative Bank, describes his role as 'running a business within a business'.He makes contracts with departments to supply their IT needs, aggregates these needs, then meets them - often through contracts outside the company.

'I could run a completely virtual IT shop, 'he says, though some elements, including the company mainframe, have stayed in-house.'What I do need to do is direct, control and manage, where appropriate.

'The two things I never outsource are systems integration management and project management - they always stay on the payroll.'

This structure requires much centralisation, particularly in areas such as hardware, networks and data, all of which are far cheaper to buy and control en masse .

This doesn't mean that local managers or customers lose control of what happens.A bank customer can run their account through a branch, cash machines or phone calls.But their account details are held on centrally managed systems, which may be geographically far-flung or even run by different companies.

This structure allows a great deal of flexibility, which Mr Girling exploited when he set up the online bank, Smile.

'Smile was built - from white-board to being on the streets - in six months using 40 suppliers, 'he says.'I wouldn't have attempted it any other way.'