Jim Mackey says an efficiency factor of 2 per cent is “closer to what’s doable” in 2016-17

NHS Improvement chief says there’s a need to make savings targets “challenging but within reach”

He hopes to “be clear” by end of the month about package of measures to help bring provider deficit down to £1.6bn in 2015-16

The first chief executive of NHS Improvement has backed calls to significantly reduce the ‘efficiency factor’ savings target embedded in the tariff prices for providers in the next financial year.

Jim Mackey was speaking in his first interview as chief executive of Monitor – which will shortly merge with the NHS Trust Development Authority to form NHS Improvement – and just weeks ahead of the spending review that will determine the 2016-17 efficiency demand on the health service.

Jim Mackey

Jim Mackey said NHS providers need ‘a more realistic efficiency ask’

Monitor is jointly responsible with NHS England for setting tariff prices, and the tariff negotiations will be an early test for Mr Mackey.

Over the past five years, the tariff has been cut by around 4 per cent a year in real terms, in an attempt to drive huge efficiencies out of NHS providers.

The previous Monitor chief executive, David Bennett, last week conceded he personally had failed to secure a balance of financial stress between providers and commissioners in the 2015-16 tariff, and as a result providers were facing a £2bn deficit this year. He warned that providers could bear a maximum efficiency factor of 2 per cent from now on.

Speaking exclusively to HSJ, Mr Mackey said he “broadly” agreed that 2 per cent is “closer to what’s doable” in 2016-17. He emphasised there were still huge opportunities for greater NHS efficiency, and that over time “we need to be able to get at that productivity opportunity”. But he added: “For this tariff round, and I hope maybe for a couple of years, we need a more realistic efficiency ask.”

The former Northumbria Healthcare Foundation Trust chief executive said: “I think the big thing for me is that when I was a provider, 4 per cent just looked beyond reach for most people [this year]. I think Northumbria will get close to that, but most people just didn’t feel they could do it.”

There was currently a “level of chaos” in a lot of providers, struggling simultaneously with deficits, declining emergency department performance, and workforce issues. He said it was necessary to get trusts to a place where there were a “smaller number of things they’ve got to focus on” and they “actually feel like they can get a result”.

Mr Mackey said he had recently had dinner with a group of provider trust chief executives, with some in the red for the first time. “Most of them were embarrassed about it, one of them was absolutely deeply ashamed of it,” he said. “And if we get this right they can be quickly back into balance next year, and starting to do the things they need to do. 

“This narrative [that] we’ve got a load of feckless managers out there who are just deliberately doing a crap job, it’s not right… Largely people want to do a good job, and actually not achieving the things they’ve delivered for 20 odd years is really painful, and it sends a really bad message.”

He conceded that the chances of the service as a whole having enough money next year were “heavily dependent” on the spending review negotiations. But he added that a lot of the conversations he had had since starting his Monitor role were “much more realistic than I thought they were going to be” about what productivity gain the service could deliver and the need to get back to a position where this was “challenging but within reach”.

However, he disputed predictions that the provider sector deficit would end up at £2bn this year, and suggested it would be possible to bring that figure down to £1.6bn.

Asked what could be done to cut the deficit so late in the financial year without rationing care, he said: “There are some things we can do, and we’re working on now, that don’t involve really terrible rationing decisions. I would hope by the end of the month to be clear about what they are and what the impact is.”

On planning for 2016-17, Mr Mackey said he did not want to see any big redesign of the tariff system in the current round. In the “circumstances we’re in”, he suggested, it was important to “keep that as stable as we can [and] simplify it as much as we can”.

Similarly, he said ministers, NHS England and NHS Improvement needed to work out “what’s a reasonable ask [of the NHS] in the planning round”. He continued: “We haven’t had that out yet, properly. I’m a big believer that if anyone says they’ve got 20 priorities, they haven’t got any priorities at all. They’re kidding themselves. Most people and places can work on about five-ish, probably. It might not be possible to get from where we are now to that kind of simplicity, but I’m naturally a simplifier.”

He suggested that the efficiency savings identified by the Carter review might be one of the “very small number” of things that should be centrally mandated in the planning round.

He said: “[Lord Carter has] done this really credible bit of work that says the NHS can save a huge amount of money.

“Well frankly, let’s bloody get on and do it then. That may be something where we just say everybody has to do their bit on this, so do it. And that might be a contractual thing or whatever.”

Exclusive: Mackey backs calls for reduced savings target