Hospital boards are finding it difficult to cut costs and maintain standards of health care. They should consider devolving operational decisions to different business units or ‘service lines’
While the NHS has been protected from the funding cuts faced in other parts of the public sector, the scale of the financial challenge it faces over the next four years should not be underestimated. Most NHS organisations have set targets to achieve 4-7% efficiency savings each year, whilst maintaining the quality of patient care and meeting ever-growing demand.
This is an immense task for a service used to large annual budget increases and with a recent history of static or declining productivity.
This week, the House of Commons Health Select Committee warned that NHS organisations appear to be focused on making short-term savings this year, an approach that looks unlikely to be sustainable in future. While the policy rhetoric has stressed the importance of making fundamental changes to the way services are delivered in order to achieve lasting savings, the practical reality for many organisations is that they are simply cutting budgets.
Such a ‘salami-slicing’ approach to making savings can generate a small contribution to efficiency overall, but it will never deliver the big gains that major changes to commission new preventative services or deliver more services out-of-hospital could do.
Making these substantial service changes requires analysis, focus and drive from NHS senior managers. It requires NHS providers in a local area to work together in new ways, to develop and implement ambitious strategies for changing the way care is delivered.
One opportunity for hospital leaders is to ensure that they are devolving issues of quality and efficiency improvement down to clinical teams to manage themselves. But can hospital boards let go of operational decisions to focus on the big picture?
Our study published today of how hospitals are implementing an approach called service-line management suggests that they can find that very hard to do. Service-line management is essentially a way of managing a huge and complex organisation like a hospital trust as a set of semi-autonomous business units, or ‘service lines’, each of which is run by a clinician and a manager with some discretion over how they manage their service.
While some trusts we spoke to seem to be managing to continue with this approach in the current climate, in other cases the financial pressures have led boards to take back control of all the smallest decisions that have cost implications.
A service director in one trust described how ‘they were very interested in going further than that about two years ago and then the NHS recession hit and now it’s gone very, very tightly controlled again, which is frustrating’.
They went on to describe how the board was taking a short-termist attitude, turning down business cases that would generate income in the medium term if they required a service to carry a small deficit between years in the short term.
As another put it: ‘I’m fighting tooth and nail to keep the delegated authority… and not to lose all the clinical buy-in… there’s a real tendency under crisis in the NHS to go back to command and control’.
Hospital boards of course need to keep sound oversight of their financial performance. But devolving operational decisions to service lines might be one important way that they can help themselves to focus on the larger and more complex question of how to meet the financial challenge in a way that delivers lasting improvements for patients.
Catherine Foot is senior fellow at the King’s Fund
