How to tackle the £22bn efficiency challenge in the NHS

5 Jun 15

Better measurement of the outcomes from NHS spending will be a key factor in meeting the efficiency target in NHS England’s Five Year Forward View. Finance professionals must focus on driving improvements in the quality of cost and business information to better inform decision-making.

In the post-election period, much has been made of the £8bn cash injection promised to the health service over the next five years to help it plug its £30bn funding gap. While this is welcome and much needed, there is now a need to shift focus to the rather murkier issue of how the health service can achieve the unprecedented £22bn in efficiency savings that are also needed, and which the Five Year Forward View has promised to make through substantial productivity gains between now and 2020.

There is no single right answer to how to balance the pressure to deliver an ever-higher quality service with this further squeeze on finances. But one thing everyone working in finance in the health service can pledge to do is give more thought to how the NHS measures and understands the results achieved from the money spent on and by it.

A lot of emphasis is placed on how much things cost and the budgets we have – we know the cost of everything that takes place in a hospital and we know what is spent. What’s more difficult to get to grips with is the return on investment of this spend because often the impact on clinical outcomes isn’t being consistently measured and evaluated.

There’s a tendency to believe that spending more equals higher quality care and improved patient outcomes, and in many instances this will certainly be the case. But, without robust ways of checking this, how can organisations therefore be expected to calculate the success of their financial decisions? How can finance professionals work out the best use for their budgets? And how can organisations be confident that any changes to their spending are having the desired improvements?

Better measurement is going to be a key factor in making these promised efficiency savings a reality. As a result, driving improvements in the quality of cost and business information used within the NHS to better inform decision-making must be a key focus.

Costing has historically been given a back seat in relation to the overall aims and challenges of an NHS organisation. However, this has changed dramatically over the past five years, particularly with the introduction of patient-level information and costing systems, which help organisations to better understand variations and their causes within the services they offer as well as helping to ensure that we make the best use of available resources.

The NHS is now at a point where it is recognising the importance of good costing, the need for highly trained costing staff and the possibilities of costing for value. To support organisations in achieving greater value for money, the HFMA has recently set up the Healthcare Costing for Value Institute, specifically targeted towards healthcare professionals including finance directors, clinicians and operational managers keen to learn how to drive improvements in the quality of costing.

The institute, which will give members exclusive access to conferences, networking opportunities and development support, will focus on how cost information is produced and used in organisations, along care pathways and across health economies. A greater understanding in this area will allow for more robust and value-based decision-making around the performance and delivery of services.

For example, recent investment in nursing staffing levels was made to improve the quality of care for patients. But an evaluation of the outcomes – are there shorter lengths of stays, fewer pressure sores, fewer readmissions, as well as improved patient satisfaction? – is vital to knowing if the investment is meeting its intention. On paper, organisations can spend more money on nurses with the aim of improving patient outcomes, experience and safety, but how can they ensure this added investment is leading to better clinical outcomes if no-one is measuring and evaluating the results of the increased investment?

It is the responsibility of healthcare organisations to balance costing with quality and if they fail to adequately measure their results they could be heading for trouble. Understanding the costing to get the best possible value will ensure organisations run more efficiently, handle tight budgets more carefully and redesign their services accordingly while also sustaining quality clinical outcomes.

Paul Briddock is director of policy at the Healthcare Financial Management Association. For more information on the Healthcare Costing for Value Institute and details on how to join visit

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