Working with the NHS: in sickness and in health

This time three years ago it looked like it was going to be a pretty grim
Christmas for the
NHS.
Ballooning deficits, with trusts in England initially facing a £250m shortfall,
which rapidly rose to more than £1bn, led the government to turn in desperation
to the Big Four to help dig the service out of its financial crisis.

This year, the general economic doom-and-gloom notwithstanding, things
couldn’t be more different, with the NHS heading for a £1.75bn surplus for the
2008/09 financial year. So, job done?

Well, not exactly, as Michael Magee, partner in the restructuring practice at
PricewaterhouseCoopers, point
outs. ‘There is probably as much work now with the NHS as there was back at the
height of turnaround,’ he says.

How come? And does this mean the big firms are simply riding a lucrative NHS
gravy train? Certainly not, stress both Magee and Alan Downey, head of public
sector and healthcare at
KPMG.

‘Because trusts are no longer facing the same acute financial difficulties
they were facing, they no longer need help that is badged as turnaround,’ says
Downey.

‘But that does not mean to say they have stopped buying our services. In
fact, we are doing even more business now than we were then, but it is now under
a different heading, more of performance improvement and cost efficiency,’ he
adds.

Chris Calkin, chairman of the
Health Financial Management
Association and director of finance and deputy chief executive of University
Hospital North Staffordshire, puts it somewhat more dramatically. ‘A lot of
organisations have looked over the precipice and do not want to go there again,’
he says.

What this has meant in practice, argues Downey, is continuing work on how
resources are being spent, removing duplication and examining what is wasteful
or inefficient.

‘It is now much more a question of joint teams and working with NHS
clinicians at all levels. The focus is not so much on desperately making
savings,’ he says.

The turnaround experience showed trusts the value of focusing very clearly on
financial management and bringing control and rigorous oversight to the spending
process, agrees Magee.

‘It was about ensuring that people did what was intended, that it had the
impact that was intended and that the benefits of what they did were effectively
tracked through,’ he says.

‘The organisations really enjoyed that approach to change and it gave them a
confidence. So they, in effect, now have an engine for change within their
organisation and are using that for other purposes, such as improving the
patient experience and programme management,’ he continues.

‘What we want to achieve is not financial turnaround, because we have done
that, but turnaround from the health perspective. So, for example, it might be
on improving the health indicators for areas such as childhood obesity, cancer
or smoking cessation,’ he adds.

There are also a number of NHS-wide projects that external consultants are
continuing to work on, including helping trusts apply for foundation status and
implementing the government’s World Class Commissioning initiative, which is
reforming how the NHS buys healthcare.

‘All 152 PCTs in England are going through a Department of Health assessment
process where they have to put together a strategic, financial and
organisational development plan and self-assess themselves. Many have looked for
external support and assistance in this exercise,’ explains Downey.

Then there is M&A support, with Imperial College, St Mary’s and
Hammersmith hospitals last year forming a ‘super trust’, plus Frimley Park in
Surrey and Middlesex’s Ashford & St Peter’s hospitals looking at the option
but deciding against it.

Finally, the toughening economic climate makes it distinctly likely that we
may not have seen the last of external turnaround consultants within the NHS.
‘Our understanding is that the Comprehensive Spending Review will be honoured
until 2010 but my opinion is that once we are into the next CSR it will be much
tighter for all public sector organisations,’ explains the HFMA’s Calkin.

‘Everyone is expecting, once we are past the next General Election and have
got through the worst of the recession, that things are going to get very
tight,’ agrees Downey.

If firms want to avoid‘gravy train’ headlines about themselves they will need
to be ensuring, even more than they already do, that they are bringing
measurable improvement or expertise to a particular area or goal, he argues.

‘Turnaround is a bit like a patient going into A&E. The priority is to
stabilise them and give a platform for improvement, recovery and
rehabilitation,’ adds Magee.

While many have done that, others have failed to develop a momentum of their
own, he warns. In fact, just last month the Department of Health admitted that
seven English trusts, even now, remained ‘financially challenged’.

‘Those that have not moved forward and made ongoing efficiencies will
probably struggle,’ says Magee. ‘So we may see the return of turnaround
specialists in a few years, although they may be called something else.’

The gentile touch

As FD of St George’s NHS Trust in Tooting, south west London, Colin Gentile
was one of the first NHS FDs to make use of turnaround experts, bringing in PwC
to plug a £30m deficit, in a programme that become a template for other trusts.

For him, the main legacy of their work was the culture shift they brought to
the NHS and how they changed the way what had up until then been a bit of a
dirty word – finance – was perceived.

‘They helped foment – and it was no stronger than that – the understanding
that finance needs to be as much of a consideration as clinical and operational
issues,’ explains Gentile, now executive director of finance at Brighton and
Sussex University Hospitals NHS Trust.

Even back in 2005, turnaround was very much seen as a short-term fix, he
stresses. ‘When we brought them into St George’s it was for three months and the
intention was that they would be transferring their skills to us, to then be
used within the in-house team,’ he says.

Now the emphasis has shifted towards financial improvement and sustainability
rather than turnaround, he agrees.

‘It is about working very closely with the senior team to embed financial
improvement into operational improvement,’ Gentile says. ‘The main lessons have
been around integrating financial and non-financial performance management and
developing a forensic attention to detail. It was not rocket science but it was
something that, up to then, had not often been done in the NHS.

‘Now it is about ensuring that when we are making savings it is not impacting
on the quantity and quality of patient care,’ he adds.