The health service does not have a good record when it comes to IT procurement. Nonetheless, recent reports that the cost of the NHS National Programme for IT (NPfIT) had escalated from an initial £6bn to between £18bn and £31bn will have given health service finance directors even more sleepless nights.
The reason for the increase in costs is straightforward enough, but will still be worrying for health service FDs, many of whom are forecasting deficits in the current financial year, despite record investment from the public purse.
When the NPfIT was launched in 2002, the government said it would set aside £2.3bn over the next three years to pay for one of the world’s biggest ever investments in IT. This was to cover the cost of buying new systems, including those allowing electronic booking of hospital appointments, and computerised medical records that can be accessed by medics across the country. The money would also fund the training and education needed to help staff use them.
A further £4bn will have to be found to pay for the contracts awarded to-date (which cover a period of seven to 10 years) and this will be funded centrally by the Department of Health. However, the NPfIT now concedes this colossal project will cost more than the estimated £6bn. Implementation costs over the next 10 years will be between three and five times as much as the procurement costs, it says, claiming such amounts are standard.
‘Assuming the department picks up the tab for the £4bn on the contracts awarded, we might have to find between £1.8bn and £3.1bn a year to implement this scheme,’ says one NHS finance director.
‘We already spend about £1bn a year on IT, so we’ve really got to find an extra £1bn to £2bn. We could afford it, provided the department passes down the money to us.’
Another adds: ‘We have a number of vague promises that the money will be there. That makes me a little edgy, as I fear we may have to find it through efficiency savings.’
Derek Wanless, former chief executive of NatWest bank, says in Securing our future health, his 2002 report on NHS funding, that the NHS should spend about 4% of its budget on IT. This figure is consistent with the £2bn to £3bn a year it is believed the NPfIT will need. But Wanless’ figure could be an underestimate. In the US healthcare system, for example, IT spending is around 7% to 8%.
Nevertheless, most FDs feel politicians will find the funding, because the government has invested too much in the initiative and it is vital for many of its plans to modernise the health service. For example, electronic booking and medical records are pivotal in making a success of Patient Choice – the scheme that will allow patients to choose where and when they are treated.
This belief is strengthened by the NPfIT’s response to the stories of escalating costs. ‘The central expenditure of £6.2bn will be complemented, and was always intended to be complemented, by local baseline IT spending. Any suggestion that vast, unforeseen expenditure has been incurred, or that patient services will be robbed to meet this, is complete nonsense,’ an NPfIT spokesman says.
While FDs may be confident the money will be found, many are not so sure the initiative’s benefits will be realised. Following Sir Peter Gershon’s review of the public sector earlier this year, the Department of Health was set a target of efficiency savings of 2.7% per year between 2005 and 2008 – around £6.5bn.
Around half of these efficiencies should come from making better use of staff time, and the NPfIT says much of these time savings will come from modernised IT. It also says electronic patient records, appointment booking and prescription transfers will mean less time wasted checking patient information, fewer letters to type, and no lost prescriptions.
These claims will be put to the test by the National Audit Office, which is currently investigating the scheme. The NAO will examine the procurement processes used for placing the contracts, whether contracts are likely to deliver good value for money, how the department is implementing the programme, and the progress the programme has made.
David Poynton, finance director of Harrogate Health Care NHS Trust, welcomes the NAO’s investigation. He believes it requires a ‘leap of faith’ for NHS organisations to spend the money, as they do not know how they will benefit.
‘A lot of people have been, and still are, worried about the implications of the programme,’ he says. ‘A lot of money needs to be put in locally. But where is the evidence that shows the benefits will follow? NHS trusts are going to have to release money from other areas to afford this.’
A NPfIT spokesman says: ‘Common systems will also lead to significant reductions in retraining costs of staff, many of whom move to a different NHS organisation each year – often requiring induction into the use of entirely different IT systems.
‘One computer system means simpler training for staff as they move between hospitals. Significant financial benefits will also accrue from the national programme as it frees doctors and other staff from time-consuming administrative tasks.’
However, Poynton is sceptical. ‘If you say it takes a nurse five minutes to track down a patient’s paper medical record, I don’t think that equates to a great deal of savings when they can call them up instantly on a screen. I think there are a whole series of assumptions that need to be scrutinised.’
The NAO is due to report on the programme next summer, but in the meantime, the biggest hurdle to overcome is the involvement of doctors and nurses. The NPfIT may put in the necessary wires, switches, servers and databases, but they will lie idle if these clinicians are not convinced the technology can improve the care they give their patients.
If that is the case, the NHS will have another IT failure on its hands. And a hugely expensive one at that.
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