NHS tests water on shared services.

Over the last two years, e-business has taken off. The internet, previously the virtual talking shop for anoraks and computer geeks, has gone mainstream.

Online banking, e-mail and internet shopping have exploded into the public’s daily lives. And for the NHS too, the e-revolution has arrived.

NHS Direct and electronic booking systems are already changing the way the NHS goes about its business. But it is not just the patient-facing aspects of the service that are being modernised.

Finance departments face perhaps the most dramatic upheaval in their long history.An NHS Executive consultation paper, published in the autumn, spelt it out. The service will simply need fewer finance staff in the future as technology takes over and business practices change.

But there is one particular initiative that is currently preoccupying the service’s financial minds – shared services.The idea of accessing economies of scale by running financial services for all NHS bodies from a handful of centres has obvious appeal and in many ways would simply bring the service up to speed with big corporations in the private sector.

But it is a sensitive issue. The Executive is determined to keep the finance function on board, despite the fact that similar exercises in the private sector have seen staffing reductions of around 25%.

And during the late summer and autumn the initiative has become mired in confusion as the service picked up apparently conflicting messages about the likely pace and scale of the changes being introduced.

The Executive has now moved to clear up some of these misunderstandings.

Letters were sent out to directors of finance, chief executives and human resources directors last week to ‘update’ the service on progress so far and plans for the future. But as senior finance managers meet in London this week for the annual conference of the Healthcare Financial Management Association, the subject is still likely to take centre stage.

The shared services initiative was unveiled to the NHS in a letter from NHS finance director Colin Reeves in October last year. One of the key motivations is the emergence of a new tier of primary care trusts (PCTs).

By April next year over 170 PCTs are likely to have been created, all with control of their own finances and needing the provision of basic financial services.

Shared service centres will ensure these new bodies have access to appropriate services of the same quality and prevent an explosion of small outsourcing contracts with the private sector.

But Reeves also pointed to the ‘continuing pressure to reduce costs’.

According to a feasibility study undertaken by consultants KPMG earlier this year, the NHS could save between £130m and £180m a year by running financial services for all health bodies out of between eight and 25 shared service centres.

Considering the NHS finance function currently costs #420m covering pay and non-pay costs, the potential savings are staggering.

The Executive does not accept that the service is ‘confused’. But it is undeniable that there has been a long delay between the submission of the KPMG report in April and the official progress report from the centre last week. This is perhaps understandable given that ministers had to give their approval to any approach and they were somewhat preoccupied with the new NHS plan.

The service has also had other things on its mind, what with the creation of new PCTs and the ongoing trust and health authority merger process.

So messages that have been given, at conferences or senior managers’ meetings for instance, have not filtered down through the ranks.

One NHS finance manager told Accountancy Age this week that the general atmosphere in payroll departments was one of ‘fear and despondency’. The reason is clear. Payroll is in the vanguard of the shared services approach and payroll staff believe their job security is about to be booted out the door.

Some managers are already reporting that payroll staff are starting to leave.

That is something the Executive is keen to avoid. The last thing the service needs is an exodus of payroll staff before new arrangements are in place. It also believes that many of the ‘surplus’ staff can be easily retrained for other clerical duties within the service.

But it is not just payroll that shared services will impact on. Changes to staff payment systems have always been inevitable. The existing SPS (standard payroll system), currently used to pay 80% of NHS staff, is now 25 years old and desperately needs replacing.

But there was a growing belief during the summer that the capital cost implications of establishing shared service centres across all financial services had forced the Executive to concentrate purely on payroll. The Executive has now made it clear that this is not the case.

Barry Elliott, HFMA chairman, believes the Executive needs to improve the selling of its vision.

‘Until (these letters) there has been a lack of clear communication around this initiative. Everyone knows it is going on, but the vision and concept hasn’t been sold. I think it is a very good vision and it is not being foisted on the NHS, it is just in line with what has been happening in other sectors, which when you see it is very impressive.’

Christine Daws, deputy director of finance at the NHS Executive and chair of the shared services steering group, admits that the service needs to be better informed. ‘I am conscious that I want to improve communication,’ she says. The letters last week start this process and they will be followed up by two NHS Executive-supported HFMA conferences, which are being organised for next March.

The situation currently is that both payroll and wider financial shared services are to be piloted, with #31.5m in next year’s allocations to cover the costs. A contractor for the new human resources and payroll system will be selected in January with contracts signed by April. Health bodies have already been invited to take part in both beta testing and piloting of the new system, starting in May.

Reeves maintains that development of wider shared services will be ‘softly, softly’, taking an incremental approach rather than big bang. One option is to start with payroll centres and then add other functions down the line. In addition to the ‘payroll plus’ approach to shared services, two other models have been identified.

Either a shared centre could be set up and then each NHS trust and health authority could be recruited or local health economies could first centralise and standardise services and then at a later stage several health economies could be moved to a shared service centre.

Two of these three models will be tested in the pilot schemes. (In fact with PCTs already coming on stream a lot of talk around standardisation and consolidation is already going on within local health economies under the co-ordination of regional finance directors.)

The letters do add clarity on a number of issues. For a start, many health bodies have financial systems in addition to payroll that need to be replaced in the short term. Introducing standardised financial systems will be critical to implementing shared services and Reeves is keen to avoid health bodies buying into new local solutions when shared service centres may be just around the corner. As part of the development of a new national framework for financial services, which will include the creation of a common chart of accounts and the agreement of performance standards, a specification for new general ledger systems will be defined. As with payroll this will be a national system. ‘If your organisation is considering the procurement of new financial systems in the next two years these systems may therefore only be needed for a relatively short period of time,’ says Reeves in his letter. ‘In light of this you may wish to re-examine that procurement decision.’ Elliott says this guidance is a major help to finance directors as it defines ‘what the rules are now’. Certainly a number of finance directors had complained over the summer that they were unsure how to proceed with the need to change systems in the short term. But the letter is also clear about the timescale. ‘By April 2002 the concepts of a shared service centre will have been tested in the NHS,’ it says. Although the speed of progress after that is uncertain – Reeves says a decision will be taken based on the experience of the pilots as to how much central dictation or local discretion will be used – it is clear that this particular modernisation exercise is now well underway. – Steve Brown is a freelance journalist NHS finance under the microscope www.accountancyage.com/ Public+Services/1112142 Rebirth for NHS finance www.accountancyage.com/ Public+Services/1110323 NHS Alliance www.NHSAlliance.org. USING TECHNOLOGY TO MAKE THE NHS EASIER FOR PATIENTS In March Tony Blair announced a major acceleration of the drive towards e-government. He scrapped an earlier target for government to offer all services electronically by 2008 and introduced a new deadline of 2005. Interpreting this target for the NHS is tricky. The health service is all about delivering ‘hands-on’ services to patients and you can’t perform a hip replacement online or deliver a baby over the internet. But the NHS is committed to the prime minister’s goals and timescale. If the health service can’t deliver healthcare virtually it can deliver information and the NHS information strategy – Information for health – was launched in 1998. Much of that strategy’s promises are already starting to be delivered. In November health secretary Alan Milburn announced that the government’s 24-hour nurse telephone advice line NHS Direct was now operating across the whole country. Milburn said the service was evidence that ‘modernisation in the health service is gaining momentum’ and that ‘the government is determined to make the NHS faster and more convenient for patients’. Already expected to handle some four million calls this year, the NHS Plan envisages this ‘traffic’ more than quadrupling within three years. It is backed up by NHS Direct On-line, which has recently been made available for those without internet access via kiosks in supermarkets, pharmacies and accident and emergency departments. Another major strand of the e-revolution in health is the emergence of electronic patient records (EPRs), which should put an end to time consuming searches for misplaced records and allow instant, secure sharing of patient details. By 2004, 75% of hospitals and 50% of primary and community trusts are expected to have implemented EPR systems. Access to personal EPRs for patients will be introduced by the same date and beyond that smart cards are being examined to give patients even easier access to health records. Electronic booking of appointments is also on the cards by 2005. Already being piloted – the third wave of pilots was announced in September – this should see patients leaving their GP surgery with a confirmed outpatient appointment at their local hospital, rather than having to wait several weeks. And patients should also be offered a date for any operation needed while at their outpatient appointment. Technology will play an enormous part in this. First of all the network has to be put in place and the government has committed to get all GPs onto NHSnet by 2002. Software also has to be developed. But it is understood that there will also be a major challenge in changing cultures and convincing consultants to release control of their lists.