Counting costs at the NHS

By the end of the year, the blueprint that will determine the shape of the finance function in the NHS into the next century should have been agreed. Its recommendations will set in train the biggest changes the service’s accountants have seen since its inception 50 years ago.

Fine words, but to employees reviews of this sort mean only one thing: job cuts. The NHS finance function employs 16,500 people, from Whitehall to trusts and health authorities across England and Wales. And while Colin Reeves, finance director of the NHS, says he has an ‘open mind’ about whether the review will necessarily result in job cuts, few expect anything else.

It is the third review of the NHS finance function in six years, but clearly it is the most ambitious. Reeves’ predecessor, Gordon Greenshields, launched Framework for the Future in 1992 but, after a bright launch, it faltered and failed to filter down to the grass roots. Reeves relaunched it two years ago, achieving some success in spreading training but internal NHS research has found that staff at lower levels of the organisation were bypassed.

The latest review is intended to tackle this and much more. Chaired by John Brassington, regional FD of the Trent office of the NHS executive, the finance staff strategy group has been backed with initial funding of #500,000. The size of financial support reflects the importance attached to the review. The government has made it clear it expects funding, wherever possible, to support front-line medical work.

Much of the review is about taking the past forward.

Secondments to and from organisations such as Glaxo will continue to be promoted, and plugging a perceived ‘skills gap’ prioritised. ‘I want to ensure that all members of staff, however junior, have a personal development plan,’ says Reeves.

But it is wider changes that are driving the review. Organisational changes include the increasing incidence of trust mergers, the NHS white paper and the forthcoming white papers on healthier national and social services.

These, says Reeves, ‘will have implications on the number of finance staff we need, their levels and abilities and their training and development requirements’.

Functional changes include new responsibilities enjoyed by NHS FDs: only 12% now have finance alone as part of their portfolio. This has increased FDs’ clout and encouraged them to move into general management.

Structural change is also on the agenda, with more of the type that has seen the number of separate internal audit groups in the NHS halved to fewer than 50. ‘That has been almost a revolution in terms of internal audit provision,’ says Reeves. ‘We now have to use economies of scale again in terms of changes within health bodies.’ This might result in an increased use of more ‘agency’ teams to provide services such as payroll.

In Scotland, a study has already looked at the viability of a group of trusts using a central payroll system – instead of having one per trust. A similar arrangement could be implemented south of the border, but this is an issue wider than finance: personnel or estate management are other prime candidates for the agency approach.

All this sounds a little like centralism, but Reeves says he is more concerned with seeing the poorer performing parts of the NHS match the best. The comprehensive spending review has given #18bn to the NHS over three years but the chancellor wants to see the money spent wisely. ‘There is a 12% differential between the average performing hospital compared with the most efficient performing 25%,’ says Reeves. ‘Which means there is still potential for improving efficiency in the NHS. All disciplines have to pay their part in that: not only clinicians and nurses but also accountants.

‘Although there is a quest to save management costs and reduce administration and bureaucracy it is still important to have a sensible financial strategy in place almost as a prerequisite for an effective system of programme care,’ says Reeves.

‘Our role, and the role of professional accountants, is to provide that expertise and so I would hope – and in a way, this is what the study is all about – to work out precisely how many people we need, their relative levels of skill requirement, and if there is a skills gap how we can respond to that with a system of training and development,’ he says.

The entire structure of the finance function will be examined: whether 16,500 employees are needed; if the skill mix with 2,600 qualified accounts is right, and if the 500 FDs across the service should be cut.

‘The first question is the total number,’ explains Reeves. ‘The second is how many should be actively studying or qualified, and the third is, once we have calculated the number and skill-mix requirements of staff in future, to look at what we have and conduct a national study to identify the skills shortages,’ he says. Armed with that, the executive will assess training and development needs – and exit strategies, if and when staff numbers are cut.

After announcing the preliminary findings in September, the group should come up with its plans in December which will be implemented over the next few years.

‘The important message is to reassure finance staff that at this stage the programme is a study group and terms of reference but nothing is predetermined,’ says Reeves.

That only holds true until the end of this year. After then, it will be about implementing some difficult decisions.

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