the voice of NHS management briefing AUGUST 2004 ISSUE 104 The 2004 Spending Review New public spending plans 2005 08 The Chancellor s 2004 Spending Review sets out departmental spending plans for the period 2005/06 to 2007/08. The Review locks in the significant additional resources for public services delivered in the past three Spending Reviews and, for the NHS, reaffirms annual increases after Summary inflation of 7.2 per cent until 2007/08. Social services will receive annual increases after inflation of 2.7 per cent until 2007/08 to support more older people to live at home. Many of the priorities and targets build on what has already been The Department of Health (DoH) has been set tough new Public Service Agreements and efficiency targets as part of the 2004 Spending Review. The Gershon Review has recommended major efficiency savings of 6.5 billion for the DoH as part of its review of public sector savings. The DoH will be expected to take tough action in areas such as back-office functions and procurement, as well as cutting over 700 civil service posts to achieve these savings. Public Service Agreements with the DoH have now put an emphasis on public health issues such as tackling obesity in children and teenage pregnancies, and chronic disease management and personalised care plans. The priorities in the 2004 Spending Review include a focus on reducing health inequalities, promoting the independence of older people and their ability to live at home, and a focus on the patient experience. agreed. However, what marks this Spending Review out are the huge annual efficiency savings of 6.5 billion that the Department of Health (DoH) has agreed to realise by 2007/08. The health Public Service Agreements (PSAs), which form part of this Spending Review, are marked by a shift of focus from access alone to public health and chronic care management. The PSA framework has also been refined, with fewer targets and greater emphasis on outcomes. Standards have been introduced for targets already met and floor targets have been used to tackle deprivation and health inequalities. This Briefing outlines the PSAs and efficiency targets set for the Department of Health and summarises the priorities detailed in the 2004 Spending Review.
Public Service Agreements The Government has set the DoH what it calls ambitious and stretching new PSAs as part of the 2004 Spending Review. These are summarised in Figure 1. Previous PSA targets that have been met or are about to be met have been translated into standards to ensure performance continues to be monitored and reported. The new health standards are examined in more detail in NHS Confederation Briefing 102. Since PSAs were first introduced in 1998, their number has fallen from over 250 to 110 and targets have become increasingly output- and outcome-focused. This is in line with the conclusions of the Government s Devolving decision-making review that, within the PSA framework, there Figure 1. Department of Health objectives and performance targets Aim: To transform the health and social care system so that it produces faster, fairer services that deliver better health and tackle health inequalities. Objective 1 Improve the health of the population by increasing life expectancy at birth in England to 78.6 years for men and to 82.5 years for women by 2010 Reduce mortality rates by 2010: from heart disease, stroke and related disease by at least 40 per cent in people aged under 75, with a 40 per cent reduction in the inequalities gap between areas with the worst health and deprivation indicators and the population as a whole from cancer by at least 20 per cent in people aged under 75, with a 6 per cent reduction in the inequalities gap from suicide and undetermined injury by at least 20 per cent. Reduce health inequalities by 10 per cent by 2010 as measured by infant mortality and life expectancy at birth. Tackle the underlying determinants of ill health and health inequalities by: reducing adult smoking rates to 21 per cent or less by 2010, with a reduction in prevalence among routine and manual groups to 26 per cent halting the year-on-year rise in obesity among children aged under 11 by 2010 (joint with the Department for Education and Skills and the Department for Culture, Media and Sport) reducing teenage pregnancies by 50 per cent by 2010 (joint with the Department for Education and Skills). Objective 2 Improve health outcomes for people with long-term conditions Improve health outcomes for people with long-term conditions by offering a personalised care plan and, by 2008, reduce emergency bed days by 5 per cent through improved care in primary and community settings for people with long-term conditions. Objective 3 Improve access to services By 2008, ensure that no-one waits more than 18 weeks from GP referral to hospital treatment. By 2008, increase the participation of problem drug users in drug treatment programmes by 100 per cent and increase year-on-year the proportion of users successfully sustaining or completing treatment programmes. Objective 4 Improve the patient and user experience Secure sustained national improvements in patient experience by 2008, ensuring that individuals are fully involved in decisions about their healthcare, including choice of provider. Improve the quality of life and independence of vulnerable older people by supporting them to live in their own homes, where possible. Source 2004 Spending Review 02
should be greater scope for local organisations to determine how best to deliver priority outcomes. PSAs have also become increasingly output- and outcome-focused and in the 2004 Spending Review there are no targets that simply focus on inputs and processes. The Government will also be reducing bureaucracy and the overall burdens on the front line by removing input targets, performance indicators and process controls below PSAs. The Chancellor claims stakeholders are now consulted more on PSAs, citing the maximum wait from GP referral to hospital treatment as one developed in response to patient and health professionals views and concerns. In order to address deprivation in key areas such as health and education, the 2004 Spending Review uses what it calls floor targets. These may specify a minimum standard to be achieved, Standards may focus on improving outcomes for deprived groups, or may concentrate on closing the gap in outcomes between areas with the worst health and deprivation indicators and the population as a whole. In health, the 2004 Spending Review retains the overall target on narrowing the gap in life expectancy. It also introduces new floor targets to reduce the gap in outcomes for cardiovascular disease by at least 40 per cent and for cancer by at least 6 per cent, and to reduce the prevalence of adult smoking. Efficiency targets for the NHS The Government has accepted the recommendations made by Sir Peter Gershon in his review of public sector efficiency; the 2004 Spending Review sets out efficiency targets that have been agreed with each department. In addition to the targets, the following standards will be achieved and maintained: A four hour maximum wait in A&E from arrival to admission, transfer or discharge. Guaranteed access to a primary care professional within 24 hours and to a primary care doctor within 48 hours. Every hospital appointment will be booked for the convenience of the patient, making it easier for patients and their GPs to choose the hospital and consultant that best meet their needs. Life outcomes for adults and children with mental health problems will be improved by ensuring that all patients who need them have access to crisis services and a comprehensive child and adolescent mental health service. Source 2004 Spending Review Department of Health civil service posts will be cut by 720 under the efficiency plans The DoH has agreed the target of making annual efficiency savings of around 6.5 billion by 2007/08. Of this sum, over half will be cashable, releasing resources for frontline activities. In order to implement this, by 2007/08 the DoH plans to: reduce civil service posts by just over 720 reduce staff of arms-length bodies by at least 5,000 be on course to relocate 1,110 posts out of London and the South East by 2010 make better use of staff time (accounting for up to half of efficiencies) through actions such as the implementation of a modern ICT infrastructure for the NHS make better use of NHS buying power at a national level in the procurement of healthcare, facilities management and medical supplies ensure NHS organisations can share and rationalise back-office services, such as finance, ICT and human resources, where possible improve the commissioning of social care to generate around 10 per cent of the efficiencies. Public sector-wide efficiency review These recommendations form part of Sir Peter Gershon s proposals for 03
New efficiency targets are supposed to be stretching but realistic efficiencies across the whole of the public sector. The Gershon Review, Releasing resources to the front line, has identified and agreed what it claims are auditable and transparent efficiency gains of over 20 billion in 2007/08. Over 60 per cent of these are meant to be directly cash releasing. The proposals will result in a gross reduction of over 84,000 posts in the civil service and military personnel in administrative and support roles. The highest agreed efficiency savings are from local government ( 6,450 million), DoH ( 6,470 million) and the Department of Education and Skills ( 4,350 million). The Government s objective in commissioning the Gershon Review in August 2003 was to find ways of releasing major resources into frontline services that meet the public s highest priorities. Sir Peter was given the specific remit of recommending stretching but realistic departmental efficiency targets for the period 2005/06 to 2007/08. Two important considerations were departmental capacity to deliver the proposals and the need to ensure savings do not impact on service delivery. The Gershon Review looked at six areas for potential savings: back-office functions through measures such as simplyfying procedures and sharing support services procurement through better supply-side management and further professionalisation of the procurement function transactional services for instance, by realising the full potential of recent IT investments policy, funding and regulation for the public sector for example, through the reduction in nationally set targets policy, funding and regulation for the private sector by simplifying the delivery landscape and changing regulatory/compliance regimes productive time of frontline public service professionals for instance, by freeing staff from unproductive tasks. The new NHS consultants contract is quoted as a way of achieving a more balanced approach to service provision across staff with complementary skill sets. Examples of efficiencies that have already been made include: the e-auction held by the NHS Purchasing and Supply Agency to renew its 40 million budgeted requirement for IT hardware the successful supplier was able to offer a 12.7 million (31 per cent) saving on the price paid in the previous contract the DoH invitation for bids for new independent sector treatment centres. Before this, the Review says the NHS was purchasing spare capacity from the private sector at rates 40 to 45 per cent above NHS tariff rates. Under the independent sector treatment centre programme and subsequent nationally co-ordinated procurements, the price of procedures from the private sector has fallen significantly. Implementation of efficiencies From autumn 2004, there will be formal assessments of departments plans and progress towards delivering their targets. Departments will produce efficiency technical notes setting out how they will assess efficiency savings. The 2004 Spending Review The 2004 Spending Review takes forward the Government s objective of a strong economy by setting out spending plans for the next three years and plans for further improvements in public services. The Review sets targets, allocates resources and details departmental spending plans for the three years from 2005/06 to 2007/08. Public spending plans set in the 2002 Spending Review have not been re-opened. The 2004 Budget set an overall envelope for the spending review period, allowing current spending to increase by an annual average of 2.5 per cent in real terms in 2006/07 and 2007/08, and public sector net investment to rise from 2 per cent of GDP to 2.25 per cent by 2007/08. The significant additional resources for public services delivered in the last three spending reviews are locked in and additional investment is focused on the Government s long-term priorities. The 2004 Spending Review demands more results for more resources and, in particular, extends devolution, 04
Health priorities and achievements The Government s key aims for the health and social care system are to: improve the health and well-being of the population improve patients experience of care reduce inequalities in health and patient experience continue to deliver value for the taxpayer. The 2004 Spending Review claims significant improvements in service standards and outcomes have already been achieved. For instance, compared to 1997/98: there are 450,000 more NHS operations per year there are 860,000 more elective admissions per year maximum waiting times for an operation have been halved from 18 months to nine months there are 264,000 fewer patients waiting for treatment. Source 2004 Spending Review The aim is to turn the NHS focus from treating sickness to emphasising health promotion treating sickness to one emphasising precaution and health promotion. The Spending Review makes considerable reference to the two reports by Derek Wanless. The first Wanless report, Securing our future health, argued that having a population fully engaged in improving its health could deliver savings of as much as 30 billion per year by 2022/23. The second Wanless report, Securing good health for the whole population, made over 20 recommendations on cost-effective approaches towards this goal. increases choice, supports flexibility and ensures greater personalisation in public services. How the Spending Review affects the NHS With spending on the NHS due to increase to 92 billion in 2007/08, compared to 33 billion in 1996/97, the 2004 Spending Review sets out priorities and targets that build upon this investment. Building on what has been achieved so far, priorities include delivering shorter waits and more personalised healthcare to patients at a time and place of their choosing, and improving primary and preventative care to tackle the underlying causes of ill health and health inequalities. Adult social care is crucial to the Government s agenda on social inclusion and health as it protects and promotes independence for the elderly and some of the most vulnerable groups in society. The 2004 Spending Review claims to lock in progress already made in driving up capacity and quality in social care. Investment delivered in the 2002 Spending Review has increased independence and provided faster, more personalised services. Examples quoted include a cut in delays in hospital discharge by 60 per cent since 2001. Improving outcomes and reducing Inequalities in health Key to much of the 2004 Spending Review of health is the Government s aim to turn the NHS from an organisation primarily focused on Issues raised in Securing good health will be addressed in the white paper on improving health due in autumn 2004. The paper will outline plans to tackle smoking and high levels of obesity, as well as substance abuse, mental illness, sexually transmitted disease and accidents. Wanless and the Spending Review both highlight the fact that: the lack of evidence on effective ways to tackle public health problems, particularly for disadvantaged groups, needs to be addressed the Government will fail to meet public health goals if it does not provide more effective help to the most deprived groups in society. In the light of these points, the Government will focus on health inequalities in its approach to public 05
Personalised care plans for at-risk CDM patients will cut emergency bed days by 5 per cent health. The three aspects of the PSA relating to cancer, cardiovascular disease and smoking will now each have a component specifically aimed at helping poorer groups and designed to move the commitment to tackling health inequalities into the mainstream. In addition, the PSA includes a new joint sub-target between the DoH, the Department for Education and Skills, and the Department for Culture, Media and Sport to reverse the rising trend of child obesity, a problem that disproportionately affects poorer groups. The Food Standards Agency has a newly-emphasised role in public dietary health improvement and the Government is reaffirming its commitment to the agency by locking in the 2005/06 levels of investment. Chronic disease management Improved chronic disease management (CDM) is key to most of the Government s strategies and the Review argues that as a part of the shift towards primary care and prevention, improved CDM will become increasingly important in keeping people healthy and out of hospital. The Review points out that 17 million people in the UK suffer from chronic disease and patients with chronic conditions account for around two-thirds of NHS bed days and are particularly heavy users of non-elective services. Many people who suffer from chronic diseases such as asthma and diabetes know as much about their own condition as health professionals. The Review argues that a strategy of support for self-care, disease management for key chronic conditions and casemanagement for the most intensive users of health services would: produce better health outcomes slow disease progression reduce disability manage the sudden deterioration often associated with underlying disease have a radical impact on patients quality of life reduce the need for patients to be admitted to hospital. The CDM strategy is supported by a PSA target to improve health outcomes for people with long-term conditions by offering personalised care plans for those most at risk. This will reduce emergency bed days by 5 per cent by 2008. The strategy is also an important component of the Government s plan to reduce waiting times. Social care The Government is making additional investment in social care to support a greater number of older people to live independently in their own homes and allow expansion of preventative services increasing the health and well-being of older people: Building on successes in cutting hospital discharge delays caused by the need to put social care arrangements in place, 60 million is to be invested over two years to set up 20 joint projects between councils and their NHS partners. These will provide seamless integrated care for older people and encourage investment in measures such as preventing falls. A new two-year 80 million prevention fund for councils to install smart alarm technology in the houses of vulnerable older people will be set up. The Government has also set a new PSA to increase further intensive home care to 34 per cent of those supported to live at home and in residential care and to provide 1 per cent year-on-year increases in 2007 and 2008 in the proportion of older people helped to live at home. Improving the patient and user experience The 2004 Spending Review argues that the NHS needs to meet the growing patient expectation of healthcare delivered at a time, place and in a manner convenient to them. Patients want to be involved in key decisions on their treatment and want more information, advice and support to lead healthier lives. The Spending Review highlights two priority areas: Reducing waiting times The Review claims to increase the ambitions of the NHS with a new, more stretching PSA target. By the end of 2008, the maximum wait from referral to hospital treatment will be 18 weeks. From the end of 2005, NHS patients will have the right to choose from at least four or five different 06
healthcare providers and, by 2008, patients will have the right to choose from any provider that meets NHS standards within the national maximum price the NHS will pay. Personalising services The Government claims a great deal of progress has been made in tailoring services to patients needs through NHS Direct and walk-in centres, while the star ratings facilitate well-informed patient choice. Transforming the patient experience means raising standards but also ensuring services are convenient, information is accessible and advice and choice of treatment are available to each person. Further steps specified in the Review include: a choice of an alternative hospital for all patients who have waited over six months for an operation, by the end of 2004 every patient to be offered choice at the point of referral by their GP by 2005 the roll-out to every primary care trust of expert patient schemes for chronic disease from this year, an electronic health space for every patient, where personal health information can be recorded, shared with NHS professionals and, in time, linked to their electronic treatment record. A specific patient experience PSA target has been set which will encourage service providers to listen to and act upon the views of their patients and local communities. The Government is providing a 60 million increase in investment towards extra care housing to offer older people an alternative to residential care. Priorities across the public sector The four key themes of the Spending Review are a stronger more productive economy, a fairer society with stronger communities, better public services, and global security and prosperity. Spending plans and priorities for other departments include: increasing the ratio of UK R&D spending to GDP to 2.5 per cent in ten years total spending on education in England to be 12 billion higher in 2007/08 than in 2004/05, increasing average per pupil funding to more than double the 1997 figure devolving additional resources and responsibilities to the regional development agencies significant additional resources for children, delivering 2,500 children s centres by 2008 halving the number of children in relative low-income households by 2010 a 50 per cent increase in the building of new social housing. Confederation viewpoint A smaller number of Public Service Agreements and the focus on health and well-being, inequalities and Patients want to be involved in key decisions on their treatment long-term conditions are welcome. Perhaps the area where some further development work is required is in the rather limited definition of personalisation. The NHS has the potential to lead developments by demonstrating how care plans, patient advisors and the use of pathways can create shared decision-making and make personalisation real. The continued high level of spending for the NHS is important given the high level of ambition in the reform programme, but there are many calls on this not least the consultants contract and Agenda for Change. The considerably less generous settlement for social services and the requirement in the Gershon Review to make a very substantial saving in social care procurement is a cause for concern. The requirement of the Gershon Review for the NHS to make a 2.7 per cent efficiency saving, of which half is supposed to be cash releasing, seems to be ambitious, particularly as foundation trusts will have the option of not participating in some of the proposed changes. For those trusts that are above reference costs this adds a further challenging target for cost reduction. Research by the University of York, commissioned by the DoH, suggests that the history of this type of target for cost improvement is not encouraging. In addition, organisations will be required to start to realise the 07
It is ambitious to expect the NHS to make a 2.7 per cent efficiency saving benefits of information procurement over this period. money is spent on the delivery of clinical care and an important lesson from the past is that we must not let the search for backroom efficiency detract from improving the efficiency of clinical care and reducing variation. This issue has been covered in more detail in the NHS Confederation report, Variation in healthcare. For further information on issues covered in this Briefing contact nigel.edwards@nhsconfed.org The history of shared services, central procurement and a number of the other proposals in the Gershon Review, suggests that any change of this sort will need to be supported by high-quality project management and appropriate investment in infrastructure. The failure of the third-party suppliers of data may have cost some trusts one or more stars in the recent ratings process and this may make boards nervous. While it is important to focus effort on reducing avoidable costs in back-office, procurement and other support functions, the majority of Further reading Stability, security and opportunity for all: investing for Britain s long-term future, 2004 Spending Review www.hm-treasury.gov.uk/spending_review/spend_sr04/report/ spend_sr04 _repindex.cfm Releasing resources to the front line, Gershon Review 2004 www.hm-treasury.gov.uk/media//879e2/efficiency_review120704.pdf Improving people s health, NHS Confederation Briefing 2004 www.nhsconfed.org/publications/briefings/briefing98.asp National standards, local action, NHS Confederation Briefing 2004 www.nhsconfed.org/publications/briefings/briefing102.asp Variation in healthcare, NHS Confederation report 2004 www.nhsconfed.org/docs/clinicalvariation.pdf Further copies can be obtained from: NHS Confederation Distribution Tel 0870 444 5841 Fax 0870 444 5842 E-mail publications@nhsconfed.org or visit www.nhsconfed.org/publications Registered Charity no: 1090329 The NHS Confederation 1 Warwick Row London SW1E 5ER Tel 020 7959 7272 Fax 020 7959 7273 E-mail enquiries@nhsconfed.org www.nhsconfed.org BRI010401 DEB00101