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NHS finances: cuts get real

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The NHS has gone into 2024-5 facing a tough financial situation and both systems and trusts are being asked to make headcount reductions and cuts. ‘Back office’ functions like IT are in the firing line.

By Highland Marketing’s advisory board.

However, as the country heads into a general election in which health and social care will be key issues, this is a strategic mistake, the Highland Marketing advisory board argued. Digital is integral to safe, efficient services, enhanced capacity, and transformation.

The government told the NHS it would get “whatever it takes” to get through Covid-19. But since then, it has been looking to get its funding back onto the track it was on before the pandemic.

As a result, for the past three years, the NHS has been allocated a funding settlement that would have been tight even if significant sums had not been earmarked for elective recovery. Or real-terms increases hadn’t been wiped out by inflation and strikes.

Or demand hadn’t continued to rise, fuelled by aging, poverty, and a big increase in mental distress. All of which happened. To try and break-even last year, NHS England was forced to transfer significant sums from elective recovery, winter pressures, and capital budgets – including technology.

Yet health systems and trusts are now reporting end of year deficits for 2023-4 that are significantly worse than expected. And the NHS is heading into a new financial year facing a ‘black hole’ of around £4.5 billion.

Cuts bite at a system level

In response, NHS England is putting more and more organisations into the ‘recovery support programme’ or special measures, while demanding a crackdown on agency staff, reductions in headcount, and service ‘consolidation’ across the board.

Things certainly feel tough on the ground, according to members of the Highland Marketing advisory board, and one reason is that system thinking is coming into play. “The deficit is being treated as a system problem and not just an organisational problem,” said Ian Hogan, the chief information officer of a mental health trust.

“That means the days of ‘I am doing ok and never mind anybody else’ are gone. If the system isn’t doing ok, then nobody is doing ok.” This raises the question of whether integrated care boards, which only got legal status in July 2022, are mature enough to cope, and have the accountability required.

As Cindy Fedell, a former trust CIO who now works at a hospital group in Ontario pointed out, “if we want ICBs to deliver system control, they will have to have the structures in place to do it, because, at the moment, the system is officially organisation based.”

There’s also the question of whether finance and control are what ICBs should be focusing on. Advisory board chair Jeremy Nettle pointed out that when they were established, “the idea was that they would drive integrated care and public health, using population health management” approaches.

But in reality, and whatever the structural wrinkles, “a lot have moved into managing the acutes.” Nicola Haywood-Cleverly, former public sector CIO and non-executive director, agreed. “The model is starting to feel like the commissioner model, rebadged,” she said.

Strong IT leadership needed – but not always in place

If ICSs are at different levels of maturity and leadership, then so is their digital and transformation capability. When they were set-up, very few integrated care boards chose to give the chief information officer a seat on the board.

Andy Kinnear, a consultant who used to lead a commissioning support unit, pointed out that this led to some high-profile digital leaders leaving the NHS – taking their experience of working through previous financial crunches and restructures with them.

Organisations that don’t have gnarly digital leadership in place are likely to find it harder to use technology to address the pressures they are facing. “How IT works in recovery terms – if that is still a thing – or productivity terms is going to be difficult if there isn’t the leadership at the ICS level,” Hogan said.

IT is not ‘back office’ (it’s not even just IT)

Entrepreneur Ravid Kumar spelled out why this is short-sighted, at best. “The answer to many problems in the NHS is to innovate,” he said. “If you are not investing, you are going to be pushing the waiting list up and compromising patient care.”

But he worried that for the reasons discussed, plus big EPR and data programmes being driven from the centre, plus a general election on the way, many organisations are “sitting back” and hoping that others will make big investment decisions for them.

Worse, there is some evidence that ICSs (and trusts) see what many still call ‘the IT department’ as the kind of “back office” function that can be offered up for cuts to preserve “frontline” services. “Where IT doesn’t have a seat on the board, it is often a responsibility of the chief financial officer, and their primary responsibility is to balance the books,” said Haywood-Cleverly.

“In the current environment, that’s going to mean that taking a predictable approach to saving is going to top an innovative approach to risk. The focus is going to be on not running out of fuel, even if that means putting off the upgrades that might get the most out of the engine.”

Hogan argued this is another mistake. “IT is not – and has never been – back office,” he said. “These days, if you don’t have IT, nothing is going to be done. Everything requires access to records, or imaging, or test results; and that’s before you even get to the transformation piece.”

Really, the board argued, digital and data should be seen as a core, strategic function, with strong professional leadership. However, this has not stopped a wave of redundancy programmes aimed at corporate teams.

Tough times for suppliers

The financial situation, and the way it is being dealt with, impacts suppliers. David Hancock, a consultant who used to work for large health tech firms, said “good vendors will always try and demonstrate value” but may still find that organisations are not receptive to their ideas; or be able to invest in them if they are.

So, what can be done? At a fundamental level, the advisory board felt that whoever forms the next government will need to take a hard look at NHS demand, scope and funding, and get them better aligned. At the same time, the NHS will need to find a better way of handling mismatches than flipping between deficits and cuts.

Which will mean getting back into the transformation agenda. Which will mean investing in digital and data. “I don’t talk about digital transformation anymore,” said Hogan, “because as soon as you do that, it becomes digital’s transformation, and it’s not, it’s everybody’s transformation. “But you still can’t do it without IT, so if you just see IT as this ‘back office’ function it’s not going to get done.”

Find the leaders, build for the followers

In the short term, Kumar argued, suppliers are going to be best looking for partners that recognise this. “If there are some ICSs that are willing to show leadership, then work with them, and others can follow,” he said.

“We’re probably looking at a difficult couple of years as a new government decides what to do, but if some areas can show the way, there will be something for others to follow.”

Kinnear argued that the loss of some senior digital leaders might, paradoxically, give suppliers the opportunity to work with people with new ideas. “We have been talking about the failure of the National Programme for IT [which ran from 2002 to 2011] for 20 years,” he said.

“It’s cast a long shadow, but the people who have lived under it are starting to move on, and we need to do the same. Benefits are achievable. We just need to get people in there, delivering them.”

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