NHS must test contract assumptions to ensure value for money

11 November 2014

The Department of Health should work with regulators to test assumptions of commissioners and providers to improve value for money in the NHS, according to the National Audit Office (NAO).

The recommendation is among a raft of proposals in a report which has found that the growing financial stress in NHS trusts and foundation trusts is ‘not sustainable’. The review includes proposals aimed at improving value for money including one that the Department of Health should work with regulators and oversight bodies to strengthen processes for testing and aligning the assumptions of commissioners and providers.

The report, The financial sustainability of NHS bodies, says: “As part of the annual planning process, oversight bodies need to understand the assumptions commissioners and providers have included in setting contracts in order to assess the risk associated with achieving them. This will help avoid pressures being dealt with in an unplanned or uncoordinated way.”

The financial position of the NHS has worsened since 2012-13, according to the NAO report. It noted financial risk is increasing in NHS trusts and foundation trusts, and those in severe financial difficulty continue to rely on in-year cash support from the Department of Health. Trusts in surplus in 2013-14 were likely to have a lower surplus than in the previous financial year. The number of trusts and foundation trusts with a surplus also fell from 222 in 2012-13 to 182 in 2013-14.

The NAO said it would look again at the planning process for commissioners and providers next year, to determine how well regulatory bodies are checking consistency between different parts of the health and social care system.

Amyas Morse, head of the NAO, said: “Until the department can explain how it will work with bodies such as NHS England, Monitor and the NHS Trust Development Authority to address underlying financial pressures, quickly and without resorting to cash support, we cannot be confident that value for money will be achieved over the next five years.”

Margaret Hodge, Labour MP and chairman of the Public Accounts Committee said the report was “deeply alarming”.

“The Department, NHS England, Monitor and the NHS Trust Development Authority between them must explain to my Committee how they are going to get a grip on this wholly unsustainable situation and get our NHS back on track,” she said.

Meanwhile, the Academy of Medical Royal Colleges has identified nearly £2 billion worth of cost savings the NHS could be making. The research Promoting Value Report: a doctor's guide to cutting waste in clinical care identified measures in 16 areas of clinical practice could create savings.

It said improving doctors’ awareness of the possibility of adverse drug reactions, particularly among the frail and elderly could save the NHS £466 million a year. Increasing the frequency of ward rounds means patients can often go home sooner, and maximising the use of operating theatres and managing operating schedules better. The report also called for a change in culture by England’s 150,000 doctors, saying they have an ethical duty to protect resources and promote value.

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