CfH may hand money back to Treasury

While many NHS trusts are thought to be struggling to achieve financial balance, NHS Connecting for Health, the Department of Health agency running health service IT programme is believed to be in the unusual position of handing money back to Treasury.

In total NHS CfH is thought to be up to £700m underspent in 2005-2006, against a forecast £1.2bn spend. The huge shortfall stems from delays in the delivery of the vital ‘strategic’ integrated electronic care record systems, which were meant to be in the process of being delivered to trusts across England by now.

Under the contracts awarded by CfH its four prime contractors – also known as local service providers – only receive the bulk of their payments once systems are installed and in use within the NHS. The vast majority of implementations that have occurred so far have been of existing specialist ‘tactical’ systems for use in primary and community care.

One well placed source told EHI the under spend was based on “The money that had been due to be paid to suppliers if everything had been delivered to plan against key delivery points.”

As a direct consequence of the extended delays in delivering the ‘strategic’ solutions the four local service providers –Accenture, CSC, BT and Fujitsu – are all thought to have not received key payments from NPfIT.

The extent of the financial shortfall was highlighted by Accenture’s recent £260m write off against its two NPfIT contracts. Accenture last month said that neither contract may prove profitable and told investors it would be seeking to renegotiate contract terms.

Details of what CfH has contracted for and paid suppliers are usually rebuffed on the basis of ‘commercial confidentiality’, but in response to a parliamentary question in March health minister Liam Byrne told the Commons that the programme had spent a total of £1,024m up to the end of January this year.

In January 2003 the government committed £2.3 billion on top of a £1bn existing NHS IT expenditure to fund the first three years of the programme. This was budgeted for an additional £400m a year from April 2003, rising to £700m the year after in 2004, to £1.2billion in 2005-06.

The well placed industry source told EHI. “My belief is that about £100m has been spent across all six suppliers so far [the four LSPs, BT on the spine and Atos Origin on Choose and Book].”

What is thought to have accounted for a lot of expenditure to date has been the cost of setting up and running the programme. Up to the point of contract awards in 2003 this is thought to have passed £80m and is now believed to be running at £30-40m a year.

Another senior industry figure close told EHI that CfH under spent by £400m last year and is "under spent by up to £700m this year". The source added "Treasury asked them to do the same next year to the tune of £400m".

Conservative MP and Commons Public Accounts Committee member Richard Bacon said that with the current NHS deficit the CfH under spend was being seen as a virtue by Treasury. "I’m hearing that there are people in the Treasury and DH saying that would fill our black hole neatly".

The industry source questioned whether money returned to Treasury now would be returned in the future. "If we are to support the current policy developments in the NHS this money needs to be spent on the necessary supporting IT systems".

Liberal Democrat health spokesperson Steve Webb told EHI that clear focus of the programme must be on delivering integrated electronic records. “That is the measure of the success of the programme. Perhaps they’ve focused too much on the peripheral stuff.”

Figures from the IT trade body, Intellect, cited last month during a discussion at Healthcare Computing 2006, confirm the underspend. Intellect’s health group warned that spending was likely to undershoot the amounts needed to support health service transformation and improve efficiency and patient safety.

The group has calculated that for the year ending 2003, the combined total of National Programme for IT and existing NHS spending should have been £1.3 billion or 2.3% of the total budget in order to reach Wanless recommendations; in fact spending totalled 1.9% or £1.06 billion. In the year ending 2004, an actual spend of 2.1% was also below the recommended 2.9% and in 2005 the gap widened with an actual spend of 2.13% against a target of 3.3%.

Link

NHS IT spending lags behind Wanless targets