Arctic blast

A think-tank recently ranked its funding forecasts for the NHS from ‘tepid’ to ‘arctic.’ Sarah Bruce asked analysts, industry experts and IT workers on the ground how they see the recession hitting NHS IT and when they expect to start feeling the squeeze.

The NHS has been warned. Over the past nine months, it has been told again and again that it needs to prepare for an almighty cut in its funding – and the message has become harsher with each repetition.

In December, The Operating Framework for the NHS in England 2009-10 said NHS organisations must sort out their finances in preparation for “very substantial efficiency savings” in 2010-11, when the present comprehensive spending review settlement comes to an end.

A few months later, NHS chief executive David Nicholson warned in his third annual report that the NHS should prepare “for a range of scenarios, including the possibility that investment will be frozen for a time” and for “unprecedented” efficiency savings of up to £20 billion over the next CSR period.

More recently, the King’s Fund think-tank laid out three funding scenarios for the NHS that it labelled ‘tepid’, ‘cold’ and ‘arctic’. It also warned that even ‘tepid’ would fall far short of what Sir Derek Wanless told the Treasury the NHS would need back in 2002, unless it could find truly heroic efficiency savings of as much as 7.4% a year over five years.

Enter the politicians

Since then, the main political parties have started to sketch out their strategies for reining-in Britain’s budget deficit by cutting back its public services. Conservative Party leader David Cameron faced uproar from his own MPs when he appeared to promise that the NHS and overseas aid would be exempt from cuts.

Yet in speeches this week, Prime Minister Gordon Brown and Chancellor Alastair Darling suggested that the health service would not be exempt from a new wave of public sector “reform.”

So what does all this mean for NHS IT? Will trusts look to make reductions in their IT spending and staff? Or is there a new opportunity for the NHS IT community to make real, strategic contributions to efficiency gains?

According to Murray Bywater, director of Silicon Bridge Research, the NHS is going to be hit by a “triple whammy” of problems over the next ten years; the need to adjust after the “eye watering” increases in expenditure that it has seen over the past ten years, the impact of the banking crisis and recession, and demographic change.

“Any of these problems on its own would represent a major difficulty for the politicians. It’s time they started being honest. The NHS knows there’s a major problem its time the politicians started talking about it,” he says.

However, Bywater also believes that the new situation will bring big opportunities for IT, since health services “won’t achieve efficiency improvements without IT deployed to help.”

David Bowen, electronic patient record programme manager at Great Ormond Street Hospital, similarly feels that: “There’s nothing like a good recession to focus the mind.”

“If the right steps are taken and the organisation is agile enough to accept it, there is an opportunity for IT to say ‘right, we can help in introducing the change that we need’,” he says. “IT cannot do the whole thing, but it can be seen as a partnership.”

An opportunity or a threat?

However, Jonathan Edwards, Gartner’s European healthcare research director, worries that the first instinct of trusts will be to look for cheaper IT. “Trusts are already going to be looking for solutions with a cheap return on investment; not initially software but things like cheaper servers,” he says. “They’ll also be looking at virtualisation, networks and storage, and business intelligence solutions.”

There is some evidence that IT projects are already feeling the crunch. Niall Poole, electronic prescribing project manager at Birmingham’s Heart of England NHS Foundation Trust, told E-Health Insider that his trust is rolling out e-prescribing; yet the money pot for the project is virtually empty.

Poole said: “We are getting squeezed on the support team, which makes it more difficult for us to give support to the clinical areas as they come up with problems.

“I’m also getting feedback from the ICT department that we’re not getting all the kit we want out on the ward and on the clinical areas. We’re working round it by prioritising what areas need more and which need less – but that’s getting harder.”

Edwards believes that the NHS will fall behind on implementing such advanced clinical systems. “Although these systems have the potential to reduce medical errors and improve patient care there’s not much evidence that they cut costs, which is what everyone will be looking to do,” he says.

He adds that finding the staff to implement clinical systems, including those due to be delivered by the National Programme for IT in the NHS, will become increasingly difficult.

“Morecambe Bay is using more than 80 staff to implement its Lorenzo system – and that amount of staff working on one project is not common,” he points out. “The availability of adequately trained staff is going to be a real constraining factor in areas where a large internal process change is needed.”

Where will the job cuts fall?

Many industries cut jobs as soon as a recession hits. The NHS is being told that it has 18 months to prepare for the impact of the downturn on its funding, and that it should concentrate on improving quality as well as efficiency to get the most out of the money it has.

As a result, it has seen no major job losses yet – and the government was quick to shoot down a leaked McKinsey report calling for a 10% reduction in headcount. Since half the NHS budget goes on staff, however, it may not be immune in the longer term.

Mik Horswell, spokesperson for UKCHIP and member of the UK Council for Health Informatics Professionals and ASSIST, is not confident that NHS IT professionals will be left out of the firing line.

“It is likely that there will be reductions in jobs, and non clinical roles will be scrutinised ahead of front-line posts,” he says. “IT and information roles are definitely at risk because their importance within an organisation is often misunderstood and underestimated at board level.”

Simon Vaughan, director of IM&T at Barking, Havering and Redbridge Hospitals NHS Trust believes that this will lead to a large increase in IT outsourcing.

“The NHS is a healthcare industry and there are not enough funds in the system. It is spending on service provision to make people better, not to run IT – so why not outsource the IT aspect to those people who do it day in day out,” he asks.

However, some analysts feel that outsourcing IT simply means outsourcing the problem – and trusts looking to make strategic IT investments should be looking to keep skills in house. Others point out that some suppliers to the NHS IT market are cutting jobs and losing capacity.

Paul McQuaid, programme manager for NHS Manchester feels that neither labour cuts nor outsourcing are the answer. “The cost savings that can be made in the NHS are not around head count; they are around inefficiencies, people doing things twice,” he says. “At the moment, there are too many levels of management – yet there is a lack of good information on which to make decisions.”

Not just a bit less business as usual

Bywater believes that the change in government that is likely to follow a general election could help to resolve these tensions. Last month, the Conservatives outlined plans to radically change – if not dismantle – the national programme and to hand more control over IT investments to local organisations.

“The switch to localisation is absolutely right,” he says. “The NHS needs to aggressively manage costs now through world class commissioning, becoming more strategically focused and tackling issues at local level – making sure chief executives manage their own business requirements.”

Meanwhile, Melissa Frewin, head of healthcare at Intellect, feels the scale of the problem is such that the NHS could finally look at using technology to replace some of the jobs done by expensive staff. For example, she argues that telehealth could cut costs and reduce pressures on community and social care.

“The NHS will try new, smarter ways of doing things,” she says. “They’ll be looking for efficiencies both in the front office with things like healthcare kiosks and we’ll probably see people taking charge of their own health.”

Bywater agrees that the NHS cannot continue with a bit less business as normal: “This recession is different to any other,” he says. “Before the NHS has weathered the storm, but this time it’s not just a recession; it is a major government expenditure problem. We have ten years of hard graft ahead of us and there will be real battles.”

More on the financial crisis and what it might mean for NHS IT:

Podcast: crunch time. E-Health Insider reporter Sarah Bruce asks NHS IT managers attending a round-table organised by Simpl how they see the financial crisis affecting them and the industry they work in.