NHS cutbacks: time for a clean sweep

Estates and facilities management is widely regarded as the Cinderella of the NHS, but in this era of savage cuts Cinderella just might save our bacon, argues Roy Lilley

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all doing direct the other way.”

Yes, Charles Dickens, you were right. His A Tale of Two Cities was written 100 years ago. But if ever a writer needed a metaphor to describe the present state of the NHS and its estates and facilities functions that has to be it!

 

A tale of two estates: the best of times and the worst of times. Some estates pristine, new, modern and as shiny as a fresh apple. Others, old shrinking and as shrivelled as a prune. New estates, chained to eyewatering  PFI payments that can only drag the organisation under, into a sea of debt. And the old curiosities, ready to float-off the junk and turn it into lifesaving cash.

 

Events in the economy and an indecisive general election have left us with a hobbled NHS. Compromise and cooperation has left us with no big idea, no flag to rally to – but does that matter when the economy has left us with no money to buy one with?

 

The only big idea out there is to save £20bn by the end of 2014. In a recent and not widely published piece of guidance from Janet Perry, the NHS fi nancial controller, Primary Care Trusts (PCTs) and Strategic Health Authorities (SHAs) are obliged to cut their management cost by 30%. How?
 

By the craftiest move I have seen for a long-time. A management costs ceiling that means total management costs are limited to 70% of the audited management costs for 2008-9. Ouch! The letter was dated All Fools’ Day, 1 April 2010.

Apposite? Yes.
Painful? Very.

 

What constitutes a manager is described in detail. It’s the job and not the pay scale that counts. But if in doubt, anyone earning more than £30,000 is fair game. It won’t stop there in SHA and PCT land. Staff levels will come under intense pressure and this bodes badly for facilities management and estates, already the Cinderella service in most NHS operations.

 

So where do we go from here? I hate it when people say ‘every cloud has a silver lining’ or that you should ‘see everything as an opportunity’, and I could cheerfully stab anyone that says ‘let’s look on the bright side!’ But what if Pollyanna and not the inner Cassandra just happens, for once, to be right? Strange though it might seem, I really do believe there are three things that could, must and should be done that only facilities management and estates people can deliver. Work that will have a huge impact on the service over the next five years and may even be the saving and  salvation of some places. This is urgent and serious business. It’s all about buying stuff, buildings and the green thing.

Let’s start with procurement, well within the purview of the FM team.

 

The NHS buys more of just about everything, from toilet rolls and pork sausages to bandages, walking sticks, pills and serious life-saving kit. Yet how many times has the supply chain been fiddled with, changed, disrupted and messed about?

 

In many cases it’s still cheaper to buy things like a laser printer from Curry’s and incontinence-aids direct from the supplier.

 

An analysis of data from the National Audit Office and NHS Purchasing and Supply Agency (PASA) by management consultancy firm McKinsey & Co suggests that savings of between 7% and 12% could be squeezed out of the supply of products not under centrally managed contracts. In the case of GP supplies the estimates savings leap to 15%.

 

McKinsey says that more should be done to force people to buy centrally. The logic is that the more you buy the cheaper it gets. That’s where I tend to part company with conventional wisdom. Buying centrally is fine if you are worried about the NHS as a whole, but if you are worried about your place and your job, forget it. It is not a blanket solution. Central contracts mean manufacturers send big lorries full of stuff to an NHS distribution warehouse where the  bulk is broken down, put in smaller lorries and delivered to the end user – your place.

 

It is known as ‘breaking bulk’ in the trade, and as ‘redistribution’. It also involves ‘on-costs’. The on-cost is a dark secret but I can tell you it can add 5% or in some cases 11% to overall costs. Check it out. It could well be cheaper to buy direct and negotiate a discount. You’ll save squillions! You might not make friends with the government buying agency, or the procurement hubs. But who needs friends who turn out that expensive? Check every item you buy. Be absolutely sure you can’t buy it cheaper elsewhere. Yes, I know we’re talking about 25,000 of them, but just do it, line-by line, item by item, inch by inch.

 

Tedious? Yes.
Time consuming? Very.

 

You’ve already done it? Do it again. Review every price every three months. Currency values change, market conditions vary and business will get into a mess because they can’t borrow for cash-fl ow and might welcome prompt payment and a deal. Be flexible. Be nimble. Do deals. More than just ‘buying-stuff’ we learn, again from McKinsey, that there are 24 external spend headings as diverse as waste removal to elevator services, from IT maintenance to printing, blood products and paint, where there is a weighted average saving of 13% to be had through comprehensive and better product procurement. Check cardiology products, employee food discounts, filters and cleaning supplies. These are tough times – so get tougher.

 

Let’s turn to buildings, because this is where you can build a reputation and demolish some myths. Let’s start with the old chestnut estates optimisation. There are about 725,000m2 of vacant space in the provider estate and 190,000m2 in the PCT empire. The national asset register shows there is a six-fold variation in trusts’ asset utilisation. If all trusts move
to a position between the average and top quartile £6bn might be saved. Where do you sit? Do you know? It must be worth finding out. Does HefmA benchmark this kind of thing?

 

 

Estate consolidation is an interesting topic. In a population of 100,000 there might be eight health centres, 18 GP practices and a community hospital.  Is there any opportunity for estate  consolidation and vertical integration? A way to drive-up utilisation and take out costs? Can you sweat the assets? Can you lead the way? Can you generate income by taking on the care of PCT and GP assets?

 

There are all sorts of reasons why nothing can be done. Planning issues, market conditions, cash, whatever, but a rigorous estates review, exploring rental agreements, short leasing, shared occupancy and better occupancy arrangements are all back on the to do-list. Done it already? Then do it again. Market conditions are changing all the time and most local authorities have a quarter of their council members rotating and up for election every
year. Ideas and outlooks change.

 

PFI is a bigger nut to crack. Here’s a fact you won’t like. In the last 10 years average bed-stays have halved. Want to take a guess on what will happen in the next 10 years? For sure they won’t get longer and for sure technology says they will get shorter. So who wants to be stuck with an 800 bed hospital and PFI payments that are enough to run a small country? Whatever the calculations that got you into this may have told you at the time, they are now shouting ‘get out’!

 

Pressures on tariff and payment by results, service line accounting, shifting care from secondary to primary locations and cuts in funding all combine to cast a really big shadow over the long-term viability of PFI deals. What can you do?

Restructure – that’s what the private sector does. In 2008 interest rates were 5.5%, today they are 0.5%. According to Treasury numbers, the all-up cost of PFI deals is running around £9.5bn and the average annual payments are in the region of £1.3bn. Don’t tell me there is nothing to be done.

 

So, what’s the answer? You lot at HefmA. HefmA should be lobbying to reduce rates and payments. Cut 80% of PFI deals by two or three base points and you make huge savings. It is do-able. It will need government intervention and maybe for them to offer a guarantee. EU accounting has put PFI debt back on the government’s balance sheet, so it is no big deal for them. Involve MPs. Lobby them, meet them, invite them in and show them what a cut in rates would do for public finances. Let them think it was their idea! Appoint an MP as your adviser. Talk to financial journalists and tell them a cut in rates would mean a gazillion more hip operations and 30 tonnes of pills for cancer victims.

 

Journalists love a story but it has to have a human interest angle and you can offer it in ladlefuls. Banker’s payments or granny’s hip? They just can’t get enough!

 

We have a new government eager to impress and banks that are more hated than a scrapyard dog. This is the time for HefmA to go straight to the Treasury and the Department of Health. PFI holders are weak and are having difficulty in borrowing, so hit ‘em when they’re down!

 

And, finally, the ‘green-thing’: the best is last! The NHS has the carbonfootprint of a herd of elephants – the worst of just about any organisation in Europe. We are talking in the region of 18m tonnes of carbon dioxide per annum, more landfill than any other organisation. An average trust has 10,000 car-park movements a week.

 

The good news is that green means lean and lean organisations are cheaper to run. This year is the first year of NHS carbon accounting. Trusts and others have to show their carbon use and what they are doing to reduce it. This puts green on the Board’s agenda and being on the Board’s agenda is definitely a good place to be. It means the issue will be on their worry list. They will want to do things which gives you their attention. It is time for FM people to become the Jolly Green Giants of the NHS.

 

Three tough things to tackle in tough times – in fact a Dickens of a  time. But, remember, as well as BleakHouse, Dickens also wrote Great Expectations! Why don’t you go and make a name for yourself?

 

Roy is a former NHS Trust chairman, a writer and broadcaster on health and social issues, and the editor of the nhsManagers.net newsletter.