NHS productivity: from diagnosis to action

Rarely is there a discussion of the challenges facing the NHS in which productivity isn’t mentioned. Debates on this issue can quickly become quite technical. This can obscure how fundamental productivity growth is to the future of the NHS and why it should be top of the to-do list for the new Secretary of State for Health and Social Care. So why does it matter so much, and what needs to change?

Put simply, ‘NHS productivity’ determines how much care is delivered with the funding available. Crucially, improving productivity is not about already hard-pressed and exhausted staff working harder. Instead, it’s about the whole service working efficiently together, with the right level and mix of resources. In the same way that a chef cannot bake a cake without the necessary ingredients and a functioning oven, a hospital cannot perform a hip replacement without the right mix of staff, enough tools and equipment, and buildings that are fit for purpose.

Last week’s REAL Centre’s funding projections highlighted the scale of the financial challenge facing the NHS. But pressures on public finances over the next parliament are likely to limit spending growth. Sustained improvements in productivity are therefore crucial if the NHS is to meet the increased needs of an ageing population and to improve the quality of services, enabling the health service to do more with the money available. 

In the early 2010s, NHS productivity rose faster than economy-wide productivity. This was achieved, in part, by making the NHS ‘leaner’: by (for example) reducing bed numbers, increasing bed occupancy rates and holding back on capital investment. From 2017 productivity growth stalled. Entering the pandemic, the NHS had little spare capacity to buffer against the pressures of COVID-19. Productivity took a huge hit and is yet to fully bounce back. 

Several complementary studies help us understand what’s gone wrong, and where policy and action need to be focused. These include last month’s analysis by NHS England, a June 2023 report from the Institute for Government and Public First (commissioned by the Health Foundation) and Diane Coyle’s REAL Challenge lecture last November.

Five priority areas emerge from these analyses:

1. Investing in infrastructure and equipment
2. Optimising use of AI and digital technology
3. Improving operational processes and management for better flow
4. Addressing workforce issues (such as skills gaps and staff morale)
5. Reforming incentives and targets, to guide productive use of resources.

We look at the challenges the new government might face in each of these key areas.

1. Investing in infrastructure and equipment

There’s long been a lack of investment in NHS infrastructure and equipment (buildings, beds, scanners, IT systems, etc), causing a drag on productivity. For example, bed shortages prevent hospitals from admitting patients, meaning ambulances waste time waiting outside hospitals. Likewise, slow computers take precious staff time away from other tasks. 

In their manifestos, the main parties have made some commitments to upgrade ageing NHS infrastructure. For instance, the Conservatives promise to replace outdated computers, and Labour has committed to doubling the number of MRI and CT scanners. The funding required is substantial, with £11.6bn needed just to fix or replace existing buildings and equipment. The scale of the challenge is huge, but is unmatched by manifesto promises.

2. Optimising use of AI and digital technology

Digital technology and AI also feature in the health sections of the manifestos. These technologies have the potential to revolutionise the quality and delivery of care, and could boost productivity, if tech enables more care to be delivered with the same amount of resources. However, the link between digital technology and productivity gains is far from guaranteed. Technology needs to be implemented and used well, with investment in training, infrastructure and support. Furthermore, our research shows that time freed up by AI may not automatically be redirected towards patient care. 

While cutting-edge technologies often grab headlines, more basic and well-established technology is more likely to have the greatest impact in the short term. This includes things like electronic patient records, video conferencing and digital messaging. The new government would do well to focus on making the most of these innovations. 

3. Improving operational processes and management for better flow

There are huge opportunities for better processes within the NHS, especially improving the flow of patients along care pathways by stripping out unnecessary actions or waits. Specific examples relate to the use of operating theatres and hospital discharge – seen, for example, in Labour’s commitment to new NHS–local authority partnerships on discharge planning. 

Effective management is vital to process improvement. But NHS managers are rarely championed by any of the parties, and the Conservatives have proposed slashing their numbers. As we recently argued, this can create the impression that NHS management is a burden rather than a benefit to the service, and something that can be scaled back without any negative repercussions. The evidence suggests otherwise. The new government should remember that reducing the number of managers could prove to be a false economy, with savings on salaries outweighed by productivity losses. 

4. Addressing workforce issues

Maximising NHS productivity depends on having a healthy and motivated workforce with the right skills and experience. The pandemic has taken a toll: many staff are burnt out, sickness absence has risen, there has been rapid turnover and a decline in experience, and morale is low. The main political parties have made broad commitments to the NHS Long Term Workforce Plan, but details are sketchy. Achieving the ambitious labour productivity targets in the plan will require substantial investment in the resources needed to support the enlarged workforce, including NHS infrastructure and technology. None of the manifestos address what this would cost or how it would be funded. 

5. Reforming incentives and targets

A final theme, and crucial to the other four, is incentives. These play a central role in determining productivity, as they shape both what resources are used and how they are used. The NHS is no stranger to targets and incentives, but they haven’t always been well designed, sometimes swallowing up energy without providing clear direction. Piecemeal proposals and disjointed targets run the risk of further compounding the problem. In a large interconnected and interdependent system like the NHS, a lack of coherence can quickly create incentives for different parts of the system to pull in opposing directions. The new government must bear in mind that pursuing short-term productivity indicators could be to the detriment of incentivising measures and investments that deliver long-run productivity gains. 

Coordinated policies to drive productivity

When a new government forms, improving NHS productivity will be at the top of the Secretary of State’s to-do list. The NHS is developing its own productivity plan, due to be published this summer, which should help guide thinking. The use of digital technology and AI will likely feature large in this, but to enable the NHS to lift its rate of productivity growth and deliver high quality care to patients, coordinated policies are needed in all the five areas set out here.