Improving productivity – what does The NHS Long Term Plan expect?

28 February 2019

The NHS Long Term Plan sets out the government’s ambitions to improve quality of care and outcomes in England over the next five years in return for the extra £20.5bn of funding announced by the Prime Minister last summer.  

The extra funding is a welcome boost. While no one is denying it’s a large investment, realising the ambitions of The NHS Long Term Plan within the available funding will be tough. 
Health care spending is a constantly moving target. As the population grows, ages, and develops more chronic diseases, extra funding is needed just to stand still. £20.5bn by 2023/24 represents an average annual increase of 3.4% in real terms for frontline services – below the historic average and just about enough to keep pace with growing demand, estimated at 3.3% a year. So, maintaining NHS standards – let alone meeting the raised public expectations that come with extra funding and The NHS Long Term Plan – will be a challenge.

Let’s talk about productivity

Realistically, if the extra funding is to make any inroads into the UK’s health outcome gap with comparable countries, this extra funding will need to be used very wisely and a lot will depend on productivity: how efficiently the NHS can use its resources.

The plan is based on a productivity target for the NHS of 1.1% a year, and this target will be make or break. Without productivity gains the NHS would need around £10 billion of further funding in 2023/24 just to stand still – that’s equivalent to around 1p extra on employee and employer NI contributions.  

Is the 1.1% productivity target realistic?

The NHS has done well to improve productivity in recent years. In 2017 it grew by 3%, substantially above both performance across the economy as a whole and the long-run trend for the NHS. 

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With that in mind, a target of 1.1% a year seems reasonable. But in fact much of that productivity growth in 2017 came from one-off events which can’t be repeated. Recent high productivity growth could also reflect the huge pressure being placed on staff at the front line to deliver ever more care despite critical and growing workforce shortages. 

What’s stopping the NHS from improving productivity?

The NHS is in many regards no different to other sectors of the economy. It needs a well-functioning labour market to supply enough staff with the right skills. It needs access to capital for buildings and equipment, and effective investment in research and development. 

The NHS Long Term Plan recognises that workforce shortages will be a major barrier to delivery. There is a gap of 100,000 staff this year, projected to grow to around 250,000 in a decade’s time. The result is clogged up A&E departments, delayed or cancelled operations, high staff turnover and wards staffed with temporary workers. 

Tackling the staffing problem

The NHS in England needs to train more staff if it is to break this cycle. The plan recognises this but can’t make firm commitments as funding for the pipeline of doctors and nurses is to be decided in the 2019 Spending Review. The NHS Long Term Plan will be no more than a wishlist if that gap can’t be closed, and Brexit and the Government’s new migration white paper may make the task of attracting health workers even harder. 

International recruitment is the only feasible way to address the NHS’s workforce shortages in the short term. The migration white paper establishes the principle of uncapped migration for the ‘high skilled’. Doctors, nurses and radiographers would seem to most people to be highly skilled, but the problem is that high skill doesn’t equate neatly to high pay: starting salaries for the staff that the NHS needs often fall below the Migration Advisory Committee’s proposed threshold of £30,000.

Awaiting decisions on capital investment

The same is true for capital investment which is also waiting on decisions in the Spending Review. 

The plan sets out sensible proposals to shift care from hospitals to the community, transform the use of technology in line with the IT revolution in other sectors, and improve cancer care through earlier diagnosis. Earlier diagnosis of cancer requires investment in MRI and CT scanners – the UK has less than half the OECD average number per head.  All of this will require capital funding, which in recent years has been repeatedly raided to fund day to day running costs. 

This month the government has confirmed that in 2018/19 a further £500 million earmarked for capital investment will need to be used for everyday running costs. 

Engaging and incentivising to drive productivity

Beyond the workforce and capital investment, if variation is to be reduced and productivity increased the NHS also needs an incentive and managerial framework that ensures these resources are used well. 

Since the early 1990s the NHS has tried to harness some of these competitive forces to drive the system. The NHS Long Term Plan confirms that competition is no longer at the heart of NHS policy. There is near universal agreement that mimicking the structures of commercial markets is not the way forward for the NHS, but the alternative is still undeveloped. 

Engaging and supporting clinicians to consistently adopt best (and cost-effective) practice is at the heart of improving productivity. There has been a lot of focus from national programmes such as GIRFT and Right Care on understanding the nature of variations in cost, utilisation and quality. This is necessary but not sufficient. Reducing unwarranted variations in care has been a key challenge for health care systems across the world for years. To really have an impact on unwarranted variation and productivity there needs to be a much greater focus on the rapid and effective diffusion of innovations that work and best practice. The NHS prizes innovation and recognises the achievement involved. But as we highlighted in our recent research on spreading innovation, it doesn’t value the adoption of innovation by others anywhere near highly enough.  Yet consistently improving productivity requires a much greater focus on the rapid and effective diffusion of best practice. 

The question for the NHS over the next few years is how to make systematic progress on improving adoption and reducing unwarranted variation. The NHS Long Term Plan sees a key role for new technology but less fashionably, research shows that good management really matters. If potential is to be realised this will also need to be a priority. 

Anita Charlesworth (@AnitaCTHF) is the Director of Research and Economics at the Health Foundation.

This blog originally featured in our email newsletter, which explores perspectives and expert opinion on a different health or health care topic each month.

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