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Angela Burns: I welcome our witnesses this morning. Please introduce yourselves for the record.
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Mr Davies: I am Paul Davies, and I am the finance director for the Cardiff and Vale Local Health Board.
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Mr Lewis: I am David Lewis, and I am the finance director for Cwm Taf Local Health Board.
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Angela Burns: Thank you for coming here today to discuss your responses to the Welsh Assembly Government’s draft budget proposals. Do you have a brief statement that you would like to make before we start the questions?
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Mr Davies: It would be useful to make a few comments. You have received our paper, but it is worth acknowledging at the outset—we did this last year as well, but it is much more evident in this year’s budget—that the public sector is facing significant challenges in terms of the economic downturn. The national health service finance directors fully recognise that and this is about how we respond to that positively and constructively.
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High-quality and safe patient care is key to the work of the NHS; we cannot compromise on that—that must be our raison d’être and key objective. So, all of the decisions and actions that we take are around safeguarding that basic principle. In simple terms, it is about the right care being carried out at the right time and in the right place by the right people. If you can do that, then you can do a lot more with the resources than that currently achieved.
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We stressed in the paper that we are facing unprecedented challenges as a result of the economic downturn and the demands on the service, and it is about how we manage those challenges with the required transformational change that we need to make, which is around the right care at the right time for all. There are two key issues in that—achieving much greater clinical engagement with the front line and the shop floor of the service, and much more constructive partnership agreements and arrangements with our local authority and other stakeholders. I believe that the reorganised NHS allows us to do that better.
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Angela Burns: David, do you want to add to that?
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Mr Lewis: No, that is fine.
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Angela Burns: I seek clarification on one matter to begin with. Looking through your paper and the Government’s report, it seems that you have a 2.6 per cent increase in revenue at the moment, which is 0.7 per cent down on the indicative numbers. I understand that you should not believe everything that you read in the press, but it says here that ‘NHS finance directors say that they are facing a shortfall in funding of 5 per cent in the Assembly Government’s draft budget’.
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2.40 p.m.
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That is courtesy of the BBC. Could you clarify where you think you are?
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Mr Davies: We recognise that the 2.6 per cent is slightly down on the budget plans over the three years, but it is slightly more than we anticipated because, given the economic downturn, we thought that we would face an even more difficult challenge. Having said that, we recognise that there are underlying costs that the NHS will always have to meet, but they are becoming more pronounced. There is the obvious inflation cost, and we have assessed that to be 2.7 per cent, so, effectively, the 2.6 per cent award or uplift in funding will be taken up by inflation costs. The question then is: what other costs will we be faced with in the coming year? The key cost will be continuing healthcare. We have seen that over the last two years, and, projecting into the future, we will start to see significant increases in the cost of continuing healthcare. That is the cost for frail, elderly patients who require ongoing support. Then there are the high-cost drugs coming through the National Institute for Health and Clinical Excellence, and the cost of sustaining the Access 2009 targets, which are particularly challenging, but also very important. We also have to meet other costs associated with statutory compliance and policy changes. Our view is that, on the assumption that inflation is paid for, we would have to absorb around 5 per cent in other costs. That is why 5 per cent is the calculation given in the paper.
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Kirsty Williams: I want to ask you about one of those specific cost pressures, around NICE high-cost drugs, which is probably one of the most high-profile issues that the National Assembly for Wales has to deal with. When new drugs become available, there is pressure to have them funded. You say that that amounts to 1 per cent of the 5 per cent that you are looking at, but, at the same time, we have drugs on patent that will come off patent soon. My understanding is that seven of the top 20 drugs that are currently prescribed are due to come off patent within the next couple of years, allowing cheaper, generic drugs to be prescribed in their place. Could you give us an idea as to whether you have looked specifically at the balance between paying for new drugs and potential savings in prescribing that might come about because of off-patent drugs becoming available?
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Mr Lewis: The all-Wales medical strategy group looks at this in the context of public health and takes that rounded view into account. It is looking ahead, with a detailed database of drugs that are becoming available and that are coming off patent, just as we do locally, within local health boards, with regard to the high-cost drugs that are increasingly used. We also look at which drugs they are replacing. So, our 1 per cent assessment is a net increase as opposed to a gross increase.
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Alun Davies: Thank you for your evidence. The sentence that leapt out at me in reading the paper that you provided for us was in paragraph 2.8:
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‘While it is clear that there is always scope for further efficiencies and improvements, it is doubtful that the service has the ability to manage such a shortfall without serious repercussions for service delivery’.
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What do you mean by that?
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Mr Davies: When you look at the next five years in the context of the economic downturn, we expect that the NHS can, at best, expect a flat budget. It will not grow, but, hopefully, it will not shrink either. We can see that, over the next five years, there will be on average anything between a 4 and 6 per cent increase in costs, which will have to be managed. We totally accept and recognise the need for the transformational change agenda, which is about doing things completely differently. The question—and this is the question that the finance directors are posing—is around moving from the current position to that transformational agenda, which will take a great deal of work, and organisational change. In the interim, there will be challenges. We are facing challenges today, in 2009-10, as we described to the committee last year, when we knew that we would be facing these challenges. We know that, going into next year, we will continue to face those challenges.
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We are facing an unprecedented challenge in terms of the resource available and the demands on it. We are responding positively, but it is a matter of recognising that we are having to make difficult choices now in the short term as we move to the transformational agenda, which is about ensuring that we have the right care, at the right time, in the right place.
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Alun Davies: Thank you for that. However, that was a very abstract answer, was it not? You used the word ‘challenges’ a number of times. I want to know what the serious repercussions for service delivery are that you referred to in your paper.
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Mr Davies: Looking at the current financial pressure that we are under, in my organisation, we have a £10 million deficit, and we have to break even: that is our plan. We know that, in the short term, we have to make some difficult choices about staff and holding vacancies to a point that we would not normally wish to do because that is what is necessary to balance the books. Likewise, we have to prioritise investments. We have a range of targets that we have to deliver under the annual operating framework; there are 25 in total. Our view is that Access 2009, which is the waiting times target, is the top priority, together with the target of a maximum four-hour wait in relation to emergencies. However, we then have to look at the other targets, and we have to prioritise things. Are we going to be in a position to deliver services across the whole range of those priorities? My view, and I think that it is also the view of the NHS, is that we have to do our best but that there is a serious question over whether we can deliver them all.
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Alun Davies: So, the serious repercussions would be the non-delivery of targets. Is that correct?
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Mr Davies: The non-delivery of services.
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Alun Davies: Services rather than targets?
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Mr Davies: Yes.
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Alun Davies: With regard to your financial planning, we are aware of the broad thrust of financial planning at a UK level and the impact that that will have in Cardiff. To what extent are you planning ahead knowing that you will be facing a flat budget? As you say, let us make the assumption that that is what you will have for the purposes of this discussion. Knowing that, what financial planning strategies are you putting in place to ensure that you protect services and invest in front-line services? I am interested in what you said about this move to a transformational agenda, because I assumed that, through the reforms that you put in place this autumn, you were already on that journey. This afternoon, you make it sound as though that is a journey that is still a year ahead of you.
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Mr Davies: I will kick off on this one. The first thing, which is so important, is that the reorganisation that we have just begun over the past three weeks and was prepared for over the past six months will, I think, enable the NHS to be in the best place possible now in terms of its structures. I believe that the removal of the boundaries that we had previously will integrate the service in a way that has never happened before. In the context of the transformation, the Assembly Government—and this is so important—has required each of the new local health boards to construct a five-year plan. Those five-year plans are about putting in place changes that will make things completely different. Over the past three or four years, as we have been making the savings, it is fair to say that many savings have been to do with housekeeping, avoiding the duplication of waste and making the best use of our resources. However, they have not been to do with making those fundamental changes that will take place through the reorganisation.
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On the time frame, year 1 starts in April 2010, and, from then, we have to start putting that transformational agenda in place. It will take two to three years to put in place. We are working on it now, and it will bear fruit, but we will see that coming through much more in two to three years.
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Mr Lewis: As Paul said, the new organisations are only three weeks old, but we have been working on this for a while. Having a much smaller number of bodies—with seven health boards and the existing trusts—gives us the opportunity to work much more closely together, but also to work more closely with our partners. It really does provide us with an opportunity. Looking at some of our major cost pressures around, for example, continuing healthcare, this gives us an opportunity to look at those in a fundamentally different way, to look at our current capacity and the amount of money currently going out of the health service for continuing healthcare and ask whether we have the opportunity to put those two things together and produce a better service model. A financial benefit in terms of the bottom line will also fall from that. I believe that that is what the new health boards are all about. It is about getting the service right, and the finances flow from that.
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2.50 p.m.
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Kirsty Williams: Mr Davies, you said that you felt that the new structures represented the best place for the NHS to be in to deliver, and I think that when you say ‘deliver’, you are talking about delivering for patient care.
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Mr Davies: Definitely.
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Kirsty Williams: Is it going to save us any money?
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Mr Davies: Yes.
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Kirsty Williams: How much?
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Mr Davies: Let us put it into context. When I say ‘the right care, at the right time, at the right place’, it is not meant to be a glib statement; it is so important because we do not get it right at the moment.
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Kirsty Williams: I know that.
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Mr Davies: Far too many patients end up in the wrong place—either being hospitalised when they should not be, staying in hospital too long, or staying in primary care when they should be in hospital. All those mistakes, or non-optimal behaviours, are poor patient care and are extremely expensive. We believe that there is at least 20 per cent that we are not using appropriately within the total budget. Were we to do so, we would see that improvement come through, and it would not detract from patient care—in fact, patients would get a better deal.
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Kirsty Williams: With all due respect, we were having exactly the same conversations 10 years ago, when I chaired the health committee. One wonders why, if those conversations were taking place 10 years ago and there was a realisation in the service then that that was the case, we have not been able to do anything about it in those 10 years. It does not give me a great deal of confidence that we can do anything about it in the next 10 years.
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Putting the issue of getting people into the right place aside, in terms of administration, we have gone from having an awful lot of organisations to having relatively few. Surely we should already be seeing a return on savings in administration, let alone from moving patients around? How many NHS managers have been made redundant as a result of the reorganisation?
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Mr Davies: None.
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Mr Lewis: We have a no-redundancy policy in the NHS in Wales.
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Kirsty Williams: One can see that there might be reasons for reorganising around commissioning and political reasons and to get rid of the purchaser/provider split, but have all those NHS managers and administrators who were working under the old system just been fitted into the new system?
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Mr Davies: You are right; it is inevitable. We have gone from having 37 organisations to having 10, because there are seven local health boards and three other—
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Kirsty Williams: One wonders whether there are a few chief executives hanging about the place.
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Mr Davies: There is no doubt that there will be, in the short term, a way of correcting the organisation costs and the structures. It is important to say that, given the challenges that the new LHBs face, particularly with the transformational agenda, we need every pair of skilled hands available. There is nobody in my organisation who is earning money sitting about. They have to be fully deployed, and their skills are entirely appropriate for some of the transformational work that we need to do.
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Mr Lewis: That was the very point that I was going to make. In the last 10 years, that group of managers has provided that capacity.
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Kirsty Williams: They have not done that in the last 10 years. We are asking the same people who have not done that in the first 10 years to do it in the next 10 years.
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Mr Lewis: Yes, but we are now getting them to concentrate on that transformational change as opposed to managing 32 organisations.
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Alun Davies: ‘Correcting the organisation costs and the structures’ is quite a euphemism. I am not entirely sure what you meant by that. How are you making these cost savings? You said that 20 per cent of your resources are not properly allocated or delivering. You do not mean 20 per cent of the total health budget, surely?
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Mr Davies: I believe that, in total, 20 per cent of our current resource is not being optimally applied.
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Alun Davies: When you say ‘resource’, you mean finances and staff, is that right?
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Mr Davies: It is staff, capacity, beds, and so on. It is about asking whether we are making the best use of that £5 billion, and we are saying that we are not.
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Alun Davies: So we are talking about £1 billion.
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Mr Davies: It is £1 billion that we are not utilising appropriately.
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Alun Davies: No doubt we will want to return to that.
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How are you going to make the cost savings that you have said are available to you in the health service? Where will they come from?
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Mr Davies: We are making major savings, and there is still significant opportunity to do that. The first issue relates to the workforce, which makes up 70 per cent of our costs. We are examining our skill mix, which is not necessarily the right one with regard to the staff on wards and in clinics. It is about making sure that you have the right skill mix to meet the needs of patients. We have a workforce turnover rate of around 7 per cent, so you would expect vacancies to accrue, and you would expect changes to then be made to the workforce as staff leave, and we do that. We employ bank and agency staff, using expensive agencies, but we have to move to a position where we have sufficient established substantive staff, as that would avoid having to do that. Over the last few years we have seen additional nurses being trained and other professionals coming in, and we no longer have problems relating to vacancies. At one time, two or three years ago, we had a major problem in attracting staff. In a general sense, that is not now the case.
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We spend 20 to 25 per cent of our money on non-pay items, such as drugs and consumables. We do not buy those in the best way, but, more importantly, we do not necessarily use them in the right way. Let me give you one example: in the case of hip replacements, we still stock around 10 different hip joints. We need to move, with clinicians, to a rational point where there are no more than three. I appreciate that doctors get trained in different work, and they get trained to deal with different joints, but they have to get retrained to use the agreed standard hip joints. If you have to stock 10 different hip joints, you can imagine what the Aladdin’s cave looks like, whereas if you were to only stock three and use those three, you could buy them in a better way and there would not be the potential for obsolescence that arises from only certain ones being taken off the shelf. So, there are big opportunities in relation to procurement. There are also housekeeping measures, namely the day-to-day things that all our staff identified, such as the use of paper towels, looking at energy costs, or reusing furniture; there are always very good examples, which staff get on with and carry out. That always represents around 1 per cent of the 5 per cent target that we aim to achieve.
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The key, and what we have not been good at to date, is the service change, that is, the transformational change. We are beginning to see it now. I will give you one example of which I am aware: in Cardiff, we invested £800,000 in the Cardiff East Locality Team. It is a multidisciplinary team, which is consultant led and which is made up of clinical staff: nurses, diagnostic staff, therapy staff, and so on. That team works in the field. It is connected to a hospital, so it has access to hospital facilities, but it links much more with GPs. If a GP has a concern about a patient at home, the GP would, typically, refer the patient to hospital, perhaps inappropriately, and this could result in a lengthy stay and other things happening. CELT visits the patient, supports the GP, and, by and large, can make sure that the patient retains the package of care in the home. We have evaluated CELT, and it is currently saving an amount that is the equivalent of the cost of a ward. A ward would typically cost us about £2 million a year; the team costs £800,000. So, it does not take a lot of mathematical skills to work out that it is better for the patient and that it is more cost effective. It is that type of transformational change and redesign that we have to get into.
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One thing that I wanted to challenge, which is an area where the Assembly Government plays an important role, is that of pump-priming, because the challenge is setting up the team while you are still running the wards. That is why the spend-to-save investment is an opportunity. As it happens, CELT was supported by the Assembly Government through the £50 million continuing healthcare allocation, which we received last year. So, creating this team is one way in which we have tried to be innovative.
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Alun Davies: You have said two things this afternoon that I find quite extraordinary: first, given the budgetary pressures, there will be serious repercussions for service delivery, meaning that the NHS will be unable to deliver whole areas of services; you then said that £1 billion is, potentially, not being used correctly. Surely it is your role as NHS senior managers to ensure that that £1 billion is used on patient care, on front-line service delivery, and is not wasted, as you appear to be saying, because of all sorts of poor management decisions and poor management processes. Those two things seem to work out.
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3.00 p.m.
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Mr Davies: That is the challenge.
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Mr Lewis: That £1 billion that we have been referring to should not be seen as all waste and poor management. Although some of that £1 billion is probably currently being used on direct patient care, we were asking whether that care was being undertaken in the right way and in the right place.
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Alun Davies: That is about management, is it not? It is about how you deploy your resources.
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Mr Lewis: That comes back to the transformational change that we are keen to support the clinical leaders to undertake.
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Angela Burns: Alun, I would like to bring in others on this point. We will start with Joyce, then Oscar, Chris and Kirsty.
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Joyce Watson: I want to explore a little more about the management. You gave a number of examples and started by saying that you had faced unprecedented challenges. I cannot imagine that the financial challenges are unprecedented, unless you are very new to the NHS. You mentioned specifically the example of the use of bank and agency nurses—and I warn you that I am on my hobby horse here—and the issue is not the type of nurse that you use, whether those nurses are paid by the bank, the agency, or are employed by you, but the management of staff. I am only aware of one reason for the use of bank nurses, and that is insufficient capacity within the hospital to deliver care to the patient with the correct staffing levels with the existing staff. You then have to call in the recruits, because there is no slack to allow for sickness. I have focused on this point because of the heightened awareness that you must have when talking about a possible flu epidemic in Wales. The current system operating in Wales has to be addressed. Are you addressing this, because this could hit us and hurt us pretty quickly?
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Mr Lewis: I would like to pick up on the point about swine flu. I am sure that everyone is aware that the Assembly Government has been doing a tremendous amount of work on planning for a swine flu epidemic, which is inevitable. We are starting on that now; the second wave, as it is called. Staff will be affected by swine flu; we will not just see an increase in the number of patients, it will increase acuity levels on wards. There was an announcement this morning on the special allocation to increase the number of ventilators that we will all have available. We have already planned for the increase in the continuing-care and high-dependency space available in most, if not all, of the acute units that we have available. So, all of our planning has gone ahead. We are taking administrative staff out of their areas to help out at distribution points for the vaccinations to ensure that we are relieving as much of the pressure on clinical staff as possible.
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However, that is almost a side question with regard to whether we are planning for swine flu, which we are doing. On your main question about the use of the bank and agency staff because of the pressure on the wards, we know that, over the last few years, generally, the acuity level of patients on wards has increased. That is what we are experiencing. The proposed models of care that we are now talking about, particularly the community primary care model that is being proposed by Dr Jones, is about having a look at how patients come into the hospital and are discharged from hospital, getting the total model right and getting the balance right, particularly at the emergency ends. Usually, when people ask us to look at the length of stay in hospitals, we see that some of the longer stays are generated by emergency patients and not elective patients. We have undertaken tremendous improvements to the elective process; the transformational change is about the emergency process.
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Joyce Watson: Shall I go on to my questions?
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Angela Burns: No, not yet, because a couple of people have supplementary questions on these initial statements.
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Mohammad Asghar: I am very concerned about this. The Assembly Government gives over £5 billion to the NHS to cater for 3 million people. I have just heard someone say the word ‘inefficiency’ in reference to providing the public with an NHS service, which is alarming. Do you not think that a bigger adjustment needs to be made? As you said, £1 billion is a lot of money in anyone’s book. So, how will you regroup and reuse it properly?
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Mr Davies: I wish to avoid the headline that somehow we are wasting £1 billion. The word ‘waste’, in common parlance, suggests that the money is being thrown—
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Mohammad Asghar: You said ‘inefficiency’.
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Mr Davies: It is important to state that the NHS, in my experience over the last 30 years, is a hard-working organisation; it is filled with staff who get on and do their jobs. What is important is that they do the right job, that they are given the right tools with which to do so and that the right care is provided. Therefore, we are not saying that £1 billion is being wasted, but that the £1 billion could be used in a much better way. It would be wrong to leave this room and state that £1 billion is being wasted by the NHS; it is wrong to record that and wrong for the headlines to state as much.
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I will give you an important example that relates to the number of follow-up attendances in our out-patient clinics. We have a number of out-patient clinics, as you all know, which people attend for consultations with a consultant and to have tests. They are then given treatment or a further consultation, but how many patients return for a routine follow-up? We have been examining our different specialties and with regard to many of those specialties, the number of people who return is too high. It is not that the clinic is not doing good work, but the question is whether there is a need for that patient to return for a follow-up consultation. In some specialties, it is crucial for that patient to return for a check-up. However, if the patient needs a follow-up consultation, does the consultant need to do that or would it be better for a nurse-led clinic to carry out a series of examinations to see if a complaint or illness had returned? So, this could be done more cost effectively than is currently the case. That is an example of how you can turn some of that £1 billion resource into something different.
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Angela Burns: Thank you for that. Before I bring in the others, I would like to state that at no point was a view expressed that NHS staff were not doing their jobs correctly. It is unfortunate that every debate on the NHS—on whether it provides a good or bad service and on whether or not it is efficient—always centres on the view that we must not do anything mean because of these poor hard-working doctors and nurses. You can talk about the NHS in fairly pragmatic language—and our job here is to scrutinise—without casting aspersions on the work rate of those in the NHS, because no-one is talking about that. However, that does not mean that we should keep our hands off the NHS and not consider whether or not the NHS is efficient. That is what the committee is trying to get at.
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Mr Lewis: On the NHS workforce, I am sure that everyone is aware of the report that came out in England not long ago, which suggested that it should get rid of 10 per cent of its NHS staff. That is not our view of the NHS in Wales. However, we have to look at the cost of staff and how we use them; that is what we are saying. This is about considering whether there is any room to reduce the cost of staff as opposed to the number of staff.
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Mohammad Asghar: May I continue with—
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Angela Burns: No, because there are a lot of questions to get through. Do Kirsty and Chris want to come in on this before we continue with Joyce’s questions?
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Chris Franks: Yes. I am pleased to hear about the Cardiff East Locality Team project, of which I was aware. You indicated that it saves the equivalent of the £2 million cost of a ward, which is great, because it is a better service and is more cost effective. However, that ward does not close, does it? It stays open. So, am I right in thinking that the cost is £800,000 for CELT, but also £2 million for the ward? More patients are being treated and some in better circumstances. Can you elaborate on that?
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3.10 p.m.
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Mr Davies: Let me elaborate on that example, because it is particularly important. Where I work, in Cardiff, we have seen such levels of demand for beds over the last two or three years that our occupancy rate has sometimes been over 100 per cent. We have had to open up capacity outside our normal funded capacity to cope with the demand. What CELT and examples like it have done is allow us to reduce our occupancy. For the first time, we now have some empty beds, which means that patients are not trapped so that they cannot move from one service to the other. There is a bit of headroom and a bit of slack. That slack, according to the Office for National Statistics, ought to be about 15 per cent. We should be running occupancy at 85 to 90 per cent, but we have been in the high 90s and sometimes hitting the ceiling. CELT, as well as the investment in the continuing healthcare field, has relieved some of the pressure. It has also meant that, in Cardiff, we have reached 93 per cent of our four-hour accident and emergency target. While that is not good enough, as we have to get to 95 per cent and above, it is one of the main reasons why that headroom has benefited the service.
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Chris Franks: As a follow-up question, I have heard of the call to arms for administration staff to help with the impending problems. Why do we not use those administration staff more frequently when it is not an emergency?
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Mr Davies: Are you talking about swine flu?
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Angela Burns: Chris, I do not think that that is appropriate. That is a policy question and we are not the Health, Wellbeing and Local Government Committee. I cannot allow it unless you can tie it very firmly to the budget.
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Chris Franks: All right. I will watch out for other questions along those lines.
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Angela Burns: Thank you. Kirsty, is your question a quick one?
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Kirsty Williams: Yes, it requires a ‘yes’ or ‘no’ answer. Is your ability to transform the agenda to redirect the £1 billion assisted or hampered by the Minister’s commitment to no redundancies and no hospital closures?
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Mr Davies: When you look at the challenges that we will face over the next five years, you will see that it is about making a shift from hospital care to community care. I believe that we will see a reduction in capacity, and I see that redefining the role of our hospitals. It is not a case of closing them but of redefining what they do. I believe that it will mean fewer beds because there will be equivalent beds either in patients’ homes or in the community. I do not necessarily translate that into wholesale changes vis-à-vis district general hospitals being closed, but I do see a realignment of the services that they deliver in future.
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Mr Lewis: I am old enough to have lived through a previous period of redundancies. I know what the impact will be on staff morale and, during this transformational change, we need morale to be as high as possible.
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Joyce Watson: I think that we will come back to the budget now. Could you tell me, please, what impact, if any, bringing forward capital resources has had on your capital plans for 2010-11?
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Mr Davies: The increase that we have seen in capital from the Assembly Government has been extremely important. It features in the new way of doing things. For example, we have now submitted our final business case to replace Whitchurch Hospital. That will go, hopefully, as long as it is all approved. That is so important in the context of the new ways of working, which are about establishing community services and not the old asylum arrangements. So, capital is a springboard for making sure that we can carry out this transformational change. As I have said before, things like spend to save and some of that seed corn and investment are so important to make the change, because you cannot change the existing service before you try to put a new service in place.
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Joyce Watson: So, has bringing forward the capital budget from next year to this year made any difference? Have projects been accelerated? Will there therefore be no loss of investment, or is there insufficient capital resource to meet the plans intended for next year?
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Mr Davies: We have not seen any specific implications. I am not aware of any. However, it has meant that we have had to phase projects slightly differently, because managing the totality of the capital allocation is about ensuring that a scheme does not suffer from huge volatility in the expenditure from one year to the next. I would say that it is about prioritising and managing it in a more constructive manner to live within the resources.
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Joyce Watson: Have you put any bids in to the strategic capital investment fund, known as SCIF, for any trusts or local health boards for the second tranche of projects?
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Mr Lewis: On the second tranche, we are involved in the Merthyr Tydfil health park, which is very much a joint venture with the local authority. That is the way of the future.
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Joyce Watson: Great. That is fine.
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Angela Burns: Lorraine wants to ask about the financial pressures.
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Lorraine Barrett: Yes. You may have answered this, but do you have anything to add to your prediction that financial pressures are likely to exceed proposed allocations by 5 to 6 per cent? That was mentioned in some of your answers. How have you reached that figure of 5 to 6 per cent? You say that there is scope for efficiencies and improvements, and you have given us an idea of some of those, but do you think that that is a realistic and sustainable method of providing financial balance?
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Mr Davies: As part of advising our boards, our job is to assess the likely demands on the service and, therefore, the cost consequences of those demands. Over the past couple of years, we have seen a reduction in the level of additional resource, and we know that that will flatten to a position of little or no additional growth. Therefore, to ensure that we continue to meet the demands and deliver high-quality care, we have to come up with different ways of improving our efficiency, by reducing the average length of stay, for example, and ensuring that patients who could be treated as day cases are treated accordingly as opposed to being treated as in-patients, or ensuring that patients who could be treated as out-patients are seen in a nurse-led clinic as opposed to coming in as a day case. You are always looking for the best appropriate care, which is good for the patient and much more cost-effective for the service provider and deliverer, which is our case.
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Angela Burns: Oscar, I think that some of your questions have already been dealt with.
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Mohammad Asghar: Part of the question has already been answered. However, you state that a number of NHS bodies are currently experiencing deficits in spite of efficiency measures. In your opinion, how long can that continue before it begins to impact on front-line services and staffing levels?
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Mr Davies: We are doing everything to ensure that our front-line services are maintained. It is so important that we do that. All the attention has been on ensuring that we are as efficient as we can be in the back-office function, so that we do not spend money unnecessarily on those staff and those services not on the front line. Even on the front line, we need to ensure that we are not using money inappropriately.
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We are in an unprecedented situation at this time, in the context of the difficult challenge of balancing the money that we have against the demands made on it, and we have to make difficult choices. We have to restrict the appointment of staff—there is no doubt about that. We have to review areas such as study leave. We will have to take some exceptional decisions that are not sustainable going forward, but they are necessary while we work through this transformational agenda.
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3.20 p.m.
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Mohammad Asghar: What measures do you want us to take to address this matter?
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Mr Davies: It is about acknowledging that, while we are going through this adjustment process, issues will emerge. Certain changes might be regarded as being too painful, and so people will not accept them. It is about acknowledging that a degree of noise will come out of this, which is inevitable as we move through this transformational change process.
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Angela Burns: You say the words ‘transformational change’ in such a quick way, but I am with Kirsty on the impact that these tightened times will have on front-line services. I find it a bit hard to get my head around the illogic of preserving and protecting every single job in the NHS, despite the massive consolidation into seven health boards. There must be a huge number of back-office staff. I understand the game only too well from personal experience of making people redundant and of being made redundant. You are saying that no-one will lose their job and that you will not spend an extra penny on back-office functions, but if you are consolidating three payrolls into one, three human resource departments into one, three accounts departments into one, and so on—and forget all the people on the front line; these are the people at the rear—how will you maintain all that and still preserve front-line services so that there is no detrimental impact on them? I simply do not follow the logic of the financial argument here.
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Mr Lewis: There are examples of where we have done it. On the question of redundancies, the other side of that is that there is a 7 per cent turnover of staff in the NHS. We must use that 7 per cent turnover to look very carefully at every vacancy that crops up to see whether it needs to be replaced. When we talk about the back-office functions, it is not just the staff costs. By bringing three payrolls together, you save on the non-pay transactional part of that process as well. So, we are not just talking about saving on the staff costs of back-office functions; it is also about the non-staff cost, and that is where you make that saving. If we have a no-redundancy policy, everyone must accept that we have to be scrupulous in looking at the 7 per cent turnover of staff, as that must provide us with an opportunity.
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Angela Burns: On the 7 per cent turnover of staff, I understand that that is not equal. Is that 7 per cent turnover mainly in front-line staff or back-office staff?
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Mr Lewis: It is across the board. It is a combination, and it is different in different areas. However, as I said earlier, it is 10 per cent of the cost of staff as opposed to 10 per cent of staff. That is what we need to look at, and there is a lot of work going on in every hospital on how we roster off-duty periods. Every nurse director would say that there is still a lot of scope to look at the efficiency with which we use staff. That will bring pay costs down without getting rid of staff.
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Mohammad Asghar: I understand that 75 to 80 per cent of your budget goes towards salaries. We discussed earlier, and you were a bit embarrassed about it, the 20 per cent of inefficiencies. Is that the remaining 20 per cent, rather than partly in the salaries? I need to clarify that side.
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Mr Lewis: The 20 per cent is across the board.
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Mohammad Asghar: ‘Inefficiency’ was your word.
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Mr Lewis: As I said before, we employ staff who work diligently. The question is whether they are doing the right job. It is about making sure that we apply that differently. So, the 20 per cent that we are talking about is the total, not the non-pay aspect.
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Alun Davies: I am not sure that I understand your answers to some of these questions either, because, in streamlining the management, for which we have been arguing for quite some time, by cutting out some of the management frameworks and some of the management tiers and structures, you are making huge savings. We must ensure that we increase the services that are available to the public, so that we increase hospital, clinical and community services. However, the people whom you are releasing by streamlining the management are not the same people whom we need to deliver clinical services.
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Kirsty Williams: If you were a private business and had too much of one thing and not enough of another, you would have to make changes.
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Alun Davies: I do not understand how, if you are saying, ‘We need extra nurses to provide this new service’, you can then say, ‘We’ve got a couple of accountants going spare; let them do it’. That is not the way that it works.
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Mr Lewis: We did not say that.
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Alun Davies: It is what you seem to be saying.
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Mr Lewis: No, that was in answer to a specific question in relation to swine flu, and we are preparing—
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Alun Davies: I am not talking about swine flu; I am talking about the reforms that you say are releasing additional resources for front-line services. That is the point that I am making. My priority is to ensure that all the resources that are available—that is, every penny of the £5 billion—is spent on providing health services to the people who need them. I am not suggesting for a moment that you are saying something different to that, but my question is how are you making all the savings and to what extent can those savings be realised in the provision of front-line services?
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Mr Davies: To take the example of CELT, when we appointed that multidisciplinary team, it cost £800,000. The staff were not new; they were drawn from our experienced pool of staff. It is about looking at different skills and applying people differently. People are up for development and change, because they can see the wisdom of doing that. It is about taking some of the staff who are working on wards and moving them into a different environment. It is about training and skill. Ultimately, it is a question of whether to close that ward. When you shift enough resource and services to the community and you have bought your occupancy levels down to a level where you have enough headroom, you have to start to reduce costs in your hospital. You want to ensure that your patients get the right care in the right place. Hospitals currently tend to be the place where the majority of care is provided, in cost terms, not contacts, and it is about how you make a shift whereby you start to release some of those costs. You are right that that 7 per cent turnover does not always fall neatly in the right places, but you have to work on that, and that is also about retraining staff.
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Kirsty Williams: Mr Davies, you know as well as I do that we have been trying to do this over the last 10 years, but every time that there is any discussion about a trust closing beds because, quite rightly, it has transferred a service into the community, which is a much more appropriate place for the vast majority of people who are being treated, there is public uproar. In the minds of the public, beds are the NHS; that is what it is about. So, there is uproar at any suggestion of doing that, because, if you keep doing so with a variety of services, you will have a building full of empty wards. You will then have to ask about the future of that particular institution. However, you know as well as I do that, in response to public uproar, the Minister has understandably said that there will be no closures, because of the political difficulty that that creates for her. It is perfectly understandable why she has done that. However, your ability to create change is hampered, because, in moving those resources, inevitably, some things that have been done in the past and that are held dear by the public will be redundant.
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Mr Davies: We have had a number of discussions with the public and the representatives of the community health councils, and you are right to say that there has always traditionally been a focus on the beds; that is what is seen as being important. At the same time, people are aware that, if the care that was previously provided in that facility is provided much better elsewhere, there is a recognition and understanding that that makes sense. The question when we close a ward is whether we can now invest in a second CELT team. I think that people support that, because they can see the wisdom of actually making better use of the resource rather than keeping the current facilities in a way that is totally inappropriate.
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3.30 p.m.
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Kirsty Williams: Good luck.
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Angela Burns: Thank you for that. I will now draw this to a close. There are a few questions that we have not asked, but I will write to you on those. My general concern, having read your paper, is that front-line services will be squeezed because we are getting a bigger and bigger back end, despite the fact that the 7 per cent works across the board. You have mentioned that you will be doing a huge transformational agenda. I totally appreciate that you have new ways of working, but all of the things that you have talked about, such as this CELT ward and so on, is all about front-line services. You still have not explained to me very clearly how the NHS is able to redeploy money—not just save money—from the back end of the organisation to the front end. The front end needs good equipment, good staff and good training. We have this consolidation, for which I can see the logic, to the seven boards, but I would still like to understand where the extra managerial staff are going. They cannot be retrained to be doctors and nurses. Where are they going? Your human resources departments could, in three organisations, have been 100 people three times over, but as a result of the consoldiation, are you now saying that there is one human resources department that is 300 people minus 7 per cent? That is just illogical. In all my years in business—and I know that other people around this table have been in exactly the same situation with organisations that have amalgamated—there has always been a fallout. I just cannot understand what you are doing with the excess personnel.
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Mr Davies: To respond very briefly, I think that there are two issues for me. We mentioned shared services in the paper. It is a very important agenda within the NHS. In south-east Wales, where David and I work, we currently have a very active programme whereby we will bring together plans to amalgamate our back-office functions, in terms of providing a better service and reducing cost much more in terms of economies of scale. We have seen the experience in north Wales, where it has worked very successfully, and we believe that there are many benefits in doing that.
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In the context, as you say, of staff falling out of the reorganisation, I believe that, in the next year or two, the agenda that we are currently faced with will mean that we need every one of those managers. The planning and the change that we will enable the front-line services to make, will need the right tools and the right skills and resources. I believe that many of those managers will be very active in doing that. Over the next two years, that will be a key kick-start for us in terms of making that programme work.
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Alun Davies: It would be good to revisit this in subsequent years.
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Angela Burns: Yes. Thank you for that, Mr Davies. I am interested in your answer and I appreciate your time. Are there any final, brief questions? I see that there are no more questions. In that case, I thank you for coming to see us today. I appreciate your time.
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| We will now take a very quick break and we will then press on with a very welcome guest, the public service ombudsman. |
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