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9 December 2010: Healthcare Financial Management Association

  • Last modified date:
    19 April 2011

Thank you Paul (Paul Assinder HFMA President & Director of Finance, Dudley Group of Hospitals NHSFT)

I am delighted to be here to help celebrate 60 years of the Healthcare Financial Management Association. 

Starting out in 1950, just 2 years after the creation of the National Health Service, the founding members of the then-named Association of Chief Financial Officers understood the vital importance of sound financial management to the success of the new NHS. 

Through six decades you and other members have upheld the highest standards of probity, efficiency and sound accounting. When people think of the NHS, they tend to think first of doctors and nurses.  It’s only natural I suppose, as these are the people they meet when they visit their loved ones in hospital, or if they need NHS services themselves. 

But clinicians are not the only ones the NHS relies upon to deliver high quality care.  If an army marches on its stomach, then the NHS depends on strong financial management to survive.  Decisions about finance aren’t some sort of peripheral add-on, they are clinical decisions in their own right.

This is because the opportunity cost of the decisions you make means the difference between offering one service or another.  Providing services this way or that way.  Most of all, the proper management of finite resources often is the difference between delivering a service, and not delivering it at all.

And what a difference you have made in recent years!

Five years ago the NHS was, quite frankly, in a mess financially.  It was running an overall deficit of around £0.5 billion, with 179 separate NHS organisations running a deficit.  But due to your determined efforts, you have turned that around.  Today only a small number of organisations are in the red – and they all have recovery plans in place – and the NHS is currently running a net surplus of around £1.5 billion.

This really is an incredible success story.  2 years ago, the surplus was around £1.7 billion.  £200 million of the surplus has been subsequently used for front line spending.  The remaining surplus will give Primary Care Trusts the financial flexibility they need as they go through the transition to the new devolved NHS.

So one of my main messages for today is a simple one – thank you.  Thank you and well done for such impressive work.  And all at a time when you were having to produce annual financial accounts faster and in a different form to meet tougher and improved standards and requirements.

Your work has laid a strong foundation for the challenges that lie ahead.  And the challenges are considerable.

First, there is the obvious financial challenge.  You know the situation.  Despite the government’s commitment to NHS funding, the costs of care will rise far faster.  Our growing and ageing population, expensive new drugs and treatments and the increasing expectations of the public all place NHS budgets under incredible pressure.  Not to mention the shock of an end to annual funding increases of around 6% that we’ve seen in recent years.

Through the QIPP programme, we need to make efficiency savings of up to £20 billion.  While achievable, this will be far from easy.  And without your continued help and dedication, it will be impossible. 

The QIPP programme must be a marriage between better clinical and better financial management.

You have already demonstrated how well you work with clinicians by engaging them for costing and budgeting. In addition, the HFMA has set out in their recent joint statement with the Academy of Medical Royal Colleges and the NHS Confederation, the importance of engaging with clinicians to deliver high quality and cost effective care.

These working relationships will become ever more important in the years ahead.

The second main challenge will to implement the government’s reforms to the NHS in England. 

Einstein put it perfectly when he said that the definition of insanity was doing the same thing over and over again and expecting different results.  We cannot continue to do things as we are now.  To cope with rising demand and tighter budgets, the NHS must change, and change significantly.

We set out how we intend to do this in our White Paper – Equity and Excellence: Liberating the NHS.  At its heart is a wholesale devolution of power away from people like me in Westminster and civil servants in Whitehall and down to the front line of care to local NHS organisations and to patients themselves. 

We will give patients control, we will give GPs and their colleagues the ability to design and pay for local services and we will free any willing provider of healthcare to fulfil its potential.

Patient choice

First, patients.  If patients are given control over their own care, then they can have a real impact on its quality.  People will have the genuine ability to choose when, where and by whom they are treated. 

The response to this idea is often to say that people don’t want choice, that what they want is for their local hospital to provide excellent care.  Even if that were true, and there is considerable evidence to the contrary, in reality it is not always the case.

People are not fools.  If they see that one hospital is better than another, or that their local hospital actually provides a poor standard of care, they will vote with their feet.  And making such a choice will soon become a habit.  Change can take some time to get used to.  But once it is accepted, people soon forget what things were like before. 

GP Commissioning

Of course, patients will make these choices jointly with their GP.  GPs and their colleagues across primary, secondary and community care, will play a far greater role in the design and management of local services as GP Consortia replace Primary Care Trusts. 

Professional responsibility must go hand in hand with responsibility for resources.  If healthcare professionals do not feel the impact of wasteful, unnecessary or excessively expensive care, it will be impossible to deliver quality efficiently.  We need to reconcile clinical decision making with resources.  We will do this through GP commissioning.

But the move to GP Consortia will not turn GPs into managers or accountants.  More than ever before, they will need the continuing support, knowledge and expertise of excellent financial managers. 

Providers

On the provider side, the delivery of healthcare will no longer be restricted to traditional NHS organisations.  We will allow any willing provider to enter the market and compete to provide patients with outcomes among the best in the world. 

Soon all NHS Trusts must become, or become a part of an independent NHS Foundation Trust.  As long as they meet basic standards of quality and financial probity, they will be free to run their services as they see fit.  And they will compete on as level a playing field as possible with other providers.

We want to create the largest, most vibrant social enterprise sector in the world, with providers free to innovate in the pursuit of ever better care for patients.

Subject to consultation, we propose to abolish the cap on the amount of private income that Foundation Trusts can raise themselves.  This is about using the entrepreneurial spirit of Foundation Trusts to generate new sources of income that will benefit NHS patients. 

The core legal purpose of a Foundation Trust will always be to provide high quality services to NHS patients.  This will not change.  But we want to free Foundation Trusts to pursue commercial opportunities that will ultimately result in better care for NHS patients.

Similarly, we propose to abolish their limits on borrowing.  Foundation Trusts need to be treated like adults and trusted to manage their own finances. 

We also propose to make it easier for Foundation Trusts to merge without having to obtain permission from Monitor, the Department of Health or the Secretary of State.  Where this leads to better patient care and better value for money for the tax payer, it is surely ludicrous that bureaucratic rules should get in the way.

Incentives

Patient choice, GP commissioning and providers need the freedom to compete.  This is the body of reform, but its meat will be information and its drink will be money – the two great incentives that will drive the NHS forward.

If people are to choose, they will need high quality, easily accessible information with which to make that choice.  We want the information revolution that has done so much to transform business and personal relationships in recent years to have a similar impact on the NHS.  We will publish more and more data in an easy to understand, unbiased and comparable way so that people can choose where to go.

Publishing data will also have a powerful impact on clinicians. The ablility to compare their performance with their peers, professional pride will drive people to ever greater effort.  The fruits of this approach can already be seen in cardiac surgery.

According to a study by the European Association for Cardio-thoracic Surgery published last month, patients undergoing heart surgery in England have a greater chance of survival than in almost any other European country.  In the past 5 years, death rates in England have halved and are now 25% lower than the European average. 

This is not down to a government target.  But the direct result of the collection, analysis and publication of outcome data by cardiac professionals. 

A new culture of increased transparency will mean a big cultural change for the NHS, but one that I hope will be welcomed.

The other big incentive will be money.  The choices that people make, the improvements in quality that clinicians can bring will be rewarded financially.  Poor quality care, and poor safety records, will be penalised.  The incentive to constantly improve will be plain for all to see.

But to deal with this new transparency, with the mechanisms of competition and with rewards for improving outcomes, a solid foundation of financial management is imperative. 

Do not think for one moment that there will not be a place for high quality financial managers in the new NHS.  Your role will be more important, more fundamental to the success of local health services than ever in your sixty year history.

Whether you work in a hospital, a community care organisation, a GP Consortium or anywhere else, sound financial management of the highest order will be pivotal.

And as clinical and resource decisions will be more closely linked, your experience in educating and training those of a non-financial background will also be vital.  The HFMA’s popular e-learning suite has already done so much to bring the classroom to people’s desktops.  It will continue to be a valued service as more non-financial people need to take on a degree of responsibility for financial decision making.

Conclusion

Soon, Primary Care Trusts will start to devolve more powers to shadow GP Consortia before eventually closing.  In their place will be an incredibly diverse, innovative and dynamic market for healthcare.  Tight financial control and robust new accounting systems will be essential every step of the way.

I know the future may appear uncertain.  Change always brings with it a degree of insecurity.  But I hope you will soon look upon the changes we are making with excitement and enthusiasm.  The role of highly competent financial managers will only become more important as we move to the new NHS.

The organisation you work in may well change.  But the importance of your role to the future success of the NHS will always stay the same.

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