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There was plenty of coverage last week surrounding hospital PFI projects, and whether they represent good value for money. Of course it’s the familiar theme of “public sector wastes money in times of austerity” and the headline numbers offered by the media are at first alarming, the NHS pays 65B over 30 years for projects with a build value of 11.5B, but of course maintenance and upkeep of the building is usually a standard part of any PFI contract and the private partner is meant to hand over the hospital as an asset to the trust in pristine condition at the end of the term.
But if PFI deals are so bad, why do trusts go for them?
Two main reasons, firstly the ageing stock of the NHS’ hospital buildings. Old Victorian hospitals, with poor physical configuration of services are just not fit for purpose to support the health needs of communities in the 21st century. Secondly lack of alternative options, the reality is that any trust approaching their local SHA and the DH for funding to build a new hospital is likely to have received short shrift in recent times. PFI is a neat way of keeping extra public borrowing off the public books, and the last Labour government have preferred to have schemes funded by private finance than go to the money markets to secure extra borrowing to fund the build of new hospitals.
But even despite the lack of alternative options, surely the level of cost / benefit analysis applied when a trust is considering a PFI is pretty robust?
Julie Moore, CEX of University Hospitals Birmingham NHS Foundation Trust appeared on BBC’s Hard Talk programme and also a Radio 5 live interview, defending their PFI, saying the annual cost of payments is only 4% higher than their current estate management and maintenance budget, and that’s for a brand new, modern hospital. I spoke to one of our interim managers who works as an Interim Director of Estates and Facilities and he commented that he has worked in trusts where the annual maintenance bill has run to 30-40M on a TO of circa 225M and the annual capital allowance has only been enough to paper over the cracks, which of course both prolongs and exponentially increases your maintenance liability. Building via PFI eradicates that maintenance bill in one fell swoop and presumably some trusts often come to that tipping point where the PFI starts to look more attractive as maintenance bills rise year on year.
And there are the softer and less tangible benefits as well – improved staff morale, better physical re organisation of services to allow for more efficient patient pathways, higher patient satisfaction, lower carbon footprint, lower HAI rates, and decreased inter-site supply chain and transport costs. Not to mention indirect local economic benefits, such as the taxes paid and employment offered by the companies running PFI schemes.
I particularly liked one poster’s comment on a PFI article last week – Show me anyone who can buy a new house with all the costs and refurbishment rolled up over 30 years for less than 10% of their in come per annum.
I’d be keen to hear back from interim managers who have worked in PFI trusts. Have you worked in a trust where onerous PFI payments meant patient care has been affected as other budgets have been squeezed? Or have you worked in a PFI hospital where delivery of service improvements have clearly justified the cost of the PFI?
I’d be keen as ever to hear your comments.
Steve Melber is Senior Consultant, Health at Interim Partners.
The Times reported on 29th July on ‘cash strapped’ Dorset County Hospital Foundation Trust spending £2500 / day on an interim chief executive, and there was the predictable angle covering the outrage from union representatives about the justification for paying such exorbitant fees to interims when front line services are under threat. Tales of spending excess in what are supposed to be times of austerity make for good copy at the moment, and its easy for the media to fan the flames of public condemnation, but the public don’t always see the full picture. The media create a glass ceiling in the mindset of the public around the Prime Minister’s salary, after all he does have the most important job in the country? But market forces and consumer demand dictate the earnings of bankers, footballer and pop stars, and likewise market rates for interim managers in the NHS are driven by supply and demand and return on investment. Rates for interim chief executives are roughly £2500 / day because trusts are willing to pay it, and because there are not a huge number of credible ex NHS Chief Executives out there to create over supply and drive down rates. As the chairman of the trust comments in the article, the interims at Dorset represented good value for money, at a cost of 647K, and they were instrumental in reducing the trust’s deficit by 8.5M, that’s a return on investment of 13:1! And what would the cost have been of doing nothing? One would have to assume that in recruiting the interim team the board of the trust had concluded the experience and capability did not exist in-house to address the deficit. If they could have done it themselves, they would have done it themselves.
I met a candidate last week with a background in turnaround and financial recovery work, he was on the market but had recently had a verbal offer from an acute trust rescinded after the local press whipped up a storm and the local MP stepped in when it was discovered their local hospital was about to employ a interim at £1500 / day. I sincerely hope that there is a growing recognition of the value added by NHS interim managers, and opportunities for them to assist trusts are not thwarted by local press trying to sell papers and politicians trying to score points with their constituents. One of the issues is around perception: interim managers operate as individuals, it personalises the fees and it just doesn’t sit well with the public to think that individuals can earn that much in public services. The reality is that if you really asked the public whether they would be happy about their local trust making an investment which would realise a ten fold return, which would cut waste, improve healthcare services, reduce a deficit and help safeguard front line jobs indefinitely in their local community, most would be overwhelmingly in favour.
Your comments as ever are always appreciated.
As for anyone working in a profession providing goods or services to the NHS you’re always wondering what impact new policy will have on your business, and I wanted to offer my opinions but also invite comment from our networks of candidates in terms of what the White Paper might mean for NHS interim managers.
The BBC estimated the abolition of PCTs by 2013 could affect up to 68000 NHS managers. Many will be redeployed of course as the responsibilities of the PCTs are distributed into other areas of public services, public health professionals may find themselves working for the local authority for example, but a good percentage might decide to try their hand at interim management. Some, but not all, might be cut out for interim work but short term the influx of new candidates will depress rates, and I think it likely that that evermore price sensitive clients might prefer to appoint an ex PCT manager turned interim, who is already in their network, rather than seasoned NHS interim managers with a track record, who come at a higher headline rate (but arguably are much more likely to deliver value). Going forward you might not expect PCTs to be the target clients for recruiters, but if substantive employees start to leave early (and who could blame them) then the PCTs might opt to recruit to vacancies on an interim basis so they are covered for the remaining lifespan of the PCT. However, perhaps more likely will be the inclination for substantive employees to sit tight until 2013 and await a redundancy payout. Either way will the key skill set in demand here be HR, with the amount of TUPE, consultation and redundancy work that is on the horizon?
Chris Ham asked on BBC news on Monday night whether GPs are “motivated or competent” enough to effectively commission healthcare services in consortia. The White Paper states that “GP consortia will have the freedom to decide what commissioning activities they undertake for themselves and for what activities they may choose to buy in support from external organisations, including local authorities, private and voluntary sector bodies.” If it turns out there is not the right level of competence across GP consortia to effectively commission services then that commissioning support may well be bought in, and perhaps we will see a marketplace where providers such as ourselves can directly provide that commissioning support to consortia in the form of interims. There may even be potential for an element of performance related pay in such roles given that “consortia will receive a maximum management allowance to reflect the costs associated with commissioning, with a premium for achieving high quality outcomes and for financial performance.”
Another key theme is that of patient choice and the vision to ensure that patients have a choice of any provider will hopefully be reflected in commissioning practices. If a genuinely free market is created between providers then the increased competition should drive quality innovation, productivity and prevention in the QIPP agenda as well as potentially create demand for business development and marketing skills. In our experience trusts that are trying to achieve FT status often need interim support to help them improve standards of healthcare and meet core targets, and if all trusts now have an obligation to go through that process it should increase general demand for change and performance improvement specialists.
Ultimately though the longer term picture might show a general reduction in the demand for interim resource, given that the Government will “impose the largest reduction in administrative costs in NHS history” and the fact that “the NHS will employ fewer staff at the end of this Parliament; although rebalanced towards clinical staffing and front-line support rather than excessive administration.” The White Paper does admit there will be a cost for this transitional work and I believe that interim managers as agents of change will certainly play a part in making it happen, but ultimately if the vision is to be realised the NHS in a few years time may look like a leaner and more clinically driven service with less need for general management support.
What are your thoughts? What intelligence have you picked up from the marketplace? I would be keen to hear the thoughts of our interim management community on how the White Paper will affect demand for interim resource in the NHS in future.
Steve Melber is Senior Consultant, Health at Interim Partners.
The Department of Health published the revised operating framework for the NHS last week which set out some new policy direction. Of potential concern to the NHS interim management community will be the targets for Strategic Health Authorities and PCTs to cut their management costs so they “do not exceed 66% of the 2008 / 2009 management costs”, which is particularly bad news if your management costs grew quite significantly from 2008 / 2009 to 2009 / 2010. In terms of the numbers, that means a reduction from 1.8B to roughly 1B over the next two years.
Of course, often the most obvious solution is bringing to an immediate end all interim contracts, and in fact I spoke to two PCTs last week who are doing just that, one was finishing all interim contracts at the end of July including the contract of their interim Director of Finance, who might be considered to be fairly secure in covering a board level statutory position. The solution imposed by the SHA is to share a substantive Director of Finance with a neighbouring PCT, but you do wonder in such scenarios when the internal resource will be stretched that little bit too thin? The other PCT was ending all interim contracts, or asking interims to consider fixed term contracts on a salary appropriate to the band at which they have been working, but I imagine the uptake will be low, given the drop the potential drop in income between a daily rate and a salary but also because the semi permanent characteristics of a fixed term contract will not sit well with purist interim managers.
Clearly there will be two competing forces at work, on the one hand PCTs will be under pressure to reduce those management costs and finish interims, but so often I speak to clients who admit that interims are operating in vital roles and on pieces of work that they do not have the internal capability or capacity to deliver. My hope and expectation is that although there may be a short term drop in demand for interim resource as PCTs identify way to cut management costs, ultimately demand will return as the use of interim managers is seen as the only way to drive through business critical pieces of work.
Steve Melber is Senior Consultant, Health at Interim Partners.
For those people I haven’t had a chance to speak to, allow me to introduce myself as the new lead on the Healthcare practice at Interim Partners.
My background is nearly 10 years in recruitment, placing professionals of varied disciplines into a predominantly public sector client base, and now I am looking forward to focusing specifically in health.
The NHS has been a solid growth market for recruitment businesses since Labour came into power in 1997, not surprising when you consider NHS spending has tripled from £37 billion in 1997 to nearly £120 billion today, with the payroll representing 60-70% of that spend, and the fact that there has been disproportionate growth in general management staff compared to front line medical and clinical staff.
But challenging times are undoubtedly ahead, and on the face of it, it is hard to reconcile anticipated savings targets of up to £15-£20 billion by 2014 with continued and growing demand for interim managers whose services generally come at a premium. However the key challenge in the NHS will be the QIPP agenda, quality, innovation, productivity and prevention.
How can it be that for all the growth in NHS spending, the FT last month reported that productivity in the NHS has actually declined year on year since 2001? The general public need to see a return on that investment, and if spending is going to be cut in real terms over the next government spending review, we need to be getting more bang for our buck.
A more austere future in the NHS will include some unpalatable changes around rationalization, organization mergers and of course hospitals closures, which always make good front page news in the local media. The HSJ reported only last week that the drive towards new commissioning clusters designed to achieve economies and pool buying power could halve the numbers of PCTs in England.
Such large scale organizational change will certainly create demand for interim resource, and interim managers with key skill sets around project and programme management and driving through change could well find themselves in demand.
Steven Melber – Senior Consultant, Healthcare
