Tackling the real questions from NHS finance leads, IMS MAXIMS Leesa Ewing provides a commercial director’s honest reflections on recurring hurdles
Ongoing news of an NHS ‘cash flow crisis’ has continued to appear in the media in recent weeks, despite new funding pledges from the government in November’s budget.
Arguably a bold move from Number 11, new capital and revenue commitments from the chancellor were better than many expected. But with funding less than the NHS had asked for, and with immediate pressures still apparent, the reality of NHS finances remains no secret.
Warnings from The King’s Fund and the Health Foundation, that cuts to capital funding have slowed transformation, and left staff reliant on outdated technology, have been met with concerns that new funding will take time to put things right.
So, when trusts face continued challenges to become paperless and invest millions in digital, how can they find the money?
It’s a question I have faced almost daily from trusts as a commercial director of an NHS supplier. The level of deficit has been so great, that even a solid business case demonstrating hundreds of millions of pounds of savings opportunities in the long term, can be rejected due to a lack of available cash and the need to balance the books.
Budgetary increases alone cannot hold the answer. Suppliers, trusts and the government must each approach finance differently to defeat obstacles and make crucial long-term investments, like digital, feasible.
The real problems: Why finance directors say no
In the conversations I have, four common hurdles typically prevent finance directors approving projects that could fulfil the urgency of the digital agenda.
Paying two suppliers at once is the first obstacle. Many trusts have legacy IT systems, and in the time it typically takes to implement a new electronic patient record system, incumbent suppliers still demand maintenance fees as high as £1m per year.
Whilst financing the incumbent, the new supplier wants its payment too. Realistically, trusts won’t pay a multi-million-pound bill upfront, but they will still face fees of that magnitude over incremental implementation milestones. And for those systems that aren’t open source, license costs add to the early financial headache.
Then comes the human resource hurdle. Implementing an EPR requires a team of IT staff, project leads, clinicians, and experts from across the hospital. In most cases, people perform their job of looking after patients whilst providing input to the digital programme, meaning deployment takes longer – and that means cost. An alternative is to create a dedicated EPR team – but then the cost of back-filling positions starts to mount.
All the while, the trust is not realising any efficiencies during implementation. And, that is the next stumbling block – cash releasing benefits and savings don’t kick in until system go-live, when staff use the system in anger, and until the hospital actually starts getting rid of paper.
Then there is an ongoing cost of implementation. Post go-live we find that staff are using paper where they shouldn’t. They need to be reminded to use their new system to stop paper building up again. There is a cost associated with transformational change.
Costs are typically high and returns very low during the initial phases of a paperless project – creating real challenges for balancing the books during implementation, often a reason why digitisation isn’t happening despite longer-term positive financial and clinical impact.
Common hurdles, common answers
It’s not all doom and gloom. We have engaged with hospitals to think on new financial models to address these issues.
There is no one size fits all approach. But understanding recurring financial hurdles also presents common answers requiring action from trusts, suppliers and the centre.
Suppliers burdening more of the financial risk
Strong finances are the life-blood of any project and as a result, flexibility from suppliers for payment is essential. Suppliers need to be able to offer the NHS a range of financial options that will allow them to fund projects in a way that best suits their budget and financial circumstances.
This means taking a shared risk to make digitisation affordable. As a supplier, there is a cost to us to implement the system, but we can factor that into a 10-year programme. This can take the payment off the balance sheet so that an EPR is not a capital asset on the books.
We can provide trusts with the options to structure payments to take account of their capital or revenue constraints, allowing the flexibility for payments to be made as a percentage of cash-releasing rewards, or for trusts to fund suppliers from the resulting enhanced performance of the hospital.
Bolder government action?
The 2017 budget has come and gone, but the government needs to consider how it can grant more flexibility to trusts to invest. Businesses with robust business cases often borrow money to finance their advancement, using returns to pay it back. Allowing the NHS to do the same could allow trusts to invest in important initiatives like digital, that will deliver financial and clinical outcomes in the longer term.
Slash implementation times
Trusts and suppliers need to reduce deployment to as little as six months, so trusts can switch off incumbent systems more quickly, stop paying for them, and stop tying up staff in implementation for anything up to two years. Arranging the implementation teams with the clinical, workstream and change leads needed to make this happen is a big challenge for any trust – but here lies the next action.
Activating the role of GDEs beyond technology
Global Digital Exemplars must become more than a blueprint for technology – but a blueprint for change. In an age of regionalisation, sustainability and transformation footprints, and digital exemplars, trusts have a strong opportunity to collaborate, and share implementation expertise and resources. GDEs could be made responsible for supporting accelerated deployment with their fast follower trusts and others, to navigate through costly implementation phases more quickly.
Suppliers too can embed implementation teams where needed, the cost of which could be spread across the term of the contract, and the centre could also look to create teams dedicated to speeding up the costly implementation cycle for trusts.
The same hurdles have haunted NHS investment for years. If suppliers, trusts and the government are open to new mechanisms then the answers are achievable.