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Outsource magazine: thought-leadership and outsourcing strategy | May 3, 2015

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A new dawn for UK healthcare

A new dawn for UK healthcare

Healthcare in the United Kingdom is provided by the government through its healthcare provider, the NHS (National Health Service). The NHS is one of the largest employers in the world. In England alone, it employs 1.4m people (just under half are clinically qualified) and caters to a population of 52 million. Around three million people are treated in the NHS in England every week. When the NHS was launched in 1948 it had a budget of £437 million (roughly £9 billion at today’s value). For 2011/12 the budget is around £106 billion.

Reality dawns

Whilst the NHS is undergoing the most radical re-organisation in its history and much attention is given to this re-structure, the real challenge the NHS faces is financial. The UK’s Office of Budget Responsibility (OBR) recently commented “health service productivity is the biggest single factor on the sustainability of the public finances”. The OBR’s most pessimistic projections show that NHS spending could rise so fast that it will push the national debt to over 200 per cent of GDP by 2060. To immediately mitigate, the NHS has mandated savings targets of £20bn by 2013/14.

Brian Gorman Healthcare Expenditure Nov 2011

This is a daunting reality check.

Historically, the public has demanded that the NHS do everything for everyone and that has evolved as its business operating model. Talks of rationalisation, change to service provision, efficiencies, closures, private sector service provision, outsourcing, privatisation or redundancies are fought vehemently by the general public. The service is protected like a national religion.

That is now changing.

NHS Boards are unable to meet their financial targets with many facing financial deficit. Strategic direction across organisations is now focused on financial viability, with quality of care and delivery a secondary strategic objective.

Whilst drastic, initial measures have been imposed such as a 45 per cent reduction in management costs these will unfortunately only result in a reduction of £0.85bn of the required £20bn savings. Opportunities are now being explored outside sacrosanct public sector provision. A new era of opportunity is emerging. Only this month, we have seen the appointment of a commercial organisation to operate an NHS hospital that has been failing financially for many years. There is an appetite to rethink the business model and look to private sector partner and supplier organisations to innovate and bring efficiencies to the sector. All options are on the table.

The opportunities

The opportunities are unfolding, starting primarily in the traditional outsourcing space of back office functions (Finance, HR&T, IT, Estates, Procurement and Payroll). These areas account for approximately 18 per cent of the workforce with IT being the largest area of expenditure.

The NHS is paying a premium for its back office functions due to the fragmentation and lack of uniformity across the sector. Evidence from the private sector, central government and the NHS has shown that adopting new delivery models can deliver significant cost savings and service improvement. It is only through such initiatives that the NHS will be able to deliver savings without impacting on patient care.

Brian Gorman Back Office Spend Nov 2011

In the area of IT service provision alone, there is scope to significantly improve services, innovate and deliver conservative savings of £240m per annum recurring.

Stepping up

Public healthcare is a notoriously difficult sector for commercial organisations. There has never been a better time to engage, but, prepare well. The majority of commercial providers and outsourcers fail to engage public sector healthcare and particularly the NHS due to their limited knowledge of the business.

It is an incredibly complex sector and organisation and requires domain specific skills and expertise. Prepare, understand the business, the financial pressures and opportunities to deliver value and savings. Work with partner organisations to build capability and domain knowledge.

There is a clear step-change in the appetite for commercial outsource and partners organisations in the NHS. The drivers for the change are in place (organisational, strategic, regulatory and technological). There is a fiscal imperative for NHS organisations to transform the way they work to deliver efficiency savings and high-quality frontline services.

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