Among the concerns raised was that Serco had been unable to fill shifts with appropriately qualified staff, with the result that the out-of-hours service was unsafe. A clinical review of the service in June 2012 found no evidence that the service was, or had been, systematically clinically unsafe.

During 2012 Serco regularly had insufficient staff to fill all clinical shifts. It also frequently redeployed some GPs, taking them out of the cars available for home visits and using them to cover clinic shifts instead. In July 2012, the Care Quality Commission reported that the out-of-hours service did not have enough qualified, skilled and experienced staff to meet people’s needs. When it inspected the service again in December 2012 the Commission found that, although the number of clinical staff had increased, Serco needed to take further action because there were not enough health advisers who handle incoming calls.

Serco has not consistently met the national quality requirements for out-of-hours services set by the Department of Health. Performance against the requirements declined significantly following the introduction in May 2012 of NHS Pathways, as required by the primary care trust, a new system for assessing patients’ needs when they call the service. Serco has since taken steps in response to the problems, including using more clinical staff to support the health advisers handling calls, and performance is now recovering.

Whistleblowers raised concerns that Serco staff were altering data about the performance of the out-of-hours service. A forensic audit by Serco, covering every interaction which passed through the switchboard between January and June 2012, found that two members of staff made 252 unauthorised changes to performance data. This represented 0.2 per cent of all interactions with patients during the six-month period.

As a result of the data changes, the performance Serco reported to the primary care trust was overstated in seven instances. Serco and the primary care trust have since taken steps to strengthen internal controls aimed at preventing or detecting data changes.

Whistleblowers’ concerns had not been identified by routine management controls or by the primary care trust itself. Serco had a whistleblowing policy but evidence suggests that whistleblowers were still fearful of raising concerns. Serco and the primary care trust have since reminded all staff of the importance of raising concerns and the protection available to whistleblowers.

By 2011-12, there were around 40,000 hospital consultants employed at a cost to the NHS of £5.6 billion, 97 per cent of whom were on the 2003 contract.

Of the expected benefits that could be measured, all have been either fully or partly achieved. Consultants’ private practice work has not increased, pay progression has slowed and 97 per cent now have a job plan setting out their objectives, although 16 per cent of these have not been reviewed in the last 12 months. While indicators show that consultant productivity has continued to fall, the rate of decline has slowed significantly. The consultant participation rate (the ratio of full-time equivalent consultants to headcount) has also increased although it remains unclear to what extent this has resulted in consultants doing more actual work for the NHS.

More could be done to achieve better value for money, by fully realising the benefits set out in the Department’s business case. Despite, for example, the contract providing a clear structure for paying for additional work at contractual rates, most trusts still use locally agreed rates of pay for additional work outside job plans, which ranges from £48 to £200 per hour. Pay progression is also the norm and not linked to consultant performance.

The contract significantly increased the cost of employing consultants. Between 2002-03 and 2003-04, total earnings per full-time consultant increased by 12 per cent in real terms with a 24 per cent increase in the bottom of the consultants’ pay band and a 28 per cent increase in the top. The NHS was investing up front for the expected benefits it hoped to achieve in the future.

Realizing the contract’s benefits depends on how well individual NHS trusts manage consultants: for example, through effective job planning to improve the management of their time. There are examples of trusts adopting good management practice; however, more improvement can be made. According to an NAO survey, only 41 per cent of consultants thought that their trust motivated them to achieve the trust’s objectives. While most trusts monitor consultant performance, only 43 per cent of trusts (27 per cent of consultants) thought that information was good enough to assess individual consultant performance. Trusts also reported that nearly a fifth of consultants have not had an appraisal in the last 12 months. Many trusts are not implementing the good practice job planning guidance published jointly by NHS Employers and the British Medical

The Department of Health has reported that the NHS achieved £5.8 billion of savings in 2011-12, virtually all of the forecast total of £5.9 billion. Most of the savings were generated through the pay freeze for public sector staff, and reductions in the prices primary care trusts pay for healthcare. NHS bodies also made savings by cutting back-office costs.

However, there is limited assurance that all the reported savings were achieved. The chief executives of primary care trusts are required to confirm they are content with the accuracy of their savings data, but the Department does not validate or gain independent assurance about the data reported. An NAO review of the Department’s analysis of national pay, activity and other data substantiated a total of £3.4 billion of NHS efficiency savings.

The NAO found that, understandably, the NHS has started by making the easiest savings first. Although the savings made by NHS providers as a percentage of operating costs are increasing, it is not clear what level of savings is sustainable over time. There is consensus that service transformation, such as expanding community-based care, is fundamental to making future savings but only limited action has been taken so far. Changes to transform services take time to implement and the Department has always expected that these savings will predominantly come in the latter half of the four-year period.

The NHS is seeking to maintain the quality of, and access to, healthcare at the same time as making efficiency savings. In 2011-12, the NHS performed well against headline indicators of quality, including waiting times and healthcare associated infection rates. The indicators focus mainly on hospital care and the Department faces a significant challenge in monitoring quality across the NHS as a whole.

The Department does not know whether the demand for healthcare is being managed in ways that inappropriately restrict patients’ access to care. Reducing demand and redesigning care pathways to treat patients in the most appropriate setting are key ways of generating savings. The Department told the NAO that, where it has been made aware of specific concerns, the relevant strategic health authority has been asked to investigate. It has also made clear that blanket bans on particular procedures are not permitted.

The board of Peterborough and Stamford NHS Trust failed to recognize in 2007 that a PFI scheme to build a new hospital, Peterborough City Hospital, would place considerable strain on its finances for years to come.

According to a report today by the National Audit Office, the then board compounded the decision to proceed with the scheme, which it could not afford, with a failure to monitor other changes affecting its income and costs between 2007 and 2011. The result was that the Trust faced a very large, recurrent deficit once the new hospital opened.

The Department of Health evaluated the scheme but was not sceptical enough about its affordability. In 2011-12, the in-year deficit was £46 million and the Trust is predicting an in-year deficit of more than £50 million in 2012-13.

Today’s report found that, although the PFI payments and other estates costs  would be a challenge for the Trust in any circumstances, past failures in financial management have compounded that issue.

Monitor, the regulator of foundation trusts, raised well-founded concerns about the scheme’s affordability with the Trust Board and the Department before the business case was approved. However, neither the Trust board nor the Department addressed these concerns fully before approval of the business case. Monitor considered that its statutory powers to intervene to stop the Trust proceeding with the scheme were limited and their use would have been inappropriate.

Between the sign-off of the business case in June 2007 and the opening of the new hospital in December 2010, Monitor and the Trust board did not adequately scrutinize the future impact of the scheme on the Trust. Despite its earlier views, the regulator rated the Trust as a very low financial risk, reflecting its reported financial position but this risk rating did not reflect the future impact of the PFI development. Monitor had a number of opportunities to intervene before finally placing the Trust in breach of its terms In October 2011 but concluded that an intervention would not necessarily improve or change the outcome positively.

The level of healthcare undertaken by the Trust is also greater than envisaged in the PFI business case, which assumed a 14 per cent drop in outpatient activity whereas this increased by 21 per cent. In addition, NHS Peterborough, the Trust’s main commissioner, which has been in financial difficulty itself, has used national and local performance indicators to withhold payments for activity undertaken by the Trust.

The National Audit Office has found that while the first private company to be awarded a franchise to run an NHS hospital has made early improvements in some clinical areas, a number of financial challenges remain.

Circle is the first private company to assume the management functions of an NHS Trust. Today’s report examines how the NHS East of England Strategic Health Authority designed, initiated and managed the project to franchise Hinchingbrooke Health Care NHS Trust, and highlights early lessons that can be learnt from the procurement process and creation of the franchise agreement.

The Trust developed a cumulative deficit of £39 million between 2004-05 and 2007-08, on an annual income of around £73 million. Before deciding to pursue an operating franchise, the Authority considered a number of options to address the Trust’s financial difficulties. In November 2011, the Authority awarded the ten-year franchise to Circle.

According to today’s report to Parliament, the Trust’s performance against standards for cancer and accident and emergency waiting times has improved since the franchise began in February 2012. However, the Trust had generated an in-year deficit of £4.1 million by September 2012, which was £2.2 million higher than planned to that point.

Circle plans to achieve £311 million in projected savings over the ten-year life of the franchise, which is unprecedented as a percentage of annual turnover in the NHS. However,  Circle is not committed to delivering the proposed savings initiatives submitted during bidding, such as reducing the lengths of hospital stays.  Most of the savings are expected to be made in the later years of the ten-year franchise.

The NAO found that, although the Authority assessed the reasonableness of bidders’ savings proposals, it did not fully consider the relative risks of bidders’ savings proposals. Assessing schemes in this way has the potential to encourage over-optimistic bids. However the agreement transfers all demand and financial risk up to £5 million to Circle.

The report also found that the Authority rejected a guaranteed payment towards the Trust’s cumulative deficit in favour of an ambitious bid that aimed to repay the debt in full. The cumulative debt stood at £38 million (at the end of March 2012).

July 2012

A report published today by the National Audit Office has found that, although in 2011-12 there was a surplus of £2.1 billion across the NHS as a whole, there is also some financial distress, particularly in some hospital trusts.

According to today’s report, in 2011-12 there was a large gap between the strongest and weakest NHS organisations. The difference was particularly marked in London.

In the long term, achieving financially sustainable healthcare is likely to mean changes to how and where people access services, and some local commissioners are already consulting on and developing plans to do this. At the moment, however, in order to break even, some organisations have relied on additional financial support from within the NHS. According to today’s report, 10 NHS trusts, 21 NHS foundation trusts, and three Primary Care Trusts (PCTs) reported a combined deficit of £356 million. The NAO estimates, based on a census of PCTs, that without direct financial support, a further 15 NHS trusts and seven PCTs may have reported deficits.

There are four foundation trusts and 17 NHS trusts which between 2006-07 and 2011-12 needed injections of working capital from the Department of Health totalling £1 billion. Among these, between 2006-07 and 2011-12, the Department issued a total of £356 million to South London Healthcare NHS Trust and its predecessor bodies, and £195 million to Barking, Havering and Redbridge University Hospitals NHS Trust.  The Department anticipates that NHS trusts and NHS foundation trusts are likely to need around £300 million more public dividend capital in 2012-13.

Of the PCTs responding to a National Audit Office census, 51 per cent said they were concerned about the financial sustainability of their healthcare providers. Previously, PCTs and Strategic Health Authorities (SHAs) have been able to support otherwise weak providers. It is not yet clear whether clinical commissioning groups and the NHS Commissioning Board will agree to provide financial support to providers, in the way that SHAs and PCTs have done.

The NAO concludes that it is hard to see how continuing to give financial support to organisations in difficulty will be a sustainable way of reconciling growing demand for healthcare with the size of efficiency gains required within the NHS. Without major change for some providers, the financial pressure on them will only get more severe.

The National Audit Office has today published a report highlighting key trends and variations in the delivery of healthcare across the four nations of the UK. The report finds that, despite the shared history and similarities between the four nations, there are considerable variations in areas such as health outcomes, spending, staffing and quality.

Life expectancy varies significantly across the UK – from 75.9 in Scotland to 78.6 in England for men, and from 80.4 in Scotland to 82.6 in England for women. Spending on health services in the UK more than doubled in cash terms in the last decade. The rate of increase has been broadly similar in all four nations but spending per person continues to vary. In 2010-11, despite devoting a higher proportion of total public spending to health, England spent the least on health per person.

In line with the rise in spending, the number of NHS staff has increased over the last decade. Scotland has the most GPs per person (80 per 100,000 people in 2009 compared with 70 in England and 65 per 100,000 in both Wales and Northern Ireland). Scotland also has the most medical hospital staff and nursing, midwifery and health visiting staff per person.

Comparable data on the efficiency and quality of healthcare are patchy. In 2008-09, average hospital lengths of stay varied from 4.3 days in England to 6.3 days in Wales.  Hospital waiting times have fallen in all four nations in recent years, although there are notable variations in how long patients wait for common procedures. In 2009-10 waiting times tended to be lower in England and Scotland than in Northern Ireland and Wales. Across the UK, there have been significant improvements in levels of healthcare associated infections. For instance, in the four years to 2010-11, rates of MRSA infection dropped by a third or more in all nations.

The National Audit Office has today issued a report examining whether the NHS in England is providing recommended standards of care to people with diabetes. The report finds that, despite some improvements since 2006-07, there is poor performance against expected levels of care, low achievement of treatment standards and high numbers of avoidable deaths, and concludes that diabetes services in England are not delivering value for money.

In 2009-10, there were an estimated 3.1 million adults with diabetes in England. The number of people with the condition is expected to increase by 23 per cent to 3.8 million by 2020. The Department does not fully understand the cost of diabetes to the taxpayer, but it estimates that it has increased its spending on diabetes services from £0.9 billion in 2006 – 2007 to £1.3 billion in 2009-10. The NAO considers these figures to be a substantial underestimate, based on incomplete data, and estimates that NHS spending on diabetes services in 2009-10 was at least £3.9 billion, or around four per cent of the NHS budget.

According to today’s report, the Department’s data show that only half of people with diabetes received the recommended standards of care in 2009-10, even though the proportion has increased from 36 per cent in 2006-07. The standards, which the Department originally set in 2001, state that people with diabetes should receive nine basic care processes each year. These care processes can reduce their risk of diabetes-related complications such as blindness, amputation and kidney disease. As well as diminishing quality of life, diabetic complications place a significant burden on the NHS.

The risk of developing diabetic complications can also be reduced if people with diabetes achieve recommended treatment standards to control blood glucose, blood pressure and cholesterol levels. However, fewer than one in five people with diabetes are achieving recommended standards for controlling all three of these levels. The Department also estimates that up to 24,000 people die each year from avoidable causes related to their diabetes.

There is significant variation in the quality of care received by people with diabetes. This variation cannot be explained by need or spending alone and is likely to be influenced by the local organisation and management of health services. The Department’s data shows that no primary care trust achieved the aim of delivering all nine basic care processes to all people, with the highest trust scoring 69 per cent and the lowest just 6 per cent.

The Department has not managed effectively the performance of primary care trusts in delivering the recommended standards of diabetes care across the NHS. The NHS also lacks clarity about the most effective ways to deliver diabetes services and does not clearly understand the costs of treating diabetes in the NHS. Through better management of people with diabetes, the NHS could save £170 million a year.

Since 2005, when the Department of Health introduced its National Service Framework for Long-term Conditions, people with neurological conditions have had better access to health services; but key indicators of quality – such as the rate of emergency hospital readmissions – have worsened. The Department does not know what the Framework and additional spending of nearly 40 per cent over four years have achieved.

The Framework was designed to improve care for people with neurological conditions but progress in implementing it has been poor. Access to health services for people with long-term neurological conditions, such as Parkinson’s disease, multiple sclerosis and motor neurone disease, has improved and waiting times for inpatient and outpatient neurology have decreased since 2007. The number of elective neurological operations performed has also increased. However, the rate of emergency admissions to hospital has increased significantly and there is large variation in emergency admission rates between Primary Care Trusts.

Access to services for patients also varies significantly depending on where they live. For example, the NAO’s analysis shows variation across the country in the number of specialist nurses per person with multiple sclerosis.

There are still significant problems with current services. Many patients, following their diagnosis, are not given information on their condition, about local services or on available support. Ongoing care is fragmented and poorly coordinated and there is a pattern of patients being referred to hospital for treatment, then discharged and then referred to hospital again. The NAO also found that there is poor coordination between health and social services. The number of adults with a physical disability receiving social services has fallen since 2005-06, because fewer people are now eligible for these services.