Delivering sustainable cost improvement programmes

1 Delivering sustainable cost improvement programmes January 2012. The Audit Commission is a public corporation set up in 1983 to protect the public purse. The Commission appoints auditors to councils, NHS bodies (excluding NHS Foundation trusts), police authorities and other local public services in England, and oversees their work. The auditors we appoint are either Audit Commission employees (our in-house Audit Practice) or one of the private audit firms. Our Audit Practice also audits NHS foundation trusts under separate arrangements.

2 We also help public bodies manage the financial challenges they face by providing authoritative, unbiased, evidence-based analysis and advice. Monitor, the independent regulator of NHS foundation trusts, was established in January 2004 to authorise and regulate NHS foundation trusts. Monitor is independent of central government and directly accountable to Parliament. Monitor's functions and powers are set out in the National Health Service Act 2006. There are three main strands to our work: determining whether NHS trusts are ready to attain NHS foundation trust status.

3 Ensuring that NHS foundation trusts comply with the conditions of their authorisation that they are well-managed and financially viable in order to deliver high quality healthcare for patients; and supporting NHS foundation trust development. Delivering sustainable cost improvement programmes 2. Contents Summary ..4. Introduction ..7. Planning the CIP ..9. Identifying CIP schemes ..15. Delivering the CIP .. 21. Monitoring and reporting ..25. Assuring and evaluating the CIP ..30. Conclusions ..32. Appendix 1: Questions for board Appendix 2: Acknowledgements.

4 37. Appendix 3: Examples of methods for reviewing efficiency to identify potential CIP schemes ..38. Appendix 4: Monitor guidance on CIPs for applicant trusts .. 39. References ..40. Delivering sustainable cost improvement programmes 3. Summary 1 This guide is relevant to acute, ambulance, mental health and specialist NHS. trusts and foundation trusts (collectively referred to as trusts). It should be read by executive and non-executive directors (NEDs), finance staff and those with responsibility for Delivering cost improvement programmes (CIPs).

5 It aims to better equip staff at all levels to ask challenging questions about aspects of the CIP process and to review their approach against the good practice identified. We have included a checklist of questions for this purpose in Appendix 1. Questions aimed at finance staff, medical directors, clinical and general managers are also available at: and 2 Some trusts are moving away from using the term CIP because they feel it does not help to engage clinical staff. Instead they use terms such as transformational change programmes ' and improvement programmes '.

6 In this briefing the term CIP encompasses all efficiency and transformation programmes . We have used it because there is a wide understanding of what the term means. 3 The guide is based on interviews with board members, and key senior finance, clinical and project staff at 16 organisations (five NHS trusts, ten NHS foundation trusts and one primary care trust). The organisations range in size and are a cross-section of trusts from across England. The list is at Appendix 2. We are grateful to these organisations for sparing the time to contribute to the guide and for being willing to share their experiences.

7 4 CIPs are integral to all trusts' financial planning and require good, sustained performance in order to be achieved. The NHS needs to save up to 20 billion by 2015, an average of 5% per year, the biggest efficiency challenge it has faced. Trusts will encounter a national tariff with built-in efficiency savings, reducing contract volumes with primary care trusts (PCTs) and rising inflation. There will also be fewer opportunities to use income generation to offset savings requirements. To succeed in making sustained annual savings of 5%, boards will need plans for significant transformation programmes and all will face difficult choices about the services they provide.

8 5 CIP success varies among trusts and no single approach works for all organisations. However, several factors are common in organisations performing well in CIP planning, delivery and sustainability. A successful CIP is not simply a scheme that saves money. The most successful organisations have developed long-term plans to transform clinical and non-clinical services that not only result in permanent cost savings, but also improve patient care, satisfaction and safety. 6 Figure 1 shows how successful organisations support CIP planning, delivery and sustainability.

9 Delivering sustainable cost improvement programmes 4. Figure 1: Key factors in Delivering sustainable CIPs Source: Audit Commission and Monitor 7 Despite finding nothing new' in Delivering CIPs we did find a significant variation in approach and success. Even the most successful trusts will find CIP delivery challenging in the future and all should review their approach to managing these programmes . The consistency of the messages from higher performing organisations regarding the need for significant transformational change suggests that adopting certain ways of working can deliver planned CIPs without reducing quality and safety.

10 8 There are some generic issues and areas for improvement that all boards should consider and certain aspects of good practice that will be new to some organisations. Figure 2 shows the key elements of the CIP process. We have also included practical examples throughout the report that may be helpful. Delivering sustainable cost improvement programmes 5. Figure 2: Flowchart of the CIP process in a high-performing organisation Source: Audit Commission and Monitor Delivering sustainable cost improvement programmes 6.