Hard Times?

While the newspapers worried about the Chancellor’s plans for VAT, national insurance and higher taxes on high earners, the leaders of the NHS and the firms that work with it focused on the government’s plans for public sector funding. Lower rates of growth and more demands for efficiency savings are on the way. Will this be good or bad news for NHS IT? Fiona Barr investigates.

The National Programme for IT in the NHS could come under further pressure as a result of the government’s pre-budget report and gathering economic storm clouds, according to industry and NHS observers.

However, smaller and more specialist solution providers could benefit, and new systems could be demanded by NHS trusts that see IT as a potential route to productivity improvement.

The NHS has seen its budget more than double since 1997 to £100 billion. It also has a three year settlement with the Treasury in place. However, in its pre-budget report at the start of the week, the government announced that there will be a cut in the rate of growth of public sector spending as it comes to an end.

The Institute for Fiscal Studies said yesterday that the NHS’ capital budget would actually fall by £1.4 billion in 2010/11. And the government has said it will be looking to make billions of pounds of additional efficiency savings across the public sector.

Steve Barnett, chief executive of the NHS Confederation, said the key issue in the pre-budget report was the need for these efficiency savings to be found.

“We know this will be a challenge, but managers in the health service understand that there is a need to continue to find more efficient ways of providing services and making the most of the public money they are spending,” he said.

“NHS organisations were expecting funding to tighten; this pre-budget report will probably mean that the belt tightening will come a bit earlier than expected.”

The late-running of key elements of NPfIT mean that it has consistently underspent its budget. The pre-budget report made no reference to targeting this underspend, or the large NHS surplus, which built up to £1.8 billion in 2007/8.

However, some observers predict the government is unlikely to leave them untouched, even though Barnett argued they should not be targeted. “Taking away surplus money will undermine trust amongst doctors and nurses in NHS, as it will be hard to persuade them of the benefits of holding back on budgets in future if they see government clawing all that money back,” he said.

The Confederation also said the surpluses built up by trusts over the last few years should enable them to continue to invest in frontline services and facilities, including IT.

Murray Bywater, managing director of Silicon Bridge Research, also felt that the pre-budget report would mean tough times ahead for the NHS and the national programme.

He told EHI that he expected the government to refocus on the remaining local service provider contracts in the North of England and London, which are currently the subject of protracted contract renegotiations, and to consider afresh what should replace Fujitsu in the South.

He added: “There is a massive amount of money at stake in these LSP contracts and several billion pounds of unspent NHS money which is not now going to LSPs. How the government is going to resolve the LSP contract resets we just don’t know yet.”

Bywater also predicted there would be a bigger role for a wide range of smaller, specialist healthcare IT suppliers as NHS trusts opted to buy for themselves the systems needed to help deliver productivity improvements required by the Payment by Results financial regime.

He added: “Trusts are desperate for these systems. A key target in the 1998 IT Strategy, Information for Health, was for every trust to have full Order Communication systems working by December 2005. Three years after the due date, it is unlikely more than 20% of trusts will have actually implemented this critical application.”

Melissa Frewin, programme manager for Intellect, the trade association for the UK technology sector, told E-Health Insider that its main concern was that the government would claw-back spending on healthcare after 2010.

She added: “This would be particularly serious, given the pressures of our rapidly ageing population and the increasing burden of chronic diseases, which has already led some to predict that existing healthcare models are likely to become unsustainable of within just a few decades.”

However, she argued that technology has the potential to deliver huge efficiency savings across the NHS. “The pre-budget report highlighted savings generated by Shared Services,” she said.

“But targeted investment in automated processes, information management systems and telehealth solutions can go further towards enabling the new models of delivery [Lord] Darzi has envisioned [in his Next Stage Review of the NHS, which reported in the summer]. Driving efficiencies through the end-to-end delivery of care would not only reduce costs but also lead to better outcomes for citizens.”

Peter Clarke, principal analyst at global advisory and consulting firm Ovum, said the announcement of tougher efficiency programmed targets for 2010/11 was a surprise addition to the pre-budget report and underlined the government’s determination to ensure value for money in the delivery of public services.

He added: “These are tough times which demand a confident, well thought through response from suppliers directly addressing the key concerns of the public sector. Those software and IT services suppliers that seize the opportunity can act as the catalyst in driving out efficiencies and improving the quality of public services.”

On an upbeat note, he argued: “Now is the time for suppliers to intensify the conversations about efficiency and improvement in public services which they have been having with the public sector over the past three or four years.”