Reader Comments: Consultants Bite Back

Last week we published comments from NHS IT managers giving their perspective on the National Programme for IT in the NHS (NPfIT) and its effect at local level. This week, management consultants have their say. A reader writes…

Dear E-Health Insider,
I am an independent management consultant who has been involved in a number of aspects of ICRS development, including an early evaluation study for a leading London teaching hospital and working closely with one of the potential LSP providers in the shortlisting and procurement process.

I think there is a danger that the whole edifice created by Richard Granger may be beginning to crumble, which has come as no surprise to many industry watchers such as myself. There are a number of reasons for this but I would like to mention just three:

1. Funding Issues
People have been talking about a ‘£2.3 billion project’ to implement the NPfIT. This is over-simplistic, as the figure refers to an investment in ICT over a three-year period from 2003/4 to 2005/6. In fact, spending on ICT will need to increase significantly on a year-on-year basis between now and 2010 if the Integrated Care Record Service and other aspects of the procurement are to have any chance of success.

Currently, the IT budget for the NHS in England is just 1.8% of the total NHS healthcare budget. However, it is reasonable to compare ICRS in its scope to ICT developments by major corporations in industry, such as those implemented successfully by the major financial services organisations, retailers and so on.

We know that spend on IT by the big corporations is 5-10% of their operating budget, and we can be sure that ICRS is every bit as complex as IT solutions in other industries.

Even if one allows for the fact that a significant proportion of the investment in ICRS will be absorbed in process change and organisational development costs, I would expect IT budgets in the NHS in England to have to rise to at least 2.5 % by 2010 if ICRS is to have any chance of success.

If one assumes a proportionate increase over the intervening years to allow for the gradual take-up of ICRS, and models this against projected increases in spend on the NHS based on Government figures, then IT budgets in England will have to increase from just over £750 million today to almost £2 billion by 2010, with total spend over the period nearing £9 billion.

These figures represent the absolute minimum required for ICRS and the other components of the national programme to be viable. They are based on bringing the IT budget up to just 2.5% by 2010 and they ignore the £2.3 initial investment, which is required in any case to kick start the project.

Unfortunately, the NHS shows no signs of stepping up to these figures in assigning its budgets, and the prospective LSPs are beginning to realise this. At present it is not clear what the IT budgets for ICRS are going to be or how much of the budget will filter down to the LSPs. Greater clarity is needed from the NPfIT to enable them to put their business plans together with confidence.

2. Change Management
The implications of ICRS on staff training are massive. ICRS focuses on clinical information and the bulk of the training requirement will be with clinicians. A percentage of staff will be lost for training over an extended period. Who is going to replace these staff and where will the budget come from? Skills are scarce and the increase in the NHS budget has already been largely absorbed in greater staff costs. There is no allowance for the process change issues demanded by ICRS. The question remains: how will the NHS find the time and resources to implement changes to working practices while maintaining essential patient service levels?

Prospective LSPs are being asked to take on the responsibility for resolving these issues, and they are beginning to see the extent of the business risk involved. Furthermore, they also understand that the responsibility for persuading reluctant clinical staff, who have been largely kept in the dark about ICRS and its impact, will rest with them. The chances are that many users will simply refuse to get involved.

3. Commercial Issues
The prospective LSPs are major ICT service organisations who are used to negotiating tough contracts. It is becoming clear that they will not be prepared to agree to a contract that presents them with huge risks while giving little or no scope for profit. Contractual arrangements invariably fail if they are unfairly biased towards one party or the other. Unless a fair contract is drafted that reflects the realities of ICRS we can expect most LSPs to drop out of the race.

Sincerely,

Anon, Management & IT Consultant
(full contact details supplied)

Procurement Headaches

Although you asked IT managers from within the service to comment on the local ramifications of the NPfIT, I thought you might like to have a few titbits from a consultant working in the field (of the management variety – not clinical).

Firstly some comments on the procurement process itself. Having done
more than my fair share of procurements in the past, I can say quite categorically that however you look at it, going from a shortlist of three to two is bad news. NPfIT is in double jeopardy, though, and it only has itself to blame.

Perhaps a view was taken that it was clever to use the same shortlist for London LSP and the Data Spine? The chances of the same three suppliers being qualitatively assessed, independently, onto two separate shortlists are very slim (it doesn’t happen with other government contracts. We have several big outsourcing deals on the table at the moment and, lo and behold, the shortlists are all different).

Your commentary last week was quite right about suppliers relaxing when they are down to two. If I were the board directors of either party, I think it would suit me very nicely if I let the world know how uncomfortable I was with some of the contract conditions.

Secondly, your sources’ comments about the macho posturing from the programme office are right. There is absolutely nothing wrong in being robust in one’s negotiation stand (I have been appalled in the past at how weak some public sector bodies have been with their supplier contracts), but you have to work out beforehand what your strengths are.

The likes of Accenture, IBM, CSC and EDS have survived the last ten years without very much revenue from the health sector – they’ll continue to make money from the other sectors in which they are successful. So who are you going to be left with? Not the real sources of capital and resource that the Department of Health was trying to woo back into the supply market.

The other important issue here is that if you push the point of risk transfer too far, all you are doing is buying a very expensive insurance policy. No suppliers will underwrite risk in an area that no-one can actually quantify at present – unless they are getting over the odds in terms of ‘insurance premiums’.

But suppliers also know that this programme has a finite amount of money available, so how are suppliers going to underwrite their own risk? Now is not exactly the best time for suppliers to being going to the bond market – so asking for such huge amounts in bonds is a real challenge by itself.

As for the poor strategic health authorities (StHAs) and trusts…..

Very few of the NHS organisations I know of, actually have a clear view of what they are going to able to commit to over the next three years. Capital spend is subject to resubmission after resubmission, and they certainly cannot take on anything that has an ongoing revenue commitment (their future LSPs would be horrified at such a thought).

So in effect, the funding for NPfIT is even worse than a crude form of top-slicing. Not only that, but they don’t actually know what it is that they are getting. Isn’t it remarkable that at such a late stage in the process, major applications such as PACS and ETP are suddenly included? Do trust IT managers now spend money on PACS projects of their own, or do they wait and see if their LSP provides it for them?

By the way, in case you think that it is easy to take pot-shots at a programme like this, I think that there have been a number of good things come out of the process as well, but these don’t make good headlines do they?

I could go on but I have a real day’s work to do as well…..