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Brief analytical summaries or syntheses #13

United Kingdom:
Management of NHS hospital productivity


Hospital productivity has fallen over the last ten years. There have been significant increases in funding and hospitals have used this to deliver against national priorities. But, according to this report from the National Audit Office, hospitals need to provide more leadership, management and clinical engagement to optimise the use of additional resources.


In 2000, the Department of Health published the NHS Plan, a ten-year vision for reforming the NHS. The Plan argued that the NHS was failing to deliver because it had been under-funded, and set out to substantially increase funding in order to meet public expectations for more and better paid staff using new ways of working; reduced waiting times; high quality patient-centred care; and improvements in local healthcare buildings. The Plan set out the systemic problems of the NHS, such as a lack of national standards and clear incentives and levers to improve performance.

The NHS and Department would need to deliver between £15 and 20 billion of efficiency savings per year by 2013-14 to be reinvested in health services. Around 40% of these savings are expected to come from driving efficiency in hospitals. To support NHS organisations to improve quality of care while making these savings, the NHS Chief Executive also launched the national Quality, Innovation, Productivity and Prevention (QIPP) challenge.

Analysis and results

  1. National measures show a decline in hospital productivity

    Figures produced by the Office for National Statistics estimate that, since 2000, total UK NHS productivity decreased by an average of 0.2 per cent per year and productivity in hospitals fell by around 1.4 per cent per year.

  2. The Department has focused on delivering the Government’s ambition for improved performance within an agreed budget

    The increased money going into NHS hospitals has helped deliver more, better paid staff, reduced waiting times, higher quality care and improved hospital facilities.

    NHS pay contracts implemented nationally since 2003 have increased hospital costs and are not always used effectively to drive productivity.

    The Department’s process of setting prices under the Payment by Results system has promoted some efficient practices.

    There have been delays in rolling out the national tariff to all hospital activity and the quality of information used to pay hospitals is variable.

    Other Departmental initiatives to improve productivity have yet to be fully evaluated and remain insufficiently used within and across hospitals.

  3. Hospitals have not focused sufficiently on driving productivity

    Hospital managers have primarily concentrated on meeting national performance targets whilst maintaining financial balance, and not specifically on optimising productivity.

    There are substantial variations in hospital costs and activity, but not all hospitals use this information effectively to identify efficiency savings.

  4. There are challenges to overcome if the NHS is to deliver £15 to 20 billion of efficiency savings
    Some hospitals do not effectively control staff cost. There are risks that QIPP targets for efficiency savings by March 2014 will not be met.


The Department’s design and the NHS’s implementation of national initiatives were predominantly focused on increasing capacity, quality and outcomes of healthcare whilst maintaining financial balance, rather than on realising improvements in productivity. Hospitals need to provide more leadership, management and clinical engagement to optimise the use of additional resources and deliver value for money.

Implications and recommendations

The reforms put forth in the July 2010 Health White Paper, Equity and Excellence: Liberating the NHS, need to be supported.

Any future national pay contracts should set out the expected productivity gains and efficiency savings that organisations should be obtaining.

National tariffs and associated business rules need to be aligned with the expected efficiency gains in a way that also promotes the take-up of productive behaviour.

A long-term strategy is required to ensure the quality and accuracy of information from the Audit Commission that underpins hospital payments.

Major national initiatives should include a realistic assessment of the costs and benefits.

The current measures of NHS productivity must include data on quality and be disaggregated for the devolved administrations and by type of healthcare service.


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