Cost savings

Cost Savings within the National Health Service in the Face of Existing and Projected Future Financial Exigencies.


The National Health Service has grown into one of the largest publicly funded health services in the world since its launch in 1948. It was founded on the principle of delivering a "comprehensive, high quality system available on the basis of clinical need and not ability to pay". (Wanless et al, 2002). It has become, with a workforce of 1.7 million (NHS website) the largest employer in the country as well as being one of the largest internationally.

Delivering high quality care has been central to the NHS. Quality, in a healthcare context, can be defined as "the process of meeting the needs and expectations of patients and health service staff." (World Health Organisation, 2000). Lord Ara Darzi, a prominent surgeon, has outlined a 10-year vision to drive up quality standards in the NHS. This was compiled as the "NHS: Next Stage Review" (2009), which focused on delivering patient-centred care and standardising high quality medical practice across the board.

In line with ever increasing patient demands, the NHS has seen significant real growth in funding this century, averaging almost 7% in England. Government spending on the NHS currently stands at about £110 billion, representing 16% of total public spending. ( Total healthcare spending now stands at 9.7% of the UK's Gross Domestic Product in line with other European countries (Appleby et al, 2009).

The future funding scenarios for the NHS did not consider the possibility of an economic downturn which started in September 2008. The recession has led the government to review its public spending plans with the aim of saving money. Most recently, the Chancellor (in the 2010 pre-budget report) revealed plans to save £10bn per year; to be delivered by 2012-2013.

In light of all these developments over the past year, an initial literature review was conducted to identify:

  1. The changes that have occurred in NHS public funding policy
  2. The strategies for reducing costs in the context of the economic crisis

It was anticipated that this initial literature review would help facilitate the formation of our research objectives through the retrospective examination of the most pertinent reviews on NHS spending.

A report commissioned in 2001 (Wanless, 2002) set out to project the NHS spending required to meet the public's expectations over a 20-year period. Three scenarios (Slow Uptake, Solid Progress & Fully Engaged) were proposed based on varying degrees of input from both the public and NHS. The most optimistic scenario "Fully Engaged" proposed to provide the most productivity whilst being the most cost-efficient. The main driver to achieving the Fully Engaged projections was the implementation and uptake of information systems.

In 2004, a second review (Wanless, 2004) was commissioned by the Department of Health which reflected on the Fully Engaged pathway, it suggested that an improvement in the Public Health framework was vital to reduce health inequalities.

The Kings Fund commissioned another review in 2007 (Wanless, 2007) to analyse the NHS's spending over the previous 5 years. It outlined "unprecedented government investment" which, generally speaking, matched the projected spending plan of the 2002 review. Although the increased spending had led to reduction of waiting times and increased life expectancy, there had been no significant improvements in productivity and Wanless emphasised that revenue expenditure was not the only contributing factor to improving healthcare quality outcomes.

A briefing paper published by the Nuffield Trust, "Health in a Cold Climate" (Ham et al, 2009) examined, in more detail, operational efficiencies and identified encompassing actions at the system, organisation, and team/practitioner levels. It attempted to identify areas which are currently successful such as Service Line Management in Foundation Trusts and benchmarking across NHS Trusts. It was proposed that measures focussed on restructuring and integrating clinical services have the potential to save £5bn.

John Appleby of the King's Fund, a leading UK think-tank on health policy, has concluded that prospects for NHS funding remain worrying for the period 2011-2017. He set out three possible funding scenarios for the health service; Tepid, Cold & Arctic. Tepid is the scenario that proposed the least savings, whereas Arctic is the one proposing the most, with Cold being an intermediate between the two. Appleby concluded that the NHS needs to make overall savings of £13bn-19bn in 2011-2014, and further savings of £9bn-18bn till the spending review period of 2016/2017 (, 2009).

At a time when resources are so limited, these savings will have to come from increasing NHS productivity (Appleby et al, 2009). Productivity is defined as the amount of output per unit of input and helps to measure the efficiency of organisations. Despite the sustained increase in NHS investment since the last decade, productivity levels have at best, remained flat compared to an average rise of 2% in the private sector (Wanless, 2002). This was illustrated further in the report by McKinsey, the management consultancy firm, which proposed major cuts in the workforce, cutting external contracts and selling NHS estates.

There has never been a period of sustained disinvestment in the history of the NHS. Vast size and providing employment for millions makes raising productivity in the NHS remains quite a sensitive issue. Cutting NHS Funding has adverse effects on public opinion and health policy is a significant factor determining voter choice. With an election looming in May 2010, developing politically feasible strategies to cope with the financial pressures whilst maintaining quality presents a real challenge.

Based on our initial review, we have identified a gap in the current literature. Whilst there have been extensive reviews pre-recession, there has not been a review which takes into account the current Economic climate as well as the political policy barriers to implementation and which examines a number of strategies in tandem. We feel that our proposed project fills this gap and we have drawn on our initial literature review to outline various broad cost-saving strategies. However, given the scope of the initial literature review, we anticipate that there may be further, more conducive strategies, which have yet to be identified and we will therefore endeavour to not limit ourselves to the proposed list.

Aims & Objectives Aim

Investigate politically feasible cost saving measures in order to ascertain key strategies, saving at least £15 billion[1] between 2011-2017, in order for the NHS to overcome the financial exigencies without compromising quality of healthcare.


To investigate in depth the financial implications, including the volume of monetary savings and effect on the overall NHS budget of implementing the following broad strategies[2] to the health service:

  • Improving public health framework; (Wanless, 2004; 2007)
  • Improving information systems; (Wanless, 2004)
  • Extending benchmarking; (Ham; 2009; Darzi; 2009)
  • Restructuring and integrating clinical services. (Ham, 2009)
  • Increasing productivity of workforce; (Wanless, 2002; Appleby, 2009)

To examine in depth the feasibility and practical implications of the above stated strategies, by looking at a variety of factors, including: possible quality of care outcomes and policy barriers.

To investigate alternative solutions, and argue their strengths and shortcomings.

To create an awareness of the overall budgetary constraints as a result of the credit crisis.


This study will make use of two main research methods; mainly literature review, but informal interview as well. Below, we discuss the choice of these methods and how they will be conducted.

Data Collection

Literature Review

Literature review has been chosen as the predominant method of undertaking this research because it provides the best way of ascertaining what research has already been conducted and what key techniques were used by other researchers - allowing us to justify the choice of our research question and demonstrate its importance in a real-world situation. It will allow us to obtain essential background information as well as valuable statistics and data that cannot be acquired within our limited means. Any literature included in the study must be critically appraised to ensure validity and quality of data. This will be achieved by looking at the internal validity, i.e. biases in the study design and implementation and measures taken to minimise these. We will ensure that the results used as our data are relevant and statistically significant, by ensuring that the appropriate method of economic analysis was used, such as cost minimisation, cost-effectiveness or cost-utility analysis (Burls, 2009; Solomon 2009).

Sources for the literature review will include: Databases (such as the National Office for Statistics, Pubmed, Health Management Information Consortium, EBSCO), key journals (including Health Services Journal, British Medical Journal, and the Lancet), media publications (such as newspaper articles and press releases), as well as government policy publications (e.g. Department of Health publications).

We intend to investigate the broad categories of cost saving measures mentioned in the objectives. This will involve looking at strategies implemented successfully and unsuccessfully in the NHS and internationally (for comparison). We will examine the amount of financial savings, or lack thereof, that each past strategy brought with it and its affect on quality of health care (quantitative data). Any practical and political barriers that were encountered in their implementation (qualitative data) will be recorded. Political feasibility is here defined, as by Majone (1975); "A proposal is feasible if it satisfies all relevant constraints. [Relevant constraints ] are specific political constraints operating in the problem under consideration.' In this situation, these constraints would be those imposed by: public opinion, institutional framework, and governmental legislation. Case studies will be identified to demonstrate the practicality and feasibility of key measures discussed.

More specifically, we identified the following preliminary areas during our initial literature review and intend to extract further data (primarily quantitative) during subsequent stages of the review. Data here implies financial figures or efficiency/productivity percentages.

Improving public health framework:
  • Data on current financial burden of health factors to be addressed in wellbeing centres e.g. obesity, smoking, etc.
  • Data on the efficiency and cost-effectiveness of nationwide and local screening programmes.
  • Compare the public health measures in place in other developed countries to existing and planned UK measures.
Improving Information systems
  • Data on the financial contribution and impact on quality of care of:
    • 'Connecting for Health' programme to NHS cost saving targets.
    • Telemedicine in chronic disease management
    • NHS Direct
Extending Benchmarking
  • Impact of benchmarking on the performance (clinical outcomes) of acute trusts and primary care trusts.
  • The efficiency savings of adherence to the National Institute for Clinical Excellence clinical practice guidelines
Restructuring and integrating clinical services
  • Data assessing the role of service line management in improving profitability and clinical quality of NHS Foundation trusts
  • Evaluating the savings from redefining the basket of services that the NHS provides on its various levels
  • The efficiency savings derived from practice based commissioning and adopting General Practitioner led health centres.
  • Evaluating the potential savings of homecare.
  • Data assessing the potential of co-payments in generating extra revenue for the NHS.
Increasing productivity of workforce
  • Contribution to the NHS budget of cuts in workforce based on increased productivity
  • Political implications / public opinion of job cuts
  • Savings gained from broadening the skill mix of the existing work force.
  • Assessing the savings gained from payment by results.

The review will not be limited to the above factors, and further areas of interest not yet identified that may emerge during the process -will be included and addressed.

Informal Interviews

We plan to interview professionals with expertise in the NHS and its finance. This will allow us to access the most up-to-date thoughts and opinions on the research question from relevant professionals - information that cannot be obtained from published documents. In addition, it will allow us to obtain immediate feedback regarding our proposed strategies, especially pertaining to their political feasibility. Soft data will be collected by asking open-ended evaluative questions. We have evaluated the merits of running a pilot questionnaire, and decided it is not necessary given the informal nature of the interview.

With permission from the interviewee, a Dictaphone will be used to record the interview and quick written notes will be taken. The recording will later be converted into a transcript.

Sample Selection

Individuals to be interviewed have not yet been identified, but selection will be primarily out of convenience, but with certain inclusion criteria. The interviewee will have to have expertise within the NHS, its finance, and be politically aware; measured by: number of key publications (min 5[3], NHS-related) years of experience (min 5[4]), and position held. We will have a minimum of 2 interviewees.

The interview will simply serve to complement our literature review and offer an added dimension by providing a base on which we can evaluate the strategies we propose. Convenience sampling renders it impossible to draw generalisation from the data, but as this is not critical to our project, it is satisfactory (which is also why only 2 interviewees are sufficient).

Data Analysis

The data collected in the literature review will include financial figures from the NHS and health services overseas. It will also include some figures in the form of percentage changes in efficiency and productivity. These will be analysed together under the presumption that increased efficiency and productivity allows for cost savings (Baldwin, 1989). In addition, qualitative data regarding political barriers to the implementation of various strategies will be analysed separately.

Analysis of Quantitative Data

Financial data extracted during the literature review will be collated - and comparisons will be made between the NHS and international health services, and also between different segments of the NHS. If a comparison shows significant potential for cost-savings, an extrapolation of the strategy to the NHS as a whole will be made. This extrapolation will simply involve taking a set of known data points and making linear projections. Acceptance of a strategy as a successful candidate for implementation in the NHS must be backed by sound evidence (statistical, financial, political, and case studies) showing that extrapolation is feasible and realistic. This should allow for a prediction of a monetary value of savings for the NHS to be reached. We will use financial modelling to enable us to propose 'what if' scenarios and evaluate the financial implication of suggested strategies. We will be making use of tools such as spreadsheets and financial software to generate costs for each possible scenario that we have outlined in our strategy.

Analysis of Qualitative Data

We have decided investigate qualitative data from literatures with regards to possible political barriers that might apply to the strategies that we have outlined. Grounded theory (Glaser and Strauss, 1967) will be used specifically as instrument in analysing these data collected because it is an inductive method that will allow us to conclude, from the pool of qualitative data, general ideas onthe existing political barriers. The data will be coded, grouped into concepts and finally categorised. By exploring the concepts and categories, we will then be able to come up with theories to evaluate the political feasibility of our strategies (Allan, 2003). If in any case, a strategy is found to be politically unfeasible, we might suggest the strategy to be replaced or improved to overcome the political barriers.

Grounded Theory

CODING - converts qualitative data into quantitative data. By creating categories, codes, in which recurrent similar themes can be categorised - we can have number of recurrences. See what the major political barriers are,

Coding can be seen as an heuristic tool (i.e. commonsense tool) or as a objective transparent representations of facts.

For the interview - evaluate our own strategies.

For the remaining qualitative data - political stuff,

We will be able to identify the key issues and themes regarding barriers to organ donation

Dissemination of Findings

Findings will be compiled in an approximately 25,000-word report that will be submitted to the Imperial College London Business School staff for marking. Proposed chapter headings for this report are enclosed herein. Authors will be listed in alphabetical order, as contribution will be equal for all members.

Copies of our final report will be given to the key professionals with whom we've been in contact with.

In addition, the findings will be presented at a University-setting forum. This will take the form of a 20-minute presentation, where each group member will speak for a designated amount of time. A PowerPoint presentation will be used as a visual aid to support the presentation. This is followed by a 10-minute Question and Answer session with an audience of our peers and an academic panel. Key professional contacts will be invited to attend.

If the findings are significant, an executive summary may be prepared for submission to some academic journals. The executive summary will be prepared by the group, with one or two key members leading the preparation (which members have yet to be determined). However, all research members will be listed as authors. This will make our findings available to the wider public, including professionals with an interest in the future of the NHS finance.

Suggested Chapter Headings
  1. Executive Summary
  2. Group Dynamics
  3. Acknowledgements
  4. Notation
  5. Introduction
  6. Aims & Objectives
  7. Methodology
  8. Ethics
  9. Improving public health framework
    1. Definition
      1. Primary Screening
      2. Interventions re: Obesity, Smoking, Physical Activity
      3. Wellbeing Centres
    2. Financial savings
    3. Practical implications
    4. Case studies - national / international examples
    5. Recommendation
  10. Improving Information systems
    1. Definition
      1. Connecting For Health
      2. Telemedicine
      3. Expanding NHS Direct Brand
    2. Financial savings
    3. Practical implications
    4. Case studies - national / international examples
    5. Recommendation
  11. Extending Benchmarking
  12. Definition
    1. Weeding out Low Value Interventions
    2. Reducing Variation in Clinical Performance
    3. Increasing Adherence to Clinical Guidelines
  13. Financial savings
  14. Practical implications
  15. Case studies - national / international examples
  16. Recommendation
  17. Restructuring and integrating clinical services
    1. Definition
      1. Polyclinics / GP Health Clinics
      2. Extending Service Line Management
      3. Adopting Foundation Trusts' Practices
      4. Redefining the NHS Basket of Services
      5. Shifting Responsibilities to Community Pharmacies
      6. Co-Payments
      7. Practice Based Commissioning
      8. Integration between health and social care
    2. Financial savings
    3. Practical implications
    4. Case studies - national / international examples
    5. Recommendation
  18. Increasing productivity of workforce
    1. Definition
      1. Broadening the skill mix of the workforce
      2. Payment by Results
      3. Streamlined Workflows
      4. Increasing clinical governance
      5. Increasing workforce wellbeing
    2. Financial savings
    3. Practical implications
    4. Case studies - national / international examples
    5. Recommendation
  19. Further Strategies
  20. Discussion
  21. Conclusions & Recommendations
  22. References
  23. Appendix

Ethical Appendix

To investigate politically feasible ways in which the NHS can reduce £15-20 billion in costs by 2014.

To enhance the value for money, by increasing efficiency and productivity, in a way that the quality of healthcare will not be compromised.

Informal interviews (after consultation and approval with our supervisor) with non-NHS and/or NHS professionals who have expertise in NHS structure and finance, and have first hand experience that we may not be able to elicit from existing literature.

A minimum of 2 professionals will be informally interviewed.

Duration: November 2009 until May 2010

Where: Imperial College Business School and alternative interview locations at the convenience of the interviewee.

An information sheet containing a list of questions appropriate for the professional being interviewed will be sent in advance.

It will be made clear that participants can refuse to answer the questions if they wish to do so.


There may be risks associated with misinterpretation of the interview questions/answers. The threshold for seeking further clarification will be low in order to minimise misunderstandings.

There will be scope for participants to request anonymity and this will be uniformly respected.

Given that 4 of the 6 researchers are medical students - there may be an element of bias with regards to, for example, the suggestion of cutting medical school places, dismissing staff or decreasing wages.

As users of the NHS, we might be reluctant to suggest strategies that may affect our future personal finances.

Participants will be informed at the offset that there may be scope for publication. In the case of a professional requesting anonymity we will utilise an alias.

As the bulk of our research is based on a literature review, we are not expecting any other form of data that will require confidentiality.

Students and staff within Imperial College will have access via the library.

In the case of a publication, the data will be accessible to the public.


By storing data in the supervisor's cabinet which is only accessible by us (researchers) and the supervisor unless any audit need be undertaken.

By shredding all paper work and permanently deleting all soft copies of the data.

  1. Figure taken from the 2009 Pre-Budget Report, from HM Revenue
  2. These broad strategies have been arrived upon through our initial literature review
  3. based on a comparison to 3 known academics of Imperial College London Business School

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