Switch attention from the catch to the throw
The ever-deteriorating budgets of the acute sector have been understandably a cause for concern over the past few years, with every year seeing the worst NHS deficits on record. This has of course generated a reduced risk-appetite amongst regulators, commissioners and providers, with all wanting to predict in detail the trajectory of financial improvement. This focus on an improvement trajectory is often applied to operational delivery as well, as organisations seek to recover A&E and Referral To Treatment (RTT) performance, and are asked to map the trajectory of improvement against these targets.
However, the attention on these trajectories has generated a micro-industry of financial improvement programmes that are very costly and yet doomed to failure. This is because concentrating on the trajectory prioritises managerial effort on negotiating the trajectory gap between a level the regulator finds palatable, and the level an organisation is willing to sign-up to as deliverable.
So rather than concentrating on what needs to be done to fix the problem, senior effort is spent on arguing over what the outcomes or targets will be if the problem is fixed. As a result both operational and financial performance programmes tend to focus on the outcomes that organisations can commit to rather than which changes will best deliver these outcomes.
The flawed financial improvement model
This has led to a relatively common (and highly flawed) model for financial improvement which tends to pan out as follows.
- Identify the type of provider by size, demographics, location, service mix and so on.
- Benchmark the provider against other similar provider types.
- Identify the several hundred-line items in the budget or cost model that fall below upper quartile performance for the provider type.
- Model the impact of moving to upper quartile against these (several hundred) line items.
- Establish several hundred schemes, each aligned to a line item of budgetary under-performance, often including bottom-up suggestions from clinicians about things that can be done against each line item to improve performance.
- Establish scenarios for these schemes and then plot different scenarios, to support the negotiations over the planned trajectory.
This activity is onerous. It requires a great deal of analytical modelling and involves several rounds of negotiations about scenarios and impacts. This leads to a time consuming process of debate around what the improvement trajectory should be. It also generates significant workload on stretched clinicians and operations teams to mobilise several hundred schemes, or projects. In general, these schemes do not really get aggregated. Even when some prioritisation is applied, there are typically 50-100 projects that are left to be taken forward by a stretched team managing very immediate delivery pressures.
Address the root causes not the symptoms
Not only does the financial improvement model approach generate significant workload, it also fails to drive the right changes. The risk aversion about overall financial results causes excessive focus on the individual financial outcomes as they are presented in the budget. It fails to recognise that many of these line items are just symptoms of a common root cause, and that a single action to address the root cause will impact many of the schemes. Indeed, in many cases there are two or three common root causes that may address a large share of the schemes, such as the management of flow or discharges. Setting up 50 projects all seeking to make the same, similar or overlapping changes, causes significant duplication and wasted effort.
Model operational performance against best practice
So what can the health system learn from jugglers? Fundamentally the focus for financial (and operational) improvement in hospitals should not be the financial outcomes (the catch), but rather the few key things that will address the root causes of performance (the throw). In such a paradigm, the approach will be less to look at the financial symptoms and what the budgetary outcome will be. Rather the focus is to model operational performance against best practice. That way it is possible to identify which underlying causes are generating the performance that’s adding to the financial pressures.
Focusing on the throw in this way will benefit from:
- speed – it will reduce the need for lengthy modelling
- outcomes – ironically, it will drive the actions that will deliver financial improvement
- ownership – it will promote win-win conversations with providers and regulators about the right things to address the challenges, rather than zero-sum negotiations over trajectory
- cost – it will also reduce the need for highly sophisticated externally commissioned financial models, drawn on huge benchmarked datasets, and as such should make financial improvement projects quicker to deliver.
If NHS providers are to move to a more sustainable model, regulators and hospital leaders alike need to stop worrying about the detailed outcomes. They need to instead focus on the smaller number of key changes that will help them to get the throw right.