NHS Productivity

Professor Diane Coyle of Cambridge University is one of the UK’s leading experts on productivity.

She recently gave a lecture on the ‘key issues’ facing the NHS in its 75th anniversary year and the changes it needs to make over the next quarter century.

She wisely says:

• We will only have the kind of NHS we would want in its centenary year if there is organisational and cultural change.
• If we want to see a productive NHS serving the population in another 25 years’ time, fundamental process re-engineering, with all that implies for people’s responsibilities and skills, is essential.

Very well said!

We’ve been banging on about just this last bullet point for years now, but still most ‘experts’ and government ministers believe the NHS is working to capacity, with all processes working perfectly, and so focus on increasing inputs, costing tax-payers billions more, believing all will then be hunky-dory.

The following are extracts from her much longer lecture, with occasional comments added (in red).

PRODUCTIVITY?

• What exactly do we mean by productivity in the health sector?
• Many have the impression that higher productivity is about people working harder. Yet NHS staff are already working very hard. Working them even harder is not a feasible way of delivering long-term growth in productivity.
• Productivity is what you are getting out for what you are putting in.
• So the issue becomes, how do you define ‘inputs’ (what you put in) and ‘outputs’ (what you are getting out)?
• Inputs:
• Economists look at all inputs, not just labour, so in particular capital inputs e.g. the use of machines and buildings.
• This involves a lot of complex calculation, because for the most part the public sector cannot be measured using market prices or revenues, unlike the private sector.
• In the case of labour input, in health, we can count the number of full-time equivalent (FTE) employees and their hours and can look at wage rates, but figuring out the amount and cost of capital equipment is trickier.
• The task of weighting and adding those up together, along with other inputs such as consumables, represents another challenge.
• Outputs:
• For outputs, we are trying to bring together a wide range of different activities in the health service, such as GP appointments, emergency interventions, prescriptions, surgeries and outpatient appointments.
• The current Office for National Statistics (ONS) measure of productivity weights these activities according to cost.
• That means there is a risk of a lower cost activity that is more productive, such as a technical improvement that makes something cheaper and more reliable to deliver, might seem to decrease productivity. This is because a lower cost activity ‘weighs’ less and decreases the calculated output when replacing a higher cost activity.
• At this point, one questions the use of any overall NHS productivity measure, or for a GP practice, general hospital or social care operation, because:
  • Such measures should steer managers (and ministers) to areas requiring their specific attention – but those they get are simply aggregates of aggregates of aggregates etc., which also mix good with bad performers and include estimates, approximations, errors and ‘magic fairy dust’ formulae – so they end up useless to those responsible for productivity improvement. 
  • And ask how quality of staff and capital inputs can be sensibly accounted for, especially given it can make a huge difference to productivity levels.
  • And what of the quality of outcomes for patients, the NHS’s ‘customers’? – did the treatment work well or not?  – it’s not the output volume of treatments conducted but how well the treatments worked that matters most to patients.
  • Far better for managers all along the NHS ‘production line’ to measure the waste of time and inefficient use of all costly resources (i.e. versus the maximum capacity) under their control – at present, most are surprised when they find out.
• To be fair, Coyle does goes on to say: “It is incredibly complicated capturing what is meant by quality across the range of different services in health”.
• However, we are not going to suddenly find that if only we measured productivity in a different way, we would have a much more robust health service.

THE BIG PICTURE:

• We need to consider a broader framework to understand the NHS’s productivity prospects.
• This has three components:

1. 1. Cost-effectiveness:
      • Purchasing the things that the health care service needs – scope for using existing resources more cost effectively.
      • But this offers limited prospects for productivity improvement. A cash-strapped public service at some point can only cut costs more by reducing activities or their quality.
   2. Organisational efficiency:
      • How the health service uses the inputs to deliver health outputs – treatments, screenings, GP visits etc.
      • Organising activities differently rather than doing the same things the same way but for less money
      • How to tackle future demand pressures, especially for chronic pain, diabetes, anxiety or depression, cance, chronic kidney disease, atrial fibrillation, COPD, heart failure, constipation and dementia.
   3. Health outcomes:
      • The impact of the health services on the broader economic and social environment affecting people’s health.

WHAT CAN BE DONE that could have a real impact on NHS productivity?

1. Think about the health care system as part of the country’s critical infrastructure:

• There has been long-term underinvestment in capital equipment and buildings in the NHS – UK capital investment has been about half the average rate of OECD countries – hence fewer beds, crumbling buildings and insufficient investment in IT hardware and software
• One of the most powerful ways to improve productivity is giving them better equipment to work with – think of a construction site where a worker is going to become more productive if they have a mechanical digger rather than a spade.
• Infrastructure is the kind of capital that a country’s economy cannot operate without – it is non-optional investment.
• We generally think of infrastructure in terms of roads and railways and power stations
• We do not want to buy a train ticket just for the experience of the journey, although that might be part of the reason – we mainly want to go somewhere.
• Similarly, we do not want to buy units of electricity for their own sake – we want the electricity to be able to do something else.
• We should think about the health service in that way as well.
• Nobody wants to consume the service of an operation or appointment for its own sake; what they want is improved health.
• What’s more, the health (or otherwise) of the population affects the functioning of the economy.

2. Investing in digital capabilities:

• There’s a growing body of evidence that strongly indicates only those on the productivity frontier are able to use digital tools effectively – and they are pulling ever further ahead of the rest.
• On the one hand, this finding gives cause for optimism because it shows big gains from deploying digital tools are possible.
• On the other hand, it is gloomy because 9 in 10 companies have not been able to realise the productivity benefits of digital tools:
  • It may be that many companies have not made the investment needed to buy the tech, subscribe to the cloud services and hire the skills,
  • But an important part of the explanation is a lack of organisations investing the thought, time and energy needed to change their activities and processes permanently in order to use digital tools effectively.
• The issue is not what inputs are being purchased and how cost effectively, but rather how the organisation uses the resources available to deliver the activities it is engaged in.
• What does this mean for an organisation?
• Many digital technologies enable the flow of more information, so they need to think about how this information is used and what is created:
  • What are the data records?
  • To what extent can different data records be joined up with each other to create useful insights?
  • How should the data flow be organised – is it around activities, organisational units or patients?
• Adopting and implementing new technology requires the replumbing of how all the data that is created is structured, joined up and used.
• Crucially, the creation of useful information made possible by using digital tools also needs to be accessed and above all used.
• One of the key lessons of the private sector productivity story:  not only have you got to create the data, and make it usable in new ways, but also empower people to make decisions using that flow of information.
• A look at what happened in Addenbrooke’s Hospital and some of the Manchester hospitals during the pandemic:
  • The hospitals were able to quickly re-engineer processes to improve patient flow, incorporate the donning and doffing of PPE and so on.
  • Those changes were possible during the pandemic because normal procedures were suspended.
  • People did not have to go through the layers of meetings and committees to be able to make decisions and reorganise the flow of activities, but they feared then (in 2021) that the treacle would come back in when the emergency was over.
• People talk about the NHS having too many managers.
• To me it seems that there are too few strategically empowered senior managers and too many people engaged in all the administration and procedure that we label ‘management’, but is actually very different.

3. Demand management:

• The benefits of demand management can be overstated, as people who are healthier and live longer are going to need more care at some point.
• But reducing demand for health care services would certainly alleviate some of the pressures the NHS is facing.
• Much of the discussion centres on preventive care and changing individual behaviour.
• For example, can we stop people smoking or eating too much sugar by influencing their consumption behaviour.

4. What kind of health service do we want in future?

• There has been a big increase in people paying for themselves, particularly for what you might call the complaints of old age, hip and knee replacements and cataracts.
• Many people do not have insurance plans, so they likely have not planned to have private care. This seems unfair, not only on the people who are not able to pay for themselves, but also on the people who can.
• We already have widespread private care in optical and dental treatment, which has failed to keep pace with demand in some cases
• What should the NHS contract out to the private sector – where ought the boundary to be?
  • We do not worry about the NHS not making its bandages or MRI scanners. They are purchased from the private sector to no concern at all.
  • Cleaning has generally been contracted out in NHS hospitals as well, and again this seems to cause little concern. But you cannot entirely tell how clean a hospital is just from looking; testing is needed to monitor effectively.
• Many other countries, such as France and Germany, include an insurance element in funding their health systems.
• What of the unmentionable ‘major rationing of services’ – thus not trying to offer everything to everyone free at the point of delivery, just services for serious complaints?

CONCLUSIONS:

• We are asking for too much from the NHS given how it is structured and run at the moment.
• There is certainly a need for:
  • To provide more investment
  • To recognise the health service as part of the national economic infrastructure and investigate what level of capacity is needed, taking into account the broader impacts on productivity and the economy.
• Rapid changes in future demand, or in how to fund health care, are unlikely so, for practical and faster improvements in NHS productivity, the need is to change organisational structures and processes – an example would be the just-in-time revolution in manufacturing, which did not change the components needed to make a car, but did dramatically increase the productivity of the auto sector
• If we want to see a productive NHS serving the population in another 25 years’ time, fundamental process re-engineering, with all that implies for people’s responsibilities and skills, is essential.