NHS cost-cutting is avoiding service redesign

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salami The ‘Nicholson challenge’ of NHS cost-cutting is being met through “short-term fixes” that block service redesign, according to the Commons Health Select Committee.

The three main methods used to reduce NHS costs have been tariff reduction, staff pay freezes and ‘salami slicing’ of providers, the MPs noted.

The Committee also observed that NHS cost savings being ‘clawed back’ by the Treasury defeated the stated aim of the savings: to create funding for service redesign that would reduce long-term costs and improve performance.

In contrast, it said, the means being used to cut £6bn each year from the NHS budget were not sustainable and harmed services.

The report found that in 2011–12, £2.4bn was saved through tariff reductions and £850m through pay freezes, with similar cuts planned for 2012–13.

It warned that these and other “short-term fixes” would be “increasingly difficult” to repeat, and that NHS commissioners needed to aim at “genuine and sustained service integration.”

Chair Stephen Dorrell said the reliance on tariff reduction “tends to have an undesirable effect of encouraging salami slicing of individual providers rather than imaginative system redesign.”

In addition, he argued, “it gives the commissioners a cop-out” when they “ought to be stage centre in the process of service re-imagination”.

The Committee warned that assuming “NHS pay will continue to fall relative to pay elsewhere in the economy” was “neither prudent nor just”.

It recommended that NHS commissioners and providers be allowed to use cash reserves to fund service change, rather than lose them to the Treasury.

Mike Farrar, Chief Executive of the NHS Confederation, commented: “We need to look beyond the short-term options and consider more radical solutions that will improve care in the long term.”