NHS hospital productivity in ‘continuous decline’

NHS hospitals in England are not providing value for money, a Public Accounts Committee (PAC) report on hospital productivity says.

Despite Government spending increasing by 70% in the last decade, figures from the Office for National Statistics (ONS) estimates that productivity has fallen by an average of 1.4% per year since 2000.

Margaret Hodge MP, Chair, PAC, said that NHS productivity “has been in almost continuous decline” in the last ten years and that taxpayers have been “getting less for each pound spent”.

Productivity is defined as the ratio of the volume of resources (inputs) to the quantity of healthcare provided (outputs), adjusted to reflect their relative costs and quality.

Government spending on the NHS has increased from £60 billion in 2000-01 to £102 billion in 2010-11. The increased funding has enabled hospitals to invest in better paid staff and improve buildings and equipment.

The report notes that there has been a significant improvement in the performance of the NHS since 2000, particularly in areas targeted by the DH, such as waiting times and outcomes for patients with cancer and coronary heart disease.

But the level of hospital activity has not matched the increased resources as hospitals have focused on meeting national targets and not improving productivity.

“The Department of Health will now have to work to reverse the trend of falling productivity if it is to meet its ambitious revised target of achieving, by the end of 2014-15, savings of up to £20 billion each year,” said Margaret Hodge.

“A key problem is that national pay contracts have not so far been used to manage the performance of staff effectively. It is indicative of this that consultants’ productivity has fallen at the same time as they have had significant pay rises.”

In 2002, the DH promised that it would deliver productivity improvements of between 1% and 2% in exchange for increased funding.

It promotes efficiency and productivity improvements in hospitals primarily through national pay contracts and by a setting a ‘tariff’ for individual hospital procedures. The report says this method has resulted in certain improvements, but as the system only covers 60% of hospital activity, there is a “substantial variation” in costs and activity.

The DH is now introducing ‘best practice tariffs’ to promote greater hospital efficiency, but the report warns this may “prioritise price over quality”.