MR DAVID NICHOLSON, MR HUGH TAYLOR AND MR RICHARD DOUGLAS

23 NOVEMBER 2006

  Q20  Dr Taylor: Will the Healthcare Commission be aware of those?

  Mr Nicholson: The Healthcare Commission have been involved in this all the way through.

  Q21  Dr Taylor: So they could judge PCTs on their position on the percentages?

  Mr Nicholson: They could. We have got to do that debate with them about what they are going to measure each year, but they certainly could.

  Q22  Chairman: Could I just ask you a little question on that, Mr Nicholson. Most PCTs, as I understand it, have people, officers, as it were, civil servants, who go round checking the prescribing. Do all of them have that, even these that have 8% prescribing? Quite clearly there are massive savings to be made for the Health Service by just changing habits, as it were. Do they all have prescribing officers, if that is the right term?

  Mr Nicholson: I do not know of any that do not have any.

  Chairman: Maybe you could look at their terms and conditions at some stage.

  Q23  Dr Taylor: Could it be one of the economies is to get rid of the pharmaceutical officers that are attached to PCTs?

  Mr Nicholson: That would be a very false economy, would it not? I do not know of any in their cost-improvement programmes that have done that.

  Chairman: It is just a thought.

  Q24  Dr Naysmith: Can we look at emergency activity for a few minutes. No one would disagree with the fact that in recent years we have been attempting to get much more activity into the community and to switch away and switch on to a more preventative model of care, and that has been happening now for two or three years. Why is it that the number of emergency admissions is continuing to rise in spite of this?

  Mr Nicholson: There are two or three things there. The first thing is, and I do not want to over state this, but there is an issue about counting in all of the emergency admission stuff with the changes in the way NHS organisations arrange their emergency services, using medical admission units, using surgical admission units, using joint units, very short length of stay, that has, I think, increased the numbers a little bit.

  Q25  Dr Naysmith: Are you suggesting there has been a change?

  Mr Nicholson: What has been happening over the last two or three years, particularly with the implementation of Payment by Results, is that coding has been much better resourced and better done, for obvious reasons. Payments are attached it to now when they were not directly in the past.

  Q26  Dr Naysmith: So some things were not reported before that are being reported now?

  Mr Nicholson: Absolutely, and they may be reported in a different way. That is absolutely true. So, coding, I think, has got much better. Overall, though, there has been a reduction in the rate of increase of emergency admissions across the country as a whole, but some areas have had serious difficulties with it. I think what we are seeing here is a time lag, it seems to me, in terms of putting things into place that will avoid medical admissions, on the one hand, and them actually delivering. This year we are seeing not such a large increase in emergency admissions as we saw the year before, as we saw the year before that, and next year, I think, we will see similar a reduction in the rate of increase, but I think it is the time lag of getting services in place which will avoid admissions. There is good evidence, and there are a number that you can do, it just takes a bit more time, we are finding, to get the actions done than perhaps we had hoped.

  Q27  Dr Naysmith: Is there any evidence that the changes to out-of-hours services have had any effect?

  Mr Nicholson: Not on emergency admissions. There is some evidence around A&E attendances, that is fairly controversial analysis, but there is no evidence that it has affected the number of emergency admissions in the hospital.

  Q28  Dr Naysmith: You mentioned attendances and attendances at accident and emergency. One of the things that was supposed to reduce that was walk-in centres. Walk-in centres were placed in the community in various places where people might pop in for a quick consultation. Has there been any change in the policy about walk-in centres?

  Mr Nicholson: There has not been a change in the policy, and they are extraordinarily well used, but there has not been a reduction in A&E attendances related to them.

  Q29  Charlotte Atkins: Am I right in thinking that the monetary incentive to PCTs to reduce emergency admissions has actually been reduced?

  Mr Nicholson: What happened in Payment by Results last year is that, over a certain level of increase, they would only get half of the tariff. It was 2½%, or there was a percentage. If the emergency admissions went a percentage above what was expected, then they would get the full tariff for each of them, but if it went above that, then they would get half the tariff.

  Q30  Charlotte Atkins: Why is that, because before that they got the full tariff, did they not?

  Mr Nicholson: Yes. It was part of building financial control and putting incentives in the system to make sure that the rate of increase and financial core relating to that was kept in place.

  Q31  Charlotte Atkins: But those PCTs that invested in, for instance, community matrons to reduce their emergency admissions, they put that in place and then you withdrew part of the financial incentive for them doing that?

  Mr Nicholson: Yes. I think the effect in the way you have just described would be extremely marginal, because it did involve full tariff up to a particular percentage. There were not many organisations that were predicting a larger percentage. I cannot remember if it was two or three, I will have to give you that, but there were not many people that were planning a reduction of a greater number than that in order to fund their community matrons, but it may have had a marginal effect in some.

  Q32  Charlotte Atkins: It certainly did. I would be interested to know which PCTs it did have a marginal effect on, because certainly I know that my own Primary Care Trust that is running in deficit and is trying to reduce that deficit by reducing emergency admissions was affected by that.

  Mr Nicholson: I should say that the reason we implemented it at the time was because the NHS, particularly PCTs, felt that it was in the best interests overall to do that. It was not something that was imposed at the last minute by the department, it was in response to quite a lot of requests from the service.

  Charlotte Atkins: If we could have a note on that, it would be useful.[2]

  Q33 Dr Naysmith: Could we to move staffing now. Quite a few interesting points emerge if you look at the staffing figures, and one set of figures show that managers and administrators are the fastest growing staff groups in the National Health Service, and yet another set of figures show that overall management costs are actually steadily falling as a proportion of the National Health Service. How can that be? How can you put these two sets of figures together? There was an 80% increase, I think, between 1997 and 2005?

  Mr Nicholson: Up to 2002 there was a cap on management costs in the NHS and that was released around about the time of the NHS—. I am sorry, it was shifting the balance of power when the arrangements for the first setting up of the Strategic Health Authorities and PCTs were in place, but the target that was identified at that time was that the management costs would take a reduction, the amount spent on management as a proportion of the total amount of money spent on the NHS would go down, and that, in fact, is what has happened, though, of course, the growth has been significant in the NHS as a whole. We are round about 3.7% at the moment, which is certainly significantly cheaper than management costs in the private healthcare sector and cheaper than management costs in the private sector overall; but, of course, we are not satisfied with that, we need to bear down on management costs wherever we can, and that is one of the reasons that we are implementing the Commissioning a Patient-led NHS and we are reducing management costs in the NHS by a quarter of a billion pounds.

  Q34  Dr Naysmith: Management costs are something that people talk about a lot in the National Health Service, and there are certain people who say there are far too many managers and yet your figures would suggest that managers are increasing but the overall costs are reducing. Are we getting the right quality of management?

  Mr Nicholson: The proportion of costs. We can always improve the quality of management, and one of the objectives of Commissioning a Patient-led NHS was to increase the quality of the management that we have got in the NHS, and that is essentially what we are trying to do by making sure we only appoint the best possible people into the new PCTs.

  Q35  Dr Naysmith: Do you think the figures are reliable, because it is enormously difficult to measure overall management costs?

  Mr Nicholson: There is an enormously complicated formula for the development of management costs which I am sure Richard can talk to you for 20 minutes about, but I think it is as good as we have had in the NHS as a definition.

  Mr Douglas: There is a very detailed definition which I would be very happy to share with the Committee but probably not talk through now, which is about 30 pages, defining what goes into management costs. The management cost figures are then included within the overall accounts, they are subject to audit review. As with all the figures that come through the system, I could not guarantee that in absolutely every organisation they are precisely right, but at a national aggregate level they should be very close, and they include not just employed managers, they include costs of bought-in consultants, outsourced services, there is a whole long definition that sits behind that.

  Q36  Dr Naysmith: Where would something like a modern matron come in? Would a modern matron be purely clinical or would there be some management tasks associated with it?

  Mr Douglas: I believe a modern matron would probably be entirely on the clinical side. I would have to double check.

  Q37  Dr Naysmith: How about ward clerks? Would that count as management?

  Mr Douglas: The definitions include, basically, every salary of everyone paid within the board, within the board's corporate function, such as finance, HR and the like. Then, for clinical functions, it depends partly on the salary at which people are paid. So, if they are in management jobs and paid over a threshold (which I believe is around £25,000), then they will be counted within the management costs overall, but there is a salary threshold or a job threshold. Some of them, if the job is purely a managerial administrative one linked to a corporate function, it will be entirely within management costs. If it is a clinical related role to some extent it will depend on the salary level.

  Q38  Charlotte Atkins: How many staff have been made redundant under Commissioning a Patient-led NHS?

  Mr Nicholson: So far just over 100.

  Q39  Charlotte Atkins: What will the overall redundancy cost be for these redundancies?

  Mr Nicholson: For the whole of the programme?