The survey found that trusts achieved on average 4.8% cost improvements in 2011/12 against targets of 5.1%. For 2012/13, trusts again targeted 5.1% cost improvements on average, reducing to 4.9% in 2013/14 and 4.7% in 2014/15. Service and pathway redesign was identified as making the single biggest contribution to cost improvements in 2012/13. For long-term cost improvements, trusts rated reducing workforce numbers and average pay as major contributors, along with service redesign and partnerships with other organizations. Mergers were seen as having only a modest contribution to long-term cost improvements.

1. Targets in sight:
Approaches to delivering
NHS cost improvements
CIPs survey
Summer 2012

2. Contents
Foreword 1
Introduction 2
CIP delivery and future plans 3
The drivers behind CIPs in 2012/13 4
Rating the ways to reach CIP targets 5
Can outsourcing of corporate services deliver savings? 7
Opportunities for outsourcing clinical support services 9
How CIP schemes have been received 10
Hitting long-term financial targets 11
Making a success of CIPs 12
Using rewards to drive CIPs 13
The goals of successful CIPs 14
Additional benefits from CIPs 15
About us 16
Contact us 18

3. Foreword
Strategic thought gets more done with less
When trusts set their financial targets, they look at their expected income for
planned activity and the current costs of delivering those services. The mechanism
for closing the gap between costs and income has traditionally been the cost
improvement programme.
During times of growth, additional income for activity above In overall terms, the NHS cannot grow its way out of the
planned levels was often a key contributor to this gap-closing current financial challenge. But we examine how individual
exercise. But in an era of flat real-terms increases, this simply organisations see the role of income generation in meeting
isn’t an option – at least not when you consider the NHS as their own ‘cost’ improvements. We also examine the appetite
a whole. to think more strategically in the quest to do more (and
Cost improvements also get progressively harder. better) with less.
The simple improvements have often been made in previous What is completely clear is that the NHS faces an
years – bearing down on use of agency staff, for example. unprecedented financial challenge in the coming years.
And given the current difficult financial environment is likely While some organisations have delivered more than 5%
to be with us for some time, non-recurrent measures such as efficiencies in the past, estimates suggest that the whole
vacancy freezes are not only unsustainable, but add to the service will need to match this performance. For some
cost improvements needed in future years. areas the challenge will be even greater.
Added to the current financial context is the quality Success will depend upon finance professionals working
agenda. As the NHS looks to improve efficiency, it must at alongside clinical colleagues and other support services. But
least maintain patient safety and outcomes and, wherever as different localities rise to their own CIP challenges, it will
possible, look to improve them. No one – frontline or back be vital to understand different approaches to the delivery
office – would argue otherwise. And while higher quality can of these CIPs and, where appropriate, to share good practice.
be lower cost by getting things right first time and avoiding
unnecessary interventions and duplication, it is not always Keith Wood
Chairman, HFMA Financial Management and Research Committee
so straightforward.
The survey undertaken for this report on cost Bill Upton
improvement programmes underlines many of these Partner, Head of Healthcare, Grant Thornton
points. It seeks to identify the areas that contributed to Clive Mellor
organisations’ most recent CIPs and the expected make-up Associate Director, Healthcare Advisory, Grant Thornton
of future savings plans.
Approaches to delivering NHS cost improvements 1

4. Introduction
Meeting the CIP challenge
As the requirement for savings continues in the NHS, every trust is feeling
the pressure. The requirement demands ever greater efforts from all healthcare
organisations to meet the ambitious £20 billion savings target, and the drive for
new savings and efficiencies to meet this target will become harder over the
forthcoming years.
During July 2012, the HFMA and Grant Thornton The results of this survey are presented in this report
conducted a survey of NHS trust finance directors to with analysis from Grant Thornton and additional
ask them about their CIPs, their experience to date, commentary on their CIPs contributed by NHS trust
and how they expected their CIPs to progress over the directors and senior finance staff interviewed for this report.
next three years. We believe it will provide valuable assistance to
In addition to asking how their CIPs were structured, finance directors in supporting trust boards to deliver on
our survey asked finance directors to rate the relative this difficult challenge, and will help to throw light on the
importance of individual components of their schemes, progress being made across the whole sector.
how different corporate and clinical services were provided
at their trust and how their CIPs – and the individual
components of their CIPs – had impacted their trust in
recent years.
In total we received 34 responses from directors
and senior finance staff, representing 14% of provider
organisations in the NHS. This included respondents from
acute, mental health, community, ambulance and integrated
trusts, including both NHS trusts and foundation trusts
(referred to as ‘trusts’ throughout this report). Not all
directors answered every question, meaning the overall
sample size changes for some questions.
2 Approaches to delivering NHS cost improvements

5. CIP delivery and future plans
Recent performance on CIPs and the next three years
To put the survey in context, consideration must be given to organisations’ track
record in delivering CIPs in previous years and the projections for the next three
years. In 2011/12, trusts set average CIP plans of 5.1% of income. By the year’s end,
they delivered on average 4.8%; 91% of the target by value.
This corresponds closely to the figures in the May 2012 The received wisdom is that 5% is the maximum cost
King’s Fund publication ‘How is the NHS performing’. improvement that can be delivered in the NHS within
That report indicated that the average savings achieved anyone year. However trusts in the survey planned an
amounted to 4.7% of turnover, compared with plans of average cost improvement of 5.1% in 2011/12 and actually
5.1% – a shortfall of around 10% compared with plan. achieved 4.8%. This average masks a number of organisations
The largest savings, as would be expected, over this with planned CIPs that were substantially higher. The full
period came from pay. While organisations focus on reducing range stretched from 3% to 7.8%. The organisation with
non-staff costs first if possible, it is simply not sustainable the highest planned CIP successfully achieved its plan.
to expect continual savings without reviewing employee/ On average, the trusts in the sample missed their planned
workforce levels. Staff costs typically account for around level of improvement by less than 10%. In total 15 out of
70% of trust expenditure and CIP plans indicate 54% of 32 trusts fell short of their CIP target in 2011/12, with one
savings in 2011/12 were in pay. Respondents to our survey organisation only achieving 64% of its planned level.
highlighted that many of their savings were achieved through Moving forward, the 5.1% CIP target planned for
such means as procurement and outsourcing reviews, 2012/13 is the same as that of 2011/12. This target reduces
but acknowledged that staffing was a prime factor in for the next two years, with 4.9% planned for 2013/14 and
ongoing savings. 4.7% for 2014/15. This is broadly in line with Monitor’s
A large proportion (62%) of respondents recorded Acute Assessor case financial assumptions of 5.0% in
income growth in 2011/12 as contributing to their achieved 2013/14 and 2014/15, although their downside case is 5.5%
CIPs, although in nearly half of these cases, the contribution for both years. This is clearly at the challenging end of
was 15% or less. This income growth related both to efficiency improvement and recent experience suggests many
demographic growth and the transfer of services from other will struggle to deliver their CIPs in full. Management and
NHS organisations. Consolidation of services and the monitoring of CIP delivery will be crucial in underpinning
creation of local hubs are clearly contributing to this, and the service’s response to the current financial challenges.
specialisation in particular areas appears to be driving Finance directors also recognise that they need to achieve
further savings in the future. this 5% alongside the improvement of services, maintaining
quality and patient safety.
Respondents to our survey highlighted that many of their savings
through such means as procurement and outsourcing reviews, but
acknowledged that staffing was a prime factor in ongoing savings.
Approaches to delivering NHS cost improvements 3

6. The drivers behind CIPs in 2012/13
Expenditure controls and service/pathway redesign emerge as the leading
contributors to next year’s targets
Which of the following will make the biggest contribution
to your cost improvement programme in 2012/13?
50%
Searching every savings route
40% “In CIP terms, we’re on year three of what has already
been 5% each year. And we have to continue that
30%
potentially for another two or three years. It becomes a
49 case of what do we do next? Where do we go to make
20%
30 further savings? It becomes more difficult the further
10%
3 3 3 you go.
0% 6 0
I don’t think we’re doing anything particularly unique,
er or
n
ls
n
ing
th
s
rtn ect
though in comparison with others I think our project
ice
sig
tio
ing
ro
ow
ur
da
nt
s
rv
de
gr
ct
co
e
se
oli
re
tru
at
management looks more robust. In terms of actual ideas
ice
ns
re
riv
ed
pa
ay
es
rv
co
itu
/p
ar
hw
tr
Se
nd
it’s been about skill mix, workforce productivity, back
Sh
ing
d
us
at
an
pe
/p
rc
Tr
Ex
er
ou
ice
office savings, streamlining management structures
rg
ts
rv
Me
Ou
Se
and procurement.
We asked respondents to rate the approaches that are driving
With our Private Finance Inititative (PFI), we’re in a 35-year
their CIPs over this financial year. Service and pathway
contract, but we had a break where we could test value
redesign emerged as the leading factor, with nearly 50% for money on the soft facilities management contract and
naming this as making the single biggest CIP contribution in that has delivered savings as well.
2012/13. This suggests there is a recognition that the saving
There is some service and pathway redesign around
targets won’t be achieved by simply squeezing harder on
A&E, diagnostics and outpatients that is additional to
expenditure budgets. Instead new pathways will be needed.
the savings on procurement, drugs, bank and agency.
These pathways will need to be centred on patient needs and
We are also pushing the quality agenda, ensuring that we
expectations, delivered in the optimum location and eliminate maximise best practice and CQUIN payments.
duplication and unnecessary interventions and tests.
While most trusts identify service redesign as key to Our key message is that high quality care costs less.
Avoiding duplication, minimising errors and waste delivers
delivering their CIP, in many cases this is still a work in
improvements in patient quality, and costs less.”
progress. Those trusts that had begun implementing plans
reported considerable improvements. Trusts who had yet to Amy Whitaker
implement may need to make project management resources Assistant Director of Finance, University Hospital
available to ensure service redesign ideas are converted into of South Manchester NHS Foundation Trust
robust deliverable plans.
Expenditure controls generally, however, remain highly
significant, with a third of directors suggesting this will be the
single biggest component of their current year CIPs. Many
respondents named procurement as a key source of savings. While most trusts identify service redesign
as key to delivering their CIP, our discussions
indicated little evidence of worked-up plans.
4 Approaches to delivering NHS cost improvements

7. Rating the ways to reach CIP targets
While headcount and pay remain crucial factors, service redesign and
partnerships emerge as key to long-term achievement
How important are the following measures in achieving your long-term cips?
35
2 3
30 3 3 5 6 4 6 5
4
8
25 14
10 6 11
13 22
20 14 13 16
12
15
29 13
27 11
14
10 10
19
5
14 14
5 12 11
8 8 3
5 5
0 3
at y
rv ps
em ive
rv on
nm m
tru tion
nis e pa
n
rs
t
ing
n
s
er fro
en
se hi
se dati
ice
sig
tio
ion
s
t
s
t
s
ag ct
be
en
en
ole da
ice
ice
st
al ers
ion
em
an effe
ra
ov s
rv
de
or rag
m
ific oli
wh oli
l g cie
ne
iss
oc tn
se
ur
nu
re
ec ns
of ons
ss ve
r l par
tm e
ge
ra poli
oc
m
ga
of
se Mor
sp co
ice
e
ro in a
m
c
rc
pr
e
ing
ot tive
rv
ce rer
co
d
d
om
fo
ed
an
an
ion
Se
rk
rc
ea
c
ed
Inc
ov
nt
wi effe
he
wo
ou
er
er
ct
Cl
as
ov
pr
ac
of
du
rg
rg
ts
in
Im
pr
Ou
re
Me
Me
Re
th
ion
Im
Mo
ct
du
Re
Major contribution Modest contribution Minor contribution No contribution
When asked to rate the contribution of specific measures However mergers and consolidation of specific services
to achieving CIP targets over the long term, reduction in are seen as having a significant role. This reinforces
workforce numbers and pay across the organisation remain other findings in the survey relating to the importance of
significant for most trusts. Some 27 out of 33 respondents partnerships. The survey highlighted the need for closer
said that headcount reduction would be making a major partnership working with community, acute, general
contribution, while 29 said that reduction in average pay practice, mental health, local authority and the voluntary
would make a major or modest contribution. sector. Working collaboratively and streamlining services in
These reductions would be expected given that pay partnership with other trusts are viewed as key to driving
costs account for approximately 70% of costs on average at new efficiencies and savings. Interestingly, there was little
provider trusts. Reductions in average pay relate mainly to evidence of partnering with the private sector.
changes in the skill mix of staff as changes are made to the The survey confirms the importance of service
way services are delivered. redesign in meeting long-term CIP targets. Some 88% of
Only 18% of trusts saw trust mergers as making a finance directors expect service redesign to make a major
significant contribution to long-term CIP achievement. contribution to plans. This underlines a recognition in the
In fact, 67% saw trust mergers as making no contribution finance community that the NHS will need to revise patient
at all, suggesting that most trusts were not considering pathways – rather than squeezing greater efficiency out
formal mergers as a solution to delivering their financial of existing ways of working – to meet the scale of the
savings target. challenge ahead.
Approaches to delivering NHS cost improvements 5

8. Rating the ways to reach CIP targets
In many cases this will involve clinically-led
Reconfiguring services redesign programmes. There could be a role
for innovative approaches. For example this
“We don’t use beds in the same way. If we close a ward we can save could involve greater use (at scale) of telehealth,
a million pounds, initially when we closed down two dementia wards providing more holistic support and reducing
the majority of the money went into creating new services, so there the need for ‘traditional’ appointments and
was an expansion. Of the couple of million pounds that we took out avoiding inpatient stays. Recently integrated
we probably got one and a half million pounds reinvested. So we
acute and community trusts (and mental health
actually treat more people now than we ever did in a bed, and it’s
and community trusts) could also provide
better for them.
opportunities to move support into community
With the acute services element, we’re going to be doing exactly the settings, delivering more patient-focused services
same – we call it the acute care reconfiguration. So we’ll ask how that could reduce costs in whole system terms.
many beds do we really need, where are we going to have them,
what buildings don’t we need? That’s something that all organisations, “While most trusts identify service redesign as key
certainly mental health, will be looking at. to delivering their CIP, our survey discussions and
work with trusts indicate a lack of worked up plans.
In terms of IAPT (Improving Access to Psychological Therapies) team
We believe trusts must make project management
services, lots of organisations up and down the country have just
resources available to ensure service redesign ideas
absorbed this into secondary care. What this trust has done is to
are converted into robust deliverable plans.”
work with the GPs to have our IAPT services sat in their surgeries.
We do the same with other areas such as consultants, who will go Clive Mellor, Healthcare Advisory Associate
out to the GPs surgery and meet with people, as do our community Director, Grant Thornton
mental health team.
We don’t need as many bases. It’s taking infrastructure out rather
than people. Obviously once you’ve disposed of the buildings that is
a one-off saving. To do something more innovative than that is going
to be what we have to face. One example is community working with
iPads/Androids, so people don’t have to come to their desk to use
their computer; they have the enablement for mobile working.
Our younger mental health clientele are very computer literate so you
can probably dial them four times a day rather than get in your car,
go and visit them and come back. So you have more contact with
them. That’s what we’re tending to spread out at the moment.
The other working relationships we have are with people like the
Alzheimer’s Society, and with MIND, and we’re going to be doing more
of that – they do some of the basic care stuff, possibly a lot better
than we can. We would be contracting with them for those services.
They are cheaper as a result of them not having the significant
bureaucracy and associated costs as a statutory service, therefore,
savings can be made. The third sector is happy, we are happy, and
many people are significantly better off.”
Mick Rodgers
Deputy Chief Executive/Executive Director of Finance,
Sheffield Health & Social Care NHS Foundation Trust
6 Approaches to delivering NHS cost improvements

9. Can outsourcing of corporate
services deliver savings?
Outsourcing of corporate services is often seen as a possible source of savings.
Yet after analysis of the costs, many trusts appear unconvinced of the benefits
How are the following corporate services currently provided (in-house or by third party)?
35
30 4 5
2 5 6 9
25 9
6
20
7
15 31 31
27 27 26
10 22
19
16
5
0
ce
HR
t
&T
e
g
oll
t
en
or
nc
kin
yr
an
IM
sp
em
na
ar
Pa
Fin
an
te
rp
ur
Tr
ain
oc
Ca
Pr
sm
te
ta
Es
In-house Private sector Other public sector/other NHS body Third sector
Given the priority of focusing resources on frontline implementation were seen as prohibitive. In particular some
activities, interest remains high in the potential to drive value trusts viewed an in-house HR team as essential because of the
from corporate services. However the survey highlights that importance of workforce reduction in meeting the current
NHS trusts have mixed views on the role of outsourcing financial challenges.
in these areas. While 40% of respondents had outsourced
“Considering outsourcing in an environment where nothing
payroll and 48% had outsourced transport, there was only
else is going to change is to miss its real potential. Successful
limited outsourcing in other areas. There seems to have been
leaders in back office transformation use outsourcing to radically
little appetite to date from many trusts to outsource functions change how their departments work and recognise they are still
such as finance and human resources. accountable for how well the overall service supports the wider
The reasons behind this retention of services are varied. organisation. Control is not lost, rather efforts are focused on
While some of the estates services would be restricted in integrating the requirements of the organisation and the service
outsourcing terms due to established PFI contracts, several provider. This is as much about changing the way departmental
respondents interviewed for this report stated that despite managers and internal customers operate as it is about managing
ongoing reviews of opportunities there was simply not the relationship with the service provider.”
enough savings to be made in these services. Bill Upton, Head of Healthcare, Grant Thornton
In interviews, several finance directors suggest that most
functions have already been assessed for possible outsourcing
or formally market tested. Market testing had often led to
the retention of services by the in-house provider, with cost
and efficiency often cited as the reasons for selection. In some
cases the costs of transfer, including redundancies and system
Approaches to delivering NHS cost improvements 7

10. Can outsourcing of corporate services deliver savings?
Procurement and services savings
“Better procurement has generated in the region of 8-10% of savings
for the last two years. This has been achieved by investing in an
internal team, focusing particularly on category management. As a
large teaching hospital, we have the ability to generate significant
savings on our own and in collaboration with other trusts locally.
The trust does not currently have a large number of outsourced
services and has ‘in-sourced’ a number of services, including laundry
and catering, following the merger of the predecessor organisations
in 2006 to utilise spare capacity and ensure a consistent service
across both campuses. However, we continue to measure the
efficiency of all of all our support service functions and where
appropriate will undertake market testing to ensure the best value
is achieved.”
David Shannon
Assistant Director of Finance,
Nottingham University Hospital NHS Trust
8 Approaches to delivering NHS cost improvements

11. Opportunities for outsourcing
clinical support services
Other public sector and NHS bodies remain the central partners in clinical
support services such as pathology, radiology and pharmacy
How are the following clinical support services currently provided (in-house or by third party)?
35
30 2
5 10
25 5 7
7
20
15
29
25 24
10 23 22 21
5
0
y
g
y
g
g
gy
ac
log
rin
rin
nin
olo
m
te
rte
ea
dio
ar
th
Ca
Cl
Po
Ra
Pa
Ph
In-house Private sector Other public sector/other NHS body Third sector
As our responses show, clinical support services are still Comments from our respondents indicate that there is,
overwhelmingly provided in-house, with services such as however, some on-going activity in relation to outsourcing,
pharmacy being 93% in-house. However, pathology and especially in the areas of pathology and radiology. Away
radiology are showing greater reliance on other NHS bodies from the survey we can see this in the south sector of Greater
to provide services. Manchester, for instance, where there is a review to combine
This reliance perhaps reflects the general CIP drive pathology services with savings expected from the early
towards efficiencies through better partnerships, creating models. In addition, trusts in Leicester and Nottingham
specialist hubs and reducing duplication of services locally. have drawn up plans to combine their pathology into the
Portering and cleaning are services where trusts (30% largest department of its kind in the East Midlands. Either
of the sample) have turned to external providers. Catering public sector alone or a mixture of public and private sector
follows behind with 5 from 32 trusts having outsourced this organisations, there are increasing examples of organisations
to a private company. Portering, cleaning and catering were coming together to offer substantial savings in terms of
also provided by the third sector in one case each. centralising facilities and improving efficiency.
Comments from our respondents indicate
that there is activity in relation
to outsourcing, especially in the areas of
pathology and radiology.
Approaches to delivering NHS cost improvements 9

12. How CIP schemes have
been received
CIPs can be key drivers of improvement in all areas if done correctly,
and our survey finds that trusts have largely avoided any negative impact
What impact have cips had on the following areas in the last two years
35
30 3
25 14
19 19
19
20 25
27
15 30
10 17
11
14 13
5
8
6
0 3 2
cy
es
ce
ty
e
rs
ale
nc
fe
be
ien
om
an
or
rie
Sa
um
rn
fm
fic
tc
pe
ve
ou
fn
Ef
af
ex
Go
ty/
af
St
nt
St
ali
tie
Qu
Pa
Positive Neutral Negative
Nearly 60% of respondents said CIPs had led to reductions A number of respondents identified that they had robust
in staff numbers, and this is reflected in a negative impact procedures for ensuring savings do not have a negative
on staff morale identified by four out of 10 directors taking impact on quality, through such means as risk assessments
part. The fact that 40% said it had not had an impact on staff at the earliest possible phase of proposal. These findings
numbers is surprising. It should however be noted that half reflect earlier work by the HFMA on clinical engagement in
of the finance directors said CIPs had not impacted on staff provider organisations, which also identified safeguards to
morale and two finance directors actually reported ensure service quality was not reduced by cost improvement.
an improvement in staff morale as a result of CIPs. As CIPs progress the integrity of these procedures will
The relatively positive picture on staff morale suggests become increasingly important.
staff may respond well to seeing an improvement in
efficiency and reduction in waste, with services being more
streamlined and focused on patient needs and expectations.
CIPs were understandably seen as having a positive
impact on efficiency. However finance directors were split
on the impact of CIPs on quality and outcomes with 42%
reporting a positive impact and 58% reporting a neutral
impact. Some trusts indicated that they had rejected or
deferred high-risk schemes.
10 Approaches to delivering NHS cost improvements

13. Hitting long-term financial targets
When asked about hitting targets over the next three years, confidence from
respondents falls
How likely is it that your trust will achieve its Our survey asked respondents to rate the likelihood of
financial targets?
their trust achieving their financial targets over the next
35 three financial years. The results show a clear deterioration
in confidence in 2013/14 and 2014/15. While 97% thought
30
that hitting the 2012/13 targets was very likely or likely, this
25
reduces to 30% for 2014/15, with the remainder indicating
16 achievement of targets was only ‘possible’.
21
20 21 This is likely to reflect two issues. First, there is greater
uncertainty about the financial context for 2013/14 and
15
2014/15. Finance directors simply do not know what tariff
10 prices and efficiency requirements will be set at. Nor do
14 they know the business rules that will be put in place – for
5 11 8 example around marginal rates for emergency work under
payment by results or possible readmissions penalties.
0 2 2
Secondly, the introduction of new commissioners in the
3
4
5
form of clinical commissioning groups will also add to
/1
/1
/1
12
13
14
20
20
20
this uncertainty.
Very likely Likely Possible However the fall-off in confidence beyond the current
Unlikely Very unlikely Don’t know year is also likely to reflect the fact that CIP schemes
are expected to become more difficult as time moves on.
Easier opportunities for savings are likely to have been
realised leaving trusts to deliver on some of the longer term,
transformational projects.
Respondents mention a number of specific concerns
around medium term targets. In particular there are concerns
about a loss of education funding and cuts to local authority
budgets, with a knock-on impact on the NHS.
Approaches to delivering NHS cost improvements 11

14. Making a success of CIPs
Trusts identify good board awareness and support for CIP schemes but some
concerns over manpower levels and capability to make partnerships work
The following are key components of successful cips. how would you rate them in your trust?
35
2 3
30 2 4 5
6 7
8
25 9
16
17
20 17
14
20
18 22
15
24
10 21
16
14 13 13
5
9 8
6
0
he ss/
sk ity
st f
pla n/
po ity
tiv –
rtn ith
al t o
ity
t
ac ity
or
cy tio
ac
an ac
pa w
es
ills
f
ns
r
ity
s
sc ne
af
nic en
we
ac
er
pp
nd ual
al ion
ap
m cap
en iga
m
or re
cli em
ap
su
s a ta q
tc
loc orat
ing it
t f awa
–
tc
g
nt f m
t
s’
en
en
ga
Da
en
er
b
rtm
rtm
co n o
pp rd
En
lla
ion
em
–
su Boa
Co
io
pa
pa
st
iss
or
ag
at
co
de
de
ific
m
an
m
ce
ce
m
nt
Co
an
an
Ide
ct
oje
Fin
Fin
Pr
Good Average Poor
The survey identified some of the key components for The sample was split in identifying clinical engagement
successful CIPs and asked finance directors to rate their in their organisations as either good or average. Perhaps the
own organisations in these areas. Some 73% of respondents greatest concern was around collaboration with partners,
said their organisations had good board awareness and considering the importance of partnership working to
support for schemes. Board level buy-in to CIPs is seen as the achievement of better integrated services. One in five
a vital foundation for achievement of targets. Trusts largely respondents said this was poor in their organisations while
suggested that they had the skills within their finance a further 55% rated collaboration as only average, reflecting
departments to deliver on CIPs. Some 64% of respondents the difficulty in enabling effective partnership working.
said finance department skills were good. However there Less than half the sample rated project management
was slightly more concern about actual numbers of staff capacity as good. Those organisations with average or poor
within finance departments to support delivery of the arrangements in place will need to address this if they are
improvement agenda. to continue to deliver CIPs successfully going forward.
12 Approaches to delivering NHS cost improvements

15. Using rewards to drive CIPs
A variety of divisional incentive schemes are in place across trusts to help
achieve targets
Our survey asked finance directors whether their trusts had trusts deliver their overall financial plan. For some to retain
incentive schemes in place to help drive their CIP targets. surpluses, for example, while other divisions fail to hit targets
Of our 34 trusts, nine have some form of scheme in place, is clearly problematic, so future surplus schemes in particular
each with a very specific and varied profile. may need to be linked to overall CIP achievement. A creative
Some trusts allow greater access to capital for divisions approach to structuring these schemes is required to balance
that generate surpluses, while others maintain reserves that the needs of incentivising individual service lines and meeting
can be accessed by divisions proposing proven ‘spend to the ongoing CIP targets.
save’ schemes. Likewise, there are also trusts that have the
“Incentives are useful but need to be structured on an
availability of transformation funds for such things as
affordable basis.”
service developments rather than awarding preferred
Bill Upton, Head of Healthcare, Grant Thornton
access to capital.
Respondents also identify CQUIN and Best Practice
Tariff funds being reinvested in the division, alongside others
who simply allow surpluses to be retained, either in full or
as a percentage.
A number of trusts are now discussing the
implementation of incentive schemes and it is clear that such
incentives may become a valuable tool in driving further
savings across the sector. The benefits of incentives are clear,
but the difficulty is that these may only be affordable if
A number of trusts are now discussing the implementation of divisional incentive schemes, and it is
clear that such incentives may become a valuable tool in driving further savings across the sector.
Approaches to delivering NHS cost improvements 13

16. The goals of successful CIPs
The highest quality care can be the lowest cost care if care is delivered ‘right
first time’ and duplication and waste are eliminated. But how do clinical staff
view efforts to improve costs?
What do you think your clinical staff see as the main goal
of your cip programme? (clinical staff = doctors, nurses and
other frontline staff) CIP impact and clinical engagement
To reduce costs “We’re making sure we look at everything, every
To reduce costs and improve quality
To reduce costs without 25 opportunity. We’ve had ideas from everywhere within the
reducing quality trust, and even from outside organisations. There isn’t
a pound of expenditure that won’t be looked at three
53 times over the next couple of years in terms of whether
22 it is being spent wisely. I don’t think there’s anything
novel, however the only thing I would say in terms of
our performance management framework is that it has
allowed us to drive some additional costs out at the same
Our survey included two key questions about the overall time as managing quality, performance and workforce
goals of CIPs and the benefits they bring. While overall the targets. If we didn’t have that framework in place I think
responses were positive – from both the points of view of we may have compromised performance or quality on the
financial directors (see page 15) and how those directors back of savings. We’ve been able to sustain performance
– improved performance, actually – as well as managing
believe their clinical staff feel – more needs to be done about
key quality metrics.
communicating the goals and reasons for CIPs.
This was shown in a question asking what finance In terms of CIP impact on staff morale, there is always
directors believed their clinical staff saw as the main goal of concern that the focus remains on finance and savings
the CIP programme. Over half (53%) thought that clinical and this of course impacts on a broad number of our
staff. I have no qualitative evidence that there is a direct
staff saw the CIP goal as reducing costs without reducing
impact of CIP on staff morale, however.
quality – a neutral stance. However, 25% thought that
clinical staff viewed CIPs as purely a cost-reduction exercise. Clinical engagement is an absolutely critical issue. It’s
Changing traditional mindsets is, as our respondents both the medical staff and broader clinical workforce.
commented, a long process. Some remarked that professional We have to develop initiatives for savings that have full
bodies greet their CIP schemes with scepticism, and that support from the clinicians delivering the services and
make sure in communicating the challenge clinicians
more work needs to be done to convince staff that efficiency
see the importance to them of supporting the savings
can be delivered while maintaining, or improving, standards.
programme.”
This implies that work needs to be done at the national level
to help both staff and professional bodies understand the role Karl Simkins
of CIPs. Engagement of clinical staff is key to successfully Director of Finance,
delivering on CIPs, and where this is failing, there may be Royal Cornwall Hospitals NHS Trust
a direct effect on the long-term sustainability of schemes.
High quality services are built on a foundation of robust
finances. But it is also the case that trusts that focus on “Those trusts that have a major focus on continual improvements
continual improvements in quality appear significantly in quality appear significantly more successful at delivering
more successful at delivering ongoing financial savings. on-going financial savings.”
The engagement of clinical staff in this process is vital. Bill Upton, Head of Healthcare, Grant Thornton
14 Approaches to delivering NHS cost improvements

17. Additional benefits from CIPs
CIPs enable improved clinical engagement and the opportunity to improve
both clinical pathways and quality
Apart from reducing costs, what are the additional A number of trusts use transformation change schemes
benefits of cips?
that stand alongside or replace CIPs. These schemes,
100% according to respondents, create more excitement and
90% engagement in their organisations as they place savings as
80% part of the process of delivering a modern, efficient and
70% successful trust.
60% One director said a balanced approach was needed on
50% quality and cost improvement. While he accepted that higher
97
40% 88 quality could mean lower cost, this would not be the case in
72 all circumstances. He suggested that a simplistic adherence to
30% 66
this mantra in all cases risked turning clinicians off.
20%
10%
0% 0 Engaging clinical teams
and improving data quality
wa to
al y to
ior s on
qu to
s
fit
ys
f
s
ty
pa unity
e nity
af
nic nit
itie
’s ocu
ne
ali
st
cli rtu
pr rtu
be
t
th
ion to f
vie or
ge ppo
im ppo
pr
No
re Opp
ov
“We have a good relationship with clinical staff: we have six
nis us
O
O
w
ga ps
at
or Hel
ga
clinical business units (CBUs) and six clinical directors. All
en
the CIPs are generated at CBU level so we have full clinical
We also asked finance directors what they saw as the involvement. Something else we’ve had for over a year now
additional benefits derived from undertaking CIPs, apart is a quality steering group, led by the medical and nursing
from reducing costs and meeting financial targets. Most directors and involving the clinical directors and other
respondents agree that CIPs provide opportunities, as well clinicians, that oversees the process of developing CIP
as challenges. plans, with a particular emphasis on the quality aspect.
Directors were almost unanimous in identifying the Data quality is not a significant issue, but an area we can
opportunity to review pathways as a key benefit. Changed always improve on. What we’re doing at the moment with
pathways can deliver better services for patients – potentially the quality steering group is to take existing performance
delivering services more proactively to avoid inpatient indicators and group them in a clearer fashion so you can
episodes or delivering different components of care on the see what impact CIPs are having on quality.
same day in the same location to provide greater convenience. You’ll get a quality set of indicators that we can take to the
The need to find cost improvements can provide an impetus trust board, CBUs, or distribute on a team basis to show
to challenge the status quo and look for opportunities to what’s happening with regards to these indicators. We
deliver improvements in both quality and value. It may be can say what’s normal, what’s good or poor, we can see
that pathways, once reviewed, remain unchanged or merely if there’s something happening in regard to quality that we
tweaked. But the act of reviewing can help clinical-financial might need to investigate further.
engagement, which is likely to pay off in other service areas At the moment we have many performance indicators.
and projects. We’ve got about 270 that we currently monitor, whether
Given that some respondents have expressed concern that’s through Monitor, or the NHS Performance Framework
over clinical staff viewing CIPs as simply cost cutting, it is or the local commissioner frameworks. So what would be
heartening to see that 88% rate the opportunity to engage helpful is a more concise group of quality indicators.”
with clinical staff as a key benefit. From comments made in
David Sproson
our survey, it is clear that the majority of trusts have made Head of Finance & Performance, Mersey Care NHS Trust
this engagement successfully as they bring clinical staff into
the very process of proposing and assessing schemes. Approaches to delivering NHS cost improvements 15

18. About us
Grant Thornton HFMA
Grant Thornton UK LLP is a leading financial and business The HFMA is the representative body for finance staff
adviser to the public and private sectors. The firm has in healthcare and – for the past 60 years – has provided
over 200 partners and nearly 4,000 staff operating from 27 independent and objective advice to its members and the
client-facing offices throughout the UK. Our key industry wider healthcare community. We are a charitable organisation
specialisms include the health sector, where we have clients that promotes best practice and innovation in financial
ranging from NHS trusts and foundation trusts to SHAs, management and governance across the UK health economy
commissioning bodies and social enterprises. We also through our local and national networks. We also analyse
supply consultancy services to Monitor and the and respond to national policy and aim to exert influence in
Department of Health. shaping the wider healthcare agenda. We have a particular
We have a specialist team dedicated to providing robust interest in promoting the highest professional standards in
financial and operational support to our clients, enabling financial management and governance.
them to focus facing significant challenges in implementing
policies and delivering improved patient care. Our
commitment to the sector is recognised by winning the
‘HealthInvestor Advisor of the Year’ award in 2009 and 2010
and the LIFT ‘Best Advisor Award’ in 2008 and 2010.
We are a corporate partner of the Healthcare Financial
Management Association, regularly contributing to HFMA
conferences and training activities, and speaking on issues
impact the sector at both a national and regional level.
Our services to health sector clients include value-added
assurance, advice on board governance and the development
of Board Reporting Frameworks, and acting as independent
Reporting Accountants for FT applicants. Grant Thornton
also provides a wide range of other financial advisory services
including advice in relation to estates projects and other major
capital investment, business case development, joint ventures,
performance and turnaround services, organisational and
operational efficiency support, taxation services, specialist
corporate finance and due diligence expertise.
16 Approaches to delivering NHS cost improvements

20. Contact us
For further information on this report and CIPs please contact Bill or Clive, or your regional contact listed below:
Head of Healthcare Report author
Bill Upton Clive Mellor
T 020 7728 3453 T 020 7865 2444
E bill.upton@uk.gt.com E clive.p.mellor@uk.gt.com
London South of England
Paul Hughes John Golding
T 020 7728 2256 T 0117 305 7802
E paul.hughes@uk.gt.com E john.golding@uk.gt.com
Midlands & East North of England
Jon Roberts Paul Deverill
T 0121 232 5410 T 0113 200 1551
E jon.roberts@uk.gt.com E paul.deverill@uk.gt.com
© 2012 Grant Thornton UK LLP. All rights reserved.
‘Grant Thornton’ means Grant Thornton UK LLP, a limited liability partnership.
Grant Thornton UK LLP is a member firm within Grant Thornton International Ltd (‘Grant Thornton International’).
Grant Thornton International and the member firms are not a worldwide partnership. Services are delivered by the
member firms independently. This publication has been prepared only as a guide. No responsibility can be accepted
by us for loss occasioned to any person acting or refraining from acting as a result of any material in this publication.
www.grant-thornton.co.uk
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