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by GK Strategy 12th April, 2017
3 min read

Estate-ing the obvious

The NHS is crumbling.

Not because of spiralling waiting A&E times, the cost of cancer drugs, or even the chronic workforce shortage.

Quite literally, the buildings are falling apart.

Our most recent assessment shows that the estate requires £5bn just to clear its existing maintenance backlog. Put another way, spending has been short term so far; the equivalent of buying a fire extinguisher every time you have a fire, rather than hiring an electrician to fix the sparking plug.

It’s not just repairs that are the problem. Over two-thirds of NHS hospitals were constructed before 1994. That means that they were built before the earliest smartphone was invented, and thirteen years before the first iPhone debuted.

The majority of NHS premises are therefore not set up for now commonplace essentials like WiFi necessary for cost-saving innovations. Visions of a “paperless NHS” are pointless if the physical infrastructure is inadequate. Think of your GP practice – chances are it’s in an “overcrowded and clapped-out” Victorian villa with several flights of stairs, hardly the ideal venue for frail or vulnerable patients.

Why does this matter? Hospitals cost £8.3 billion to run – that’s not including primary care premises like GP surgeries, meaning that the actual cost is much higher. While we can’t eradicate running costs, modernising the estate will ensure these costs remain manageable and allow the NHS to spend its money elsewhere.

 

Taking the Forward View

Simon Stevens, the chief executive of NHS England, has made clear in his update to the Five Year Forward View that ‘new care models’ are necessary to deliver care for an ageing population.

This means moving care out of monolithic standalone A&E departments conceived in the 50s, and towards much more flexible arrangements distributed through the community, like urgent care centres.

It doesn’t have to mean “rationalisation” – or closing – of wards. For example, co-locating a GP within an emergency department is proven to help manage demand by clearing blockages and reducing inappropriate referrals. Urgent care hubs, situated outside of a hospital but equipped with some specialist equipment, can massively reduce strain on the rest of the system.

But without the buildings allowing for these more efficient models of care delivery, cost savings cannot happen.

 

The building problem

Sir Robert Naylor’s recent review of the NHS estate identified that it requires about £10bn worth of capital investment to drag its buildings into the 21st century.

He found that the NHS is more than capable of meeting the Department of Health’s target to free up £2bn of assets.

But where can the remainder of the money come from? Sir Robert recommends that disposal of its property, topped up by significant support from the Treasury. However, he does not shy away from adding that the NHS should look to private capital to finance the necessary transformation.

 

PFI

It is impossible to talk about a solution to this without recalling the spectre of the private finance initiative (PFI) scandal of the New Labour years. While a neat solution to infrastructure upgrades at the time, the rigid repayment rules, the high cost of servicing the debt, and interest repayments outstripping current inflation have led to a deserved suspicion of any such agreement.

But in truth, some of the fault for the continuing burden of the contracts lies with the NHS organisations themselves, which lack the commercial skill to renegotiate better deals.

Sir Robert’s report suggests a greater willingness than we have been used to regarding public and private sector partnership. To embark on this will require the NHS to change the way it procures and to think like an intelligent customer.

 

The NHS as a customer

In theory, the NHS has massive buying power, wielding several billions worth of cash.

But rather than a smart, commercially-minded customer, often the internal politics of competing organisations inside the health service itself – acute, mental health, community, primary, ambulance – are totally counterproductive.

Currently, the property is managed by NHS Property Services and Community Health Partnerships, although together they only hold about 15% of NHS assets.

Naylor recommends the creation of a single, powerful property board to manage the estate with an additional strategic advisory function. The body will provide the valuable commercial acumen the NHS is so badly missing.

A single organisation will provide the necessary strategic support and, with a centralised collection of financial data, will allow better decisions to be made.

As a purchaser and commercial partner, Nigel Edwards of the Nuffield Trust writes that the NHS has a “reputation for being indecisive, adversarial, overly controlling and risk-averse”. Such an attitude “reduces the opportunity for innovation and increases the cost as these challenges are factored into the price by suppliers.”

To enable cultural transformation, first, we must begin with the bricks and mortar.

 

For more information about our healthcare public affairs capabilities please email ilana@gkstrategy.com

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