Section 23 Report
“Overview of the NHS in Scotland's performance 2008/09”
We move on to consider Audit Scotland's report, "Overview of the NHS in Scotland's performance 2008/09". Members are aware that there has been significant press comment on the report, which is penetrating and identifies major issues for the future of the national health service in Scotland, although it is based on 2008-09. I invite the Auditor General for Scotland to brief the committee on the report.
Mr Robert Black (Auditor General for Scotland):
As the committee knows, each year I bring an overview report of the NHS to the Parliament and to this committee in particular. Each year the report covers financial performance and every second year it takes a wider look at the performance of the health service as a whole. This is one of the years in which we produce a comprehensive report, which considers finances and performance. The report follows up some of the themes that I raised in our recent report, "Scotland's public finances: preparing for the future". The media coverage that the convener referred to also takes up some of those themes.
Part 1 of this report considers the implications for the NHS in Scotland of the current economic climate. Part 2 considers how the NHS might operate in a tighter financial climate. In part 3, I summarise the overall performance of the health service in Scotland.
I will begin with part 1. Our recent report to the Parliament on Scotland's public finances confirmed that the public sector in Scotland will soon come under the greatest financial pressure since devolution. During the past eight years, the NHS in Scotland has experienced a growth in funding of 38 per cent—that is in real terms, excluding inflation—but the years of plenty are drawing to a close. The growth in funding of the NHS during the past few years has allowed an expansion of the workforce and significant improvements to the infrastructure. For example, capital expenditure rose from £132 million in 2003-04 to more than £500 million in 2008-09. The growth has also enabled the NHS to cope with significant cost pressures, as is well known to the committee and as I have said in previous reports.
In 2008-09 the auditors reported again that cost pressures would arise from the cost of prescription drugs, pay modernisation, the European working time directive, the cost of energy and utilities generally and the cost of upgrading the NHS estate. About a third of the estate requires major upgrading within the next three years. It is likely that the cost pressures that I have set out—or most of them—will continue into the future, and the more challenging economic climate will mean that the health boards will find it more difficult to absorb the increases in costs that probably lie ahead. Pay costs, as I am sure that the committee is well aware, have increased due to recent pay agreements, and there has been growth in staff numbers. The rising pay bill in recent years has absorbed much of the funding increases.
I am delighted to report again that life expectancy continues to rise and will do so during the next 25 years. We have a growing number of older people in Scotland, which will place extra demands on health and other services. On page 7, in exhibit 3, we show the rising number of emergency readmissions of patients aged 65 or more, which is a real pressure on the acute sector.
The current economic climate has already affected the planned income for some health service bodies. In particular, some capital programmes are partly reliant on asset sales, which might not have materialised in the way that was expected. We give an example from Forth Valley NHS Board in the report.
I turn to part 2, on the challenges for the NHS of operating in the tighter financial climate. For the most part, the health service has managed to achieve the necessary level of savings to ensure financial stability in the past few years. However, health boards forecast that they will need to make more than £175 million in recurring savings and £25 million in non-recurring savings to deliver the efficiencies that are expected for 2009-10. That presents a significant challenge for boards and, as members will be aware, there has been some press coverage of that in the past few days.
In the report, I highlight the point that it will be difficult for health boards to make significantly more efficiency savings unless they target some of the larger areas of committed expenditure, such as pay costs. On page 13, in exhibit 7, we summarise the significance of pay costs, which account for about two thirds of running costs in the hospital sector and 70 per cent of costs in the community sector. Clearly, there will be a need for at least some flexibility in how staffing resources are used.
A better understanding of productivity in the NHS is urgently needed. That has been a theme of my reports in the past and is even more so this year. I would be the first to acknowledge that measuring productivity in the NHS is complicated. The measure must somehow consider not only activity and costs, but quality. All three of those are important. We have tried to summarise what is involved in exhibit 8 on page 14.
Last year, the Office for National Statistics produced a report at the UK level. That report indicated that, on the basis of the measures that the ONS was able to use—that is an important qualification—productivity in the health service fell by 10 per cent between 1995 and 2006. That is because health care output measures, such as occupied bed days or the numbers of patients treated, grew over that period but the input costs, such as staffing and infrastructure costs, rose even more rapidly. Therefore, the arithmetic means that productivity is reported as falling, but the assessment does not necessarily include adequate measures of quality. There was a Government review of how NHS output and productivity at the UK level were measured. The Atkinson review made some suggestions about how ill-health output measurement could be developed, and we have tried to capture some of that complex report round about paragraph 40 on page 13 in our report. In essence, the Atkinson review said that we need to measure more things, measure them differently and try to find ways of measuring the less tangible outputs, such as the effectiveness of public health campaigns and the improvements in quality as a result of improved techniques and technology, which mean that the number of interventions may reduce, but the quality of the outcomes is better. None of this is easy, and I am well aware that we tend to report only what can be measured, such as the number of in-patients or the number of out-patient episodes. However, without good information on whether quality is improving, the NHS will always be forced to present an imperfect picture of its productivity and performance.
In reflection of Government policy, not only of the Scottish Government but going back to the previous Scottish Executive, one of the themes of a previous report was the policy of providing more care in community settings as locally as possible. However, I am afraid that, as we show in exhibit 9 on page 15, there is still no evidence of any significant transfer of resources from secondary care into primary care, with the split remaining—pretty stubbornly, I have to say—at about 60 per cent being spent on hospital services; 27 per cent on general practice and family health services; and 13 per cent on community services.
A significant part of that problem is the pressures on hospital services but, as I described, the measures of activity are not comprehensive. In paragraphs 46 through 48 on page 15, we try to tell the story of some of the things that are going on in the acute sector, based on the information that we have. For example, in recent years, the number of planned in-patient admissions has continued to reduce but the number of emergency patients continues to rise; day surgery levels are increasing, which is good news, but the number of out-patients being treated has been falling. That may be the result of changes in the way that health care is being delivered, with more patients being treated in community or general practitioners' surgeries but, to be frank, we do not have the information to know whether that is happening.
The demand for emergency care services continues to increase each year throughout Scotland. That does not fit terribly well with trying to develop services in the community that prevent people from being admitted to hospital. There has been a 6 per cent increase in attendances at all types of accident and emergency services since 2004-05. It is estimated that up to almost a quarter of patients attending A and E are admitted to hospital as an emergency; that, of course, can disrupt the planned activity in hospitals and contribute to the problems of productivity measurement and the need to keep spending money in the acute sector, and the difficulty of getting it out into community settings.
In part 3 of the report there is a look at the overall performance of the health service in 2008-09. I am pleased to report that all health boards met their three financial targets in that year and that most of those bodies have reduced their reliance on non-recurring funding. The three island health boards relied most significantly on non-recurring funding to break even. As I am sure that the committee is aware, NHS Western Isles received brokerage funding from the Scottish Government to eliminate its cumulative deficit. Auditors will continue to monitor the financial health of the boards. Exhibit 12 on page 20 of the report outlines the actual surpluses and deficits in 2008-09 for each health board and the forecast for 2009-10, as they appeared at the time that our report was being made.
I am pleased to say that there is quite a lot of good news to report on key health indicators and the NHS's achievement of its national performance targets. Rates for the three biggest causes of premature deaths—cancer, coronary heart disease and stroke—are declining, as members will see from exhibit 16 on page 23. Suicide rates, which we know have been an intractable problem for a number of years, have been falling and increased testing and early diagnosis mean that the number of AIDS-related deaths is decreasing. However, some indicators continue to show negative trends. Scotland continues to have high levels of drug and alcohol misuse, on which we reported not that long ago to this committee, compared with the rest of the UK, and teenage pregnancy rates continue to remain high, particularly in certain areas of Scotland.
The NHS met 10 out of the 13 national performance targets that were due for delivery in 2008-09. Two targets were not met, and the most significant of those relates to reducing sickness absence rates to 4 per cent, although they were getting down towards that and significantly improving.
The target for reducing the number of older people readmitted to hospital as an emergency in one year was dropped in November 2008. I am not sure of the reasons for that. Certainly, as I described earlier in relation to the exhibit on page 7, the trend for readmissions has been consistently rising. There is a real risk that that activity is crowding out planned admissions and putting at risk the health service's overall performance and productivity. That important target has been replaced by a new target that focuses on emergency bed days rather than emergency readmissions. Appendix 3 on page 30 of the report is a summary of how the NHS performed against its national targets. I will say no more about that at the moment.
As ever, convener, my colleagues and I are happy to answer any questions that you might have.
Thank you. Paragraph 28 says that the Scottish Government health department will "recalculate" the NHS Scotland resource allocation committee target shares
"every year to take into account movements such as changes in population in board areas."
Will the target shares be reallocated simply on the basis of changes in population, or are issues such as poverty and morbidity also taken into account?
Population is the main driver. For 2009-10, the new formula from the NHS Scotland resource allocation committee, which we shorten to NRAC, replaced the Arbuthnott formula. The latter was population based, but it gave extra weight to factors such as age and sex profiles, morbidity and the life circumstances of a population, which was essentially about deprivation and the additional costs of providing services in rural and remote areas. The Arbuthnott formula was intended to give greater resources to areas of greatest need. It has been around since about 2000 and has been used to distribute funding to the health boards for hospital and community services and GP prescribing, which accounts for about 70 per cent of the total budget. The NRAC formula seeks to improve and refine the Arbuthnott formula to take into account new sources of information on, in particular, deprivation and new developments in care provision, because the Arbuthnott formula is a bit dated. Under NRAC the target share of funding that each board should get is recalculated annually to take account of changes in demographics and other factors. As we indicate in the report, it is clear that some boards stand to gain significantly under the new formula, but the Government has made a commitment that no boards will receive funding cuts. As we say, given the tighter financial circumstances that lie ahead for the health service it is rather difficult to see how the health directorates will be able to help boards move closer towards their target shares without extra resources being devoted to doing so, given the commitment that no boards should lose out in absolute terms.
I note your comments that no board will lose out in absolute terms, that there will be no cuts and that the new formula will be phased in but, looking at the differences that it makes, the new formula hardly makes sense. Deprivation is still a real problem in Scotland. Although the new formula seeks to refine and improve a formula that tries to reflect some of the significant problems associated with deprivation, Ayrshire and Arran, where many communities are still afflicted with such problems, stands to be a major loser. Greater Glasgow and Clyde, which includes the areas worst affected by poverty and deprivation in the whole of Scotland, stands to be the biggest loser. How are those boards to continue to cope with the problems of alcohol and drug abuse and the long-term problems of ill-health in many of those deprived communities when the resources are shifting elsewhere?
That is a very important question and it addresses one of the areas where the analysis that we present raises questions that are difficult for us to answer. It might be more appropriate for you to seek answers from the health service.
Okay.
Thanks very much for the report. In paragraph 25 you say that
"Equal pay remains a potential liability that the NHS is unable to quantify."
It also mentions that, as of
"March 2009, NHS bodies had received in excess of 12,000 claims"
on equal pay. I do not know until when equal pay claims can run and whether there is an end date for when people may claim. If there is, does the fact that there have been 12,000 claims up to 31 March 2009 not make it possible to quantify the potential liability for the NHS?
As we say in the report, the NHS Scotland central legal office has told us that it is not possible to calculate the potential liability. The issue has been around for a number of years and the NHS is not very willing to put a figure on claims that it believes are increasingly unlikely to materialise. Only a handful of trusts have settled claims in England. Recent test cases in England have proved that agenda for change is not discriminatory in the eyes of the law, so we are given to believe that that means that only cases before 2004 require to be considered, and that for those cases it will be quite a challenge for claimants to find valid jobs that can be compared with their own to show that gender discrimination took place, because we are talking about some years ago. Understandably, I guess, the NHS is not willing to state categorically that there is no liability for NHS bodies, so there is still an element of uncertainty around the issue.
I reckon that the NHS is being disingenuous in saying that it cannot find comparable jobs, because the jobs that existed before 2004 are pretty much the same as those that exist now. However, that is not for you to comment on.
No.
Where did the funding come from for the few NHS trusts in England that settled claims? Did it come from within the trusts or from some Government body?
Given that that question relates to the English health service, I doubt that we have the information. The team has some general knowledge, but I am afraid that we cannot help you on that.
Thank you anyway.
I thank the Auditor General and his staff for another excellent report that contains some extremely stark messages for us. It follows on from, and points in the same direction as, the recent report on the overall pressures on the Scottish Government's budget. We see continuing cost pressures in the NHS at a time of severely tightening public finances.
I have several questions, the first of which relates to efficiency savings, which you mentioned, and, in particular, the impact on staff costs. You referred to exhibit 7 on page 13 of the report, which shows the high percentage of the total NHS budget that staff costs account for. I am sure that you will have noted the recent comment by a senior health professional, who said that it was incumbent on high earners in the health service to take a pay cut to reflect the cost pressures and perhaps support those staff on lower earnings. I would not necessarily expect you to comment on that as a way forward, but is it your view that something of that nature will be required? Given the budgetary pressures that face the NHS, will overall staff costs have to be looked at?
I am afraid that my answer is rather obvious—it is the Scottish Government that sets the salary bandings for everyone in the NHS and, in doing so, it takes advice from the Senior Salaries Review Board. It is well outwith my remit to comment on what salaries are appropriate for senior managers in the NHS in Scotland.
I will press you further. Given what you said about the percentage that staff costs make up of the total budget, if there are pressures, they will impact on the overall staff budget.
Yes. It might be helpful if I were to widen my response. Given the very high percentage of running costs that staff costs account for in both the hospital sector and the community sector, the containment of staff costs across the NHS as a whole is an issue. Just as important is the need to find flexible ways of making best use of the resource, and quite a lot of thinking is being done about that in the health service. Some policy decisions will have to be taken on whether the NHS can be empowered to use its staff in different ways in the future.
Thank you—that was helpful.
I have a question about part 3 of the report and, in particular, the section of it, from paragraph 83 onwards, that looks at the key indicators on health improvements, particularly life expectancy and the reduction in death rates. You mentioned the fact that we have an older population because people are living longer. That is a good thing in itself, but what are the cost implications? When the NHS was first set up, the expectation was that we would have to spend a lot of money for a short period, after which we would have a healthier population and the cost pressures would reduce. Of course, that is not what happened. People lived longer but developed other conditions. Will the progress that is being made on producing a healthier population cost us more or less money in the long term?
Exactly so. There is a fundamental issue in the demographics. Life expectancy is increasing, but the number of years of healthy life that people can expect is not increasing at anything like the same rate. As you rightly say, the consequence of that is that the pressures on the health service are growing. We can see that in a number of different ways. One example, which we include in the report, is readmissions of over-65s to hospital, in relation to which the trend is remorselessly upwards. That is just one example of the sort of pressures that there will be on the health service.
Of course, that brings us to the fundamental importance of trying to deliver as much preventive and anticipatory care in the community as possible, to avoid the need for elderly people to be admitted to hospital. We are locked into a position in which elderly people are presenting in the acute sector, which means that money must be provided to the acute sector and resources cannot be transferred into community settings. Perhaps the team can provide more information on the general topic.
Barbara Hurst (Audit Scotland):
New research, which was published about the day after we sent the report to print—that was annoying—has showed that it is highly likely that our grandchildren will have lower life expectancy than we do. We have almost reached a tipping point, which I think is due to issues to do with obesity and deprivation. It will be interesting—in the sense of the Chinese proverb—to see what happens during the next few years if those findings are correct. We have a lot of older people in the population, and research shows that in our last few years of life we make greater use of health services. However, a lot of younger people with chronic conditions that are due to lifestyle will also come through the system. The health service has a difficult job, because it needs to invest in preventive work while having to pick up the acute and chronic conditions that come through.
That was helpful.
The Auditor General and his team have produced a useful report. The report contains many positive messages, most notable of which is the continuing reduction in death rates from cancer, strokes, heart disease and so on, in men and women.
However, there are clear warning signs for the future. The rates of hospital discharges that are related to alcohol abuse have increased rapidly, particularly among youngsters. The report noted that during the past five years there has been a 36 per cent increase in alcohol-related discharge rates in the 20-to-24 age group. The research to which Barbara Hurst referred increases concern about such issues. Does the Auditor General get the impression that, overall, health boards are preparing well enough for the future that we face, given the budgetary conditions that we anticipate during the next few years?
The committee will recall that some months ago we produced a major impact report, "Drug and alcohol services in Scotland", which presented a comprehensive picture of what is going on throughout Scotland. It might be difficult for us to have perfect recall of all the report's key messages, but perhaps the team can remind us of the high-level messages.
Since we published that report there has been a lot of work on and commitment of funding nationally to the area. We know that almost all the community planning partnerships, perhaps with only one or two exceptions, include in their single outcome agreements the need to tackle alcohol abuse. It is clear that alcohol abuse is not just a health service problem, so it is encouraging that councils and the health service are starting to consider the issue.
When the committee heard evidence on mental health services not long ago, witnesses highlighted serious problems to do with alcohol-related brain damage and told the committee that there had not been enough investment in the area. For different areas of the health service there will be intractable problems.
I recall a previous report that showed us clearly that the rate of deaths in Scotland due to conditions such as cirrhosis of the liver in the 1980s was half the European rate, but it is now double. That and Barbara Hurst's previous comments point to a real need to get a grip on some of those issues in the future. I am concerned about that, but also pleased to hear from Audit Scotland that the health boards are trying to make some provision for such a future and are planning for it. Scotland cannot, over a long number of years, sustain the current level of support with the cost and pressures that it places on the health service.
I add to the positive comments about the report. Exhibit 15 on page 22 focuses on the percentage of babies that are exclusively breastfed at six to eight weeks. I am sure that everyone knows that those figures are hugely disappointing compared with those for some other nations—for example, in Scandinavia, the rates are significantly higher. In some parts of Scotland, well below 20 per cent of children are breastfed at six to eight weeks. Can we get any more information on the trend in the different health board areas? We are told in paragraph 78 that the breastfeeding target
"is not due to be met nationally until 2010/11",
but are we heading in the right direction? On the lack of figures for NHS Grampian, NHS Orkney and NHS Shetland, the note to exhibit 15 states:
"Grampian and Orkney ... do not participate in the Child Health Systems Programme Pre-School".
That surprises me. Are there no figures for NHS Grampian?
Nick Hex (Audit Scotland):
I am afraid that we do not have a figure for the trend on the breastfeeding health improvement, efficiency, access and treatment target because it was set only during 2008-09 to be met in 2010-11. We will monitor how breastfeeding rates are improving nationally and keep an eye on what is happening at individual board level.
You asked about boards that do not participate in the child health systems programme. We noted that point from the data provided by the Information Services Department Scotland, which is part of NHS National Services Scotland and produces the information on health issues. All we know is that NHS Orkney and NHS Grampian do not participate; NHS Shetland has only recently started participating, so it should be able to produce some figures next year.
It is also worth while reading paragraph 80, which says that HEAT targets were introduced only in 2006-07. It also states:
"Of the 30 targets used to measure performance in 2008/09, only 14 were also used in 2006/07, when"
the targets were introduced. That figure—only 14 out of 30—brings us back to a theme that we have discussed in the committee before. The NHS has huge volumes of statistics and information but the key targets to scrutinise are changed dramatically every year. That does not suggest a good system.
I will pick up on my previous answer. I have just been looking at the NHS chief executive's report, which was produced about a week before ours. It contains a trend figure for the breastfeeding target:
"In the year ending December 2008, 26.4 per cent of all babies receiving a 6-8 week review were exclusively breastfed, a marginal increase on the 26.2 per cent reported in the year ending March 2007."
There has been a marginal increase.
Paragraph 80 also says:
"For 2009/10, ten of the targets used to measure the performance of the NHS in 2008/09"—
so that is 10 out of 30—
"have been changed and two targets ... have been dropped."
That is a real concern for public audit of our non-financial responsibilities. How can we scrutinise an organisation effectively over time with that degree of churn and instability? It is a questionable approach.
As there are no other questions, I thank the Auditor General and his staff for their contribution. In the next section of the meeting, we will reflect on how we wish to deal with the report. I close the public part of the meeting and move the committee into private.
Meeting continued in private until 12:05.