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Public Sector Health, Private Sector Practice

Competition and choice bring shared services—and cost savings—to the U.K.’s National Health Service.

by Tara Swords, February 2010

The U.K.’s National Health Service (NHS) was founded in 1948 on the principle that all residents, regardless of their means, deserve access to free quality healthcare. And today, that’s how it still works: NHS offers care to more than 60 million people at a rate of 1 million patients every 36 hours, virtually free of out-of-pocket charges. The NHS is a colossal machine employing more than 1.5 million people, many of whom face the notorious challenge of bureaucracy: how to efficiently deliver the best value for taxpayer money. That means the highest-quality service at the lowest-possible cost—a magic combination that most people don’t associate with government agencies.

About 10 years ago, each NHS provider organization was doing a lot more than simply providing care. Each organization also handled complex processes, such as procurement, financials, and HR, that lay outside its core mission. In addition, providers generally couldn’t afford state-of-the-art IT or in-house experts to manage what systems they did have, so it wasn’t uncommon for midlevel finance employees to find themselves responsible for managing inefficient technology systems in addition to their core job function.

To help reduce the cost of providing care, NHS leadership pursued a strategy of shared services. The idea was that a number of shared-service centers would manage back-office functions such as payroll, procurement, and financials so individual organizations could focus on their missions of healing patients. And, in theory, the specialized shared-services organization could do a much better job at these functions than provider organizations. It sounded like relief to overburdened providers, but others saw a potential problem.

“I really didn’t want to go down the route of the national option,” says Jim Mackey, then regional finance director of the northern and Yorkshire regions. “We would have very little control, and we’d be giving most of it away to a big bureaucracy where we had very little say.” In addition, Mackey felt that the NHS, using old technology, wasn’t offering a high-quality alternative for finance services. That’s why Mackey and his colleagues across the North East of England decided to build their own systems based on best-of-breed software, looking to the private sector for inspiration.

“We determined that within a period of five years, we would create a system at least as good as the best of the private sector,” says Mackey, now the chief executive of Northumbria Healthcare NHS Foundation Trust.

The plan worked. In fact, Northumbria’s project was so successful that Mackey and his team quickly saw an opportunity to compound their success by offering their financial system to other organizations in the country that were also dissatisfied with the national option. Out of this idea was born the North East Patches (NEP) Shared System Group.

Private Sector Approach
NEP attracts and keeps its clients by offering the best technology available and backing it up with high-quality service and support. It’s a simple idea but one that often isn’t possible in government. Typically, a lack of competition lets agencies fall behind the private sector in terms of quality, while government’s tendency to bloat processes with bureaucracy merely exacerbates the problem.

That’s what makes NEP’s approach so novel. The consortium, with its own blend of public funding and independence, injects a private sector approach to business into a government-operated system. Clients get the best of both worlds, and taxpayers benefit.

“We’re constantly looking at the private sector and abroad for best practices,” Mackey says. “We’re clearly part of the NHS, but we have a very rapid decision-making process, we’re innovative and very light on our feet, and we have a small team of very capable people rather than being part of a big bureaucracy. We make it easy for people to access very good technology with very good support. That eliminates an awful lot of cost across 60 organizations.”

Mackey says this approach makes people feel more independent and in control of their ability to offer better care. In fact, the private sector approach is part of an interesting development: more and more NHS organizations are forming into foundation trusts, which gives them a greater measure of independence and control. It seems that Mackey’s philosophy is contagious.

“That movement has allowed people to look at their own futures, make good business decisions, have the courage to take risks, and do the right things for their service,” Mackey says. “In the past, it was very much a waiting-for-permission system. The whole principle of the foundation movement is breaking away from that and allowing good organizations to determine their own vision and direction and go for it.”

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