Haddington Road savings used to mop up increased demand and cut backs

Posted in Articles by saraburke on May 1, 2014

See here Medical Independent column from 1 May 2014

The HSE will achieve just 53 per cent of the savings envisaged under the Haddington Road Agreement in 2014. This is the key finding of the as-yet unpublished PA Consulting report on the benefits arising from the Haddington Road Agreement (HRA).

Specifically, the report set out to assess the value being realised from the savings, with a particular focus on what has materialised in cash savings.

Originally, the 2013 HRA identified €350 million in savings for 2014, however in the last budget, this was negotiated upwards to €398 million for 2014. The PA report predicts that just €212 million will be saved.

Of this, over €112 million of the predicted savings are pay related, ie, cuts to overtime and weekend pay as well as salary cuts. By far the next biggest chunk of money saved will be gained through extra hours worked and the remaining from the introduction of cheaper schemes, such as graduate nurses and intern schemes.

So why is it that the full €398 million or even the original figure of €350 million will not be achieved?

The HRA was predicated on the health system working an extra five million hours due to increasing the working week to 39 hours, each worker providing one hour of overtime free each week and more flexible working arrangements.

The PA report estimates that 4.6 million of these hours will be achieved through these measures and notes that the 10 per cent shortfall might be “reconciled once further outstanding queries in the returns are resolved,” ie, it might be a data error.

Critically, it finds there is “no correlation between the reported benefit of HRA hours and reported trends in spending, particularly on agency [spending]”.

So if the HSE will be close to or even reach the extra five million hours in 2014, why will half the predicted savings not be achieved?

The PA research found that the vast majority of cash savings were achieved in the acute hospital sector, where additional hours and changes to shifts are delivering significant savings. But it is much harder to achieve these in services which are not 24/7 nor residential. It also finds that there needs to be a critical mass for the extra hours to result in savings, ie, there needs to be a big enough staff pool.

In every area of the health service, the vast majority of extra hours generated under HRA were retained for ‘productivity’. This makes sense as the HSE has managed to provide more care to more people with fewer staff and less money, although its ability to continue to do this has depleted over time. And there is evidence that throughout 2013, it was no longer able to do this, indicating a system that has reached it maximum capacity.

Critically, the report highlights how the greatest potential savings are in the extra hours replacing very expensive agency and overtime spend, however this has not happened. In fact, agency costs increased in 2013, up to €260 million from €215 million in 2012.

This report details how this is a direct result of the Employment Control Framework (ECF), whereby the numbers in the public system have had to be reduced year-on-year since 2008. There are now currently more than 12,500 fewer HSE staff than there were when employment was at its height in December 2007.

The ECF is a very crude measure, which means that the HSE has no choice but to hire agency staff. The requirement for agency staff is also driven by increased demand for services from a growing, ageing, sicker population.

The report highlights how efforts to meet the European Working Time Directive are also pushing up the need for agency spend, which is highest in the medical category. Even when new positions are sanctioned, the HSE has huge difficulties attracting staff to fill vacancies due to changed terms and conditions, including lower pay. HSE managers state that they find it particularly hard to fill some posts, especially those in smaller organisations and in some regions. They also detail how this has a knock-on effect on existing staff, leading to increased sickness and many moving to work elsewhere.

The Department of Expenditure and Reform is furious that the HSE will not meet the agreed HRA savings. However, what the PA report shows is a much more complex picture where it is increasingly hard to realise cash ‘savings’ in the context of increased demand for a service with declining staff.

There are stark choices to be made. Either the HSE gets a supplementary budget now or at year end, further productivity is negotiated or there are further cuts to services. None of these are pretty options. Each requires the Department of Expenditure and Reform to face up to the diminishing returns of never-ending cuts to the health system.

A supplementary budget for 2014 now seems inevitable.

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