Thursday, June 26, 2014

Teesside health chiefs could pay consultancy firm over £500k - for advice on cost cutting


Health chiefs could pay more than half a million pounds to a private consultancy firm for advice on how to cut costs.


South Tees Hospitals NHS Foundation Trust announced last month that consultancy giant McKinsey had been appointed to help it plug a £29m black hole in its finances.


The trust had refused to say exactly how much it will pay the US firm - but has now confirmed the bill could top £500,000.


Details released under Freedom of Information laws have revealed that health chiefs have set aside “less than” 0.1% of the £580m annual budget on fees for McKinsey.


However it is claimed McKinsey’s services have been secured for a “reduced rate” and that the scope of the work has not yet been identified.


It has also emerged that South Tees, which runs James Cook University Hospital, in Middlesbrough, previously paid £187,600 for work carried out by the consulting giant, in 2012.


The trust said McKinsey, which has estimated annual revenues of £5bn, has provided advice on South Tees’ “performance relative to its peer group and helped develop the necessary in-house capability to apply operational best practice within the trust”.


South Tees is facing a £29m deficit for this financial year, and now it has been projected that the 2015/16 budget deficit is likely to be almost £50m, putting it at risk of being deemed unsatisfactory by health watchdog Monitor.


The Royal College of Nursing said the cash for cost-cutting advice was a “waste of money”.


Glenn Turp, regional director of the RCN, said: “We already know that South Tees Hospitals NHS Foundation Trust ran a deficit for 2013/14 of approximately £7m; they had the worst financial position of any trust in the North-east.


“So given this context, it seems completely inappropriate that they are wasting yet more money to private external consultants, asking them how to save money.


“It might be stating the obvious, but perhaps one way to save money would be to avoid haemorrhaging hundreds of thousands of pounds on management consultants.


“If they are spending £500,000, then that would be the equivalent of 20 Band 5 nurses’ salaries for a year.”


The trust’s chief executive, Professor Tricia Hart said the financial problems were a combination of factors, from annual ‘efficiency savings’ demanded by the Government, inflation, higher prices, increasing pressure on emergency care, an increasingly elderly population with complex needs and high patient expectations.


The trust said it managed to head off a predicted deficit of £49.5m by the end of the current financial by introducing more rigorous cost improvement plans and has not ruled out job losses.


Prof Tricia Hart said: “It would be disingenuous of me to say at this stage that there might not be some jobs lost, but we have a track record of keeping those to an absolute minimum.”


Bosses are hoping experts from McKinsey will deliver a plan that will “drive out waste” and help move the organisation back to a stable financial position.


Director of finance Chris Newton said: “We have extraordinary talent in our organisation but we don’t have a monopoly on all the best ideas or best practices across the country and the world, and therefore to have access to that experience is enormously valuable to us but they’re here to supplement what we have.


“We’re not subcontracting our problem.”



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