NHS Greater Manchester: The shared services gamble

NHS Greater Manchester has proposed to standardise its financial systems across 10 primary care trusts (PCTs) at an initial cost of nearly three times what it pays for existing systems.

The organisation plans to spend £4.55 million on the new system in 2012-13, which is expected to be supplied by NHS Shared Business Services. Its current systems and services cost £1.49 million.

NHS Greater Manchester expects the price it pays to return to £1.49 million, or less, the following year, as the new system delivers anticipated cost savings. However, even if the local health service ends up the same price or less for its financial systems under a shared service deal, the public sector as a whole will end up paying more for the service.

This situation highlights the complexity and difficulties both the government and private sector providers have in moving public services to a shared service model. While the promise of efficiencies and savings is tangible, achieving those savings depends on many factors, from successful IT project implementation to contract negotiation with legacy suppliers.

In Manchester, the single system will replace the 10 Greater Manchester PCTs' existing finance ledger systems and finance and accounting services, which are currently provided by a range of different suppliers.

Although implementing the new system will cost significantly more than it currently pays, NHS Greater Manchester expects greater efficiency and reduced costs from using a standardised system.

It is expected to enable consistent reporting and compliance with the trusts' standard financial procedures and policies, as well as improved quality of reporting and efficiency in the production of financial and management information.

The system will also have extra functionality, for example, enabling the introduction of e-procurement across all the PCTs.

"It is worth noting that this isn't about replacing like for like," said Naomi Duggan, director of public affairs at one of the Greater Manchester PCTs, NHS Tameside and Glossop.

"The new system will replace some out-of-date and labour intensive systems, and ensure high quality, accurate data, which enables timely and effective decision-making."

The total cost of the new system comprises the existing recurrent costs of £1.49 million, non-recurrent implementation costs of £1.89 million and an additional recurrent cost of £1.17 million. The additional £1.17 million is the cost of moving to NHS Shared Business Services, which is the proposed national service provider of finance and accounting services.

Professor Ross Anderson, chair of the Foundation for Information Policy Research and author of the 'Database State' report on public sector IT, said: "This is yet another example of how healthcare organisations end up paying way over the odds when forced to buy their IT via NHS central bodies.

"Central government should set the standards, then get out of the way, freeing NHS trusts to buy their systems from the most capable suppliers."

However, Duggan argued that the benefits of the new system will outweigh the cost.

"These one-off costs will be offset by current costs of systems and potential reductions in staffing. This detail is currently being worked through as there is a very different position in each of the 10 PCTs.

"It's expected that there will be recurrent savings as the contract for the National Commissioning Board in the future will be nationally determined and paid for centrally," she said.

This means that after the first year, the PCTs' individual contracts with NHS Shared Business Services will migrate to an arrangement where they will be managed and paid for centrally by the Department of Health (DH).

The exact amount of the recurrent additional cost that DH will pay has not yet been confirmed, as DH will be negotiating this as part of the national contract with NHS Shared Business Services from 2013 onwards. NHS Greater Manchester expects, however, that this cost will fall from £1.17 million.

NHS Greater Manchester expects to start realising some savings in 2012-13, with the full-year effect of the savings to be realised the year after (2013-14), once the service redesign has taken place.

"This will only be possible because we will be using a common ledger system and be able to lever economies of scale," Duggan added.

Tola Sargeant, analyst at TechMarketView, said that the extra costs were not surprising.

"I would expect there to be an additional cost as they transition from one system to another. I can see the benefits of having standardised systems across the area as a whole. Plus they will have greater functionality than they have at the moment, so you're not talking about apples and apples," she said.

The organisation hopes to implement the new system from April 2012, when three of the Greater Manchester PCTs expect to renew their licences. The other PCTs have indicated a preference to implement the new system from 1 April 2012 or 1 July 2012.

The PCTs different contracts means that NHS Greater Manchester will incur non-recurrent write-off costs in 2011-12, in addition to the existing £1.49 million cost of financial systems. The write-off cost is related mainly to the current 10-year contract that NHS Manchester PCT holds for its current Oracle Financials system provided by North East Patches shared service provider.

Other existing suppliers include Syntegrate, which provides the system for four PCTs, Sage AccPac, which provides one system, Cedar E-Financials, which provides for three PCTs, and Sun Systems (one PCT).

As well as NHS Manchester and NHS Tameside and Glossop, NHS Greater Manchester includes the following PCTs: NHS Ashton Leigh and Wigan, NHS Bolton, NHS Bury, NHS Heywood Middleton and Rochdale, NHS Oldham, NHS Salford, NHS Stockport and NHS Trafford.

Copyright © 2012 IDG Communications, Inc.

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