Bosses say NHS shared financial services initiative will not work

The NHS' shared financial services project will struggle to survive under its new remit, according to its chief executive and a...

The NHS' shared financial services project will struggle to survive under its new remit, according to its chief executive and a former finance director.

The NHS aimed to save £480m a year by centralising accounting and making its £11bn annual procurement budget more transparent, but the scheme has been scaled back because the government will be unable to mandate financial practices under the proposals for foundation hospitals approved by Parliament last week.

Philip Hewitson, chief executive of the National Shared Services Initiative, said, "This sort of initiative cannot realise significant savings and benefits on a voluntary basis and will only be effective if centrally led."

The shared financial services project was aimed at providing the NHS in England with a common, state-of-the-art finance system that could improve planning and deliver significant economies of scale.

When the project was first announced in December 2001, the Department of Health said, "Up to £180m a year could be saved and ploughed back into patient care as a result of the overhaul."

Whitehall also planned to develop an NHS-wide e-commerce strategy that could save more than £300m.

However, Department of Health officials recently decided that the shared financial services proposition did not sit comfortably with plans for increasingly independent foundation hospitals.

Two shared services centres, in Leeds and Bristol, running Oracle 11i and Torex systems, were opened this month. Together the services centres are capable of running the back-office financial operations of 40% of all NHS organisations in England. But as staff prepared for the opening they were told the NHS was no longer going be mandated to use their services.

Julie Armstrong, who was finance director of the National Shared Services Initiative until March, was sceptical about new plan. "You cannot turn the pilots into a straightforward commercial operation. The overheads stack up against it."

Armstrong condemned the move to undermine the shared financial services project. "NHS financial systems are 20 years behind the game. It has 14,500 finance staff. No commercial company has that. With modern systems it could be halved."

Some 46 NHS trusts and organisations will still migrate to the shared service centres in coming weeks as part of a pilot project.

Philip Hewitson, chief executive of NHS shared services, said, "In light of a change in thinking by the Department of Health, steps have been taken to reassure the NHS that the planned migration of the pilot trusts to the shared services centres will continue as originally planned."

Hewitson is now drawing up a new business plan for the centres and will have to go out and sell their services. However, it faces a number of obstacles. Many NHS trust finance directors oppose the scheme.

The Department of Health said, "It was never intended to roll out shared services nationally and the £1bn costs are not a sufficiently high priority to make investment in this project on a national basis worthwhile."

But Armstrong said, "There wasn't the will among politicians and civil servants to make it work, yet the prize is enormous."

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