Health services must not be compromised despite plans to save billions

Productivity is defined as the ratio of the volume of resources (inputs) to the quantity of healthcare provided (outputs), adjusted to reflect their relative costs and quality.

There have been significant improvements in the performance of the NHS, particularly in those areas targeted by the Department of Health (DH) such as hospital waiting times and outcomes for patients with cancer and coronary heart disease, but productivity has actually fallen over the last decade.

The Office for National Statistics estimates that, since 2000, total NHS productivity fell by an average of 0.2% a year, and by an average of 1.4% a year in hospitals. The trend of falling productivity will need to be reversed if the NHS is to meet the Department's productivity challenge, to deliver up to £20 billion of efficiency savings a year, by 2014-15, without compromising services.

The Payment by Results approach (a tariff for procedures) has driven some improvements, but it only covers 60% of hospital activity and there is substantial variation in hospital costs and activity. The tariff system could, though, prioritise price over quality.

National pay contracts have not yet been used to manage staff performance effectively, and consultants' productivity has fallen at the same time as they have had significant pay rises.

There are risks to the NHS being able to deliver up to £20 billion savings annually, for reinvestment in healthcare, alongside implementing a substantial agenda of reform. Productivity improvements will be key to delivering these savings.

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