Wednesday, 20 March 2013

Merger Mania six.


In six years the NHS cut 112 acute Hospitals; think how much that would have cost in redundancy payments, management time, wasted equipment and stock, redundant buildings, cancelled operations, disruption, unhappiness and stress to staff and patients. And then we ended up with fewer Hospitals.

It must have produced a heck of a lot of efficiency savings to make that all worthwhile? The italics are mine throughout, the rest are quotes from the report.


“Activity, Staffing and Financial Performance

The first four columns of Table 2 show measures of activity – total admissions, total staff, beds and total operating expenditure. These show a general fall in hospital activity post-merger. Columns (1) – (3) show that post-merger, admissions, staff and beds have fallen by around 11-12 per cent each year.”

So, the merged Hospitals shrunk by almost 12% -less staff, less beds and less patients.

“Column (4) shows the fall in activity is not matched by a fall of the same size in total operating expenditure. In the first year post merger the fall in the growth rate of expenditure was similar to that of admissions, but thereafter was less than the fall in admission, staff or beds.”

But expenditure did not fall as much as the fall in the work done.

“Column (5) examines the number of staff and shows little change in the share of staff that is medically qualified, implying that mergers lead to little change in hospital spending on staff who might bring about higher clinical quality. Columns (6) and (7) examine expenditure on managers and agency staff as a share of total hospital expenditure. The share of expenditure on managers rises a little in the year of merger: the point estimate of 0.35 percentage points represents around an 8 per cent increase on a mean of around 4.4 per cent.”

Wait a minute, after mergers the expenditure on managers goes up by 8% while there is no change in the share of staff that is medically qualified – no more Nurses or Doctors but more managers?

But there was less to manage.

Or maybe they just awarded themselves a big, fat pay rise to celebrate the merger?

“What is more dramatic is the increase in the share of staff who are not permanent employees of the hospital. The share of expenditure on agency staff rises significantly post-merger and by year 4 post-merger is about 1.15 percentage points higher. At the sample mean of around 3.5 per cent this is an increase of around 33 per cent. This provides a possible answer to how merger can lead to a larger decrease in (permanent) staff than in hospital spending. Merging hospitals appear to be offsetting decreases in permanent staff with temporary hires.”

So the effect of the merger is to make experienced staff redundant to ‘save’ money (‘we’re making savings through merging’) but then the expensive managers find they got it wrong, so the cost of expensive, temporary agency staff goes up by 33%, because they got rid of too many medical people.

Agency staff are far more expensive than permanent staff, and they don’t have a commitment to the Hospital (as in “ do I give-a-damn?, I’m outa here”).

DOH! and I thought I was stoopid.

“The last two columns of Table 2 shows a key measure of performance for the government – the surplus of the hospital (in levels) - and a crude measure of labour productivity: the (log of the) volume of admissions per NHS employee in the hospital. The surplus is shown in column (8). It is clear that mergers are costly: any surplus falls in the year immediately before operation as a merged unit and falls thereafter, such that by four years after the year of first operation as a merged entity, the deficit is nearly £3m. This result suggests that mergers are expensive to carry out and result in the increasing deterioration of the financial position of the hospitals involved both in the short and in the long run. Column (9) shows no significant productivity gain following the merger.”

Do my eyes deceive me?

Mergers are expensive.

Managers are expensive.

We end up with fewer Hospitals, which cost more and are less efficient. And more managers.

The result of mergers is worsening financial deficits and no improvement in productivity. That’s a tough one to swallow; I thought it was supposed to be the other way round.

Surely quality must have gone up?

Tomorrow will tell.

 Neil Harris

(a don’t stop till you drop production)


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