Consultancy firms make hospitals worse

By Chris Smith - The Times 21st February 2018

The hundreds of millions of pounds the NHS spends on management consultants actually make it less efficient, the first study of its kind has concluded.

Not only are hospitals wasting their money but the consultants appear to make finances marginally worse.

Researchers said that “inefficiency is the norm” in NHS consulting projects.

Health unions reacted furiously to the “scandalous” findings, urging ministers to divert money from management consultants to doctors and nurses. Hospitals and consultants insisted that external advice was needed, but conceded that the results underlined the need for clear measures of value for taxpayers’ money.

Andrew Sturdy, professor in management at Bristol University, who carried out the study, said: “Our research has clearly shown that management consultants are not only failing to improve efficiency in the NHS but, in most cases, making the situation worse . . . this is money which, many argue, could be better spent on medical services or internal management expertise.”

Despite consistent political criticism of management spending from both main parties, the cost to the NHS has increased under both, reaching £640 million in 2014 before falling to £263 million in 2016-17.

Professor Sturdy gathered data on 120 NHS hospitals over four years, comparing spending on consultancy with an efficiency measure recording how much it cost them to carry out standard procedures. Each £100,000 spent on management consultants led to extra costs of £880, he concluded in the journal Policy & Politics.

The average trust spent £1.2 million a year on management consultants and afterwards became less efficient by about £10,600 a year. Professor Sturdy said: “The big question is what that money could have been spent on instead.”

He also tracked efficiency changes after the consultants were brought in, to rule out the possibility that the worst hospitals needed more outside advice. He found no clear effect of consultancy spending on quality of care.

“What stands out is how widespread that increase in inefficiency is across the board. Inefficiency is the norm,” Professor Sturdy said. He argued that British hospital bosses, unlike those in places such as Germany, seemed to “default to external management consultants” and needed to be more rigorous about their use. About a third of a subset of hospitals seemed to improve efficiency using consultants he said, adding that he wanted to find out what could be learnt from them.

“There will always be a role for external management consultants. A lot of people will say don’t use them at all but this isn’t the conclusion of this study. The message here is the need to assess and be more cautious and sceptical,” he said.

“Clearly an organisation like a hospital does need management advice, the big question is what terms is it on.”

Chaand Nagpaul, head of the British Medical Association, said: “At a time when patients are enduring long waits due to overstretched hospitals and GP surgeries, it is scandalous that huge sums of money are being spent on management consultants in the NHS. This is not just a waste of taxpayers’ money — these findings show that they lead to a rise in inefficiency and are actually making things worse.”

Janet Davies of the Royal College of Nursing said that her members would be “exasperated” by the findings.

However, hospitals defended the use of management consultants, saying they had been told to lay off so many managers that some projects could only be done with outside help.

A spokesman for NHS Improvement, the financial regulator, said: “We are working with all trusts on reducing their costs which includes spending less on management consultants; and have had some success . . . in future, we will continue to work with trusts on keeping their consultancy spending to a minimum, and on commissioning it better.”

Behind the story
There is nothing management consultants love more than a data-rich analysis — except, it seems, when it comes to their own performance (Chris Smyth writes).

Even though such consultancy has been embedded in the NHS for decades, there has been little published research on whether it works. If this study does nothing else, it throws down the gauntlet to management consultancies to demonstrate which of their efforts really do justify their fees.

Much of the scepticism comes from a suspicion that when managers reach for outside consultants, it is simply because they do not have any better ideas, or to legitimise a decision they have already reached. It is striking that the researchers behind this study say that the answer to wasteful consultants might be not to spend the money on doctors and nurses, but to use it hire more permanent managers who know what they are doing.

Consultants say they are already trying to prove their worth with contracts that link their fees to the money they save, or the clinical results they improve. The NHS must explore this. But at a time when the NHS is struggling to implement its long-term strategy for joined up care, there is a more fundamental question: how does the NHS make the change it needs to survive? Anyone who can crack that question will be worth the money.

Paper

'The impact of management consultants on public service efficiency' [open access until 31 March 2018] by Ian Kirkpatrick, Andrew J. Sturdy, Nuria Reguera Alvarado, Antonio Blanco-Oliver and Gianluca Veronesi in Policy & Politics

Postscript:

Health Service Journal reported on 20th February:

The results of a government tendering exercise ranking dozens of management consultancies wanting to sell to the NHS was leaked to HSJ:

  • Scoring document ranks 62 consultancies on price and quality
  • Only two firms scored more than 50 per cent on price, including Deloitte
  • Eleven bidders, including KPMG, fail to get on to framework

The process was run by the Crown Commercial Service, which reports to the Cabinet Office, in late 2017.

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