HSE needs a programme of rapid, focused cost savings

Brian Kenny kindly invited me to give a talk to the IHCA AGM in Adare, Co. Limerick. I spoke about running the health services through a recession. I also wrote a piece which appeared in the Irish Times, on the same day, Saturday 2nd October. My original slides are here as a 6MB OpenOffice Impress file, and, if you insist, here, as a 6 MB Powerpoint file and here as an 9 MB Adobe pdf.

HSE needs a programme of rapid, focused cost savings

“IRELAND IS experiencing its worst economic crisis since the Great Depression of the 1930s. What are the implications for the public health service of the recent budget cuts and the likely ones to come?

The HSE has had rising budgets since 1995. This rise has partly gone to higher salaries, and partly to playing catch-up from the severe under-investment before then. The HSE will lose about €600 million this year, and is likely to lose as much again, or more, in 2011 and again in 2012.

These cuts are hitting frontline services quite disproportionately, for several reasons. First, many services are delivered by temporary staff, or low-paid staff on short-term contracts. Examples include home helps, some hospital nurses, some social workers, and others. Second, many frontline staff grades are young, and so have higher staff turnover for social reasons. Again, this affects key staff like nurses, community welfare officers, psychologists and social workers. Finally, some frontline services have been, effectively, discontinued, non-emergency dental services being an example. Given another two years of this, our health services will be badly damaged. What can we do to avoid this?

The various problems of the HSE have been thoroughly discussed in the media. It is well known that we have unaccountable services of variable quality. We have a two-tier health service with a vicious bias against poorer people. Our GP services are laughably underdeveloped. We have a large, unplanned, and unsustainable private health sector, which is destabilising the public services and the insurers. Services for adult and child mental health are a national scandal. Services for disability and long-term care are equally poorly developed. Ours is neither a quality nor a fair health service.

There are glimmers of hope. The concentration of cancer services in eight centres has worked well. Drug costs are falling, a little. New clinical pathways are being developed in the acute hospital sector. The quality of HSE management has improved.

There are less cheery signs. The primary care strategy is, more or less, dead. The HSE still has 11 financial systems, which are not mutually compatible. There is still intense confusion of roles and lines of responsibility within the HSE. The co-location of private hospitals consumes scarce HSE management resources.

So, what can be done now to avoid serious harm to patients over the next two or three years? In my view, the HSE needs a better financial structure and a rapid programme of focused cost savings.

The HSE’s financial system was described by the Minister for Health’s expert group on resource allocation as “fail[ing] to meet most of the guiding principles that [we] would consider essential to have a system that is fit for purpose”. There are now two detailed reports on this, one from my colleagues and me and one from the resource allocation group chaired by Frances Ruane. These reports agree in detail and complement each other. We need action on these, not further prevarication.

There are some obvious areas where a lot of money can be saved quickly – drugs, acute hospitals and private healthcare. For drugs significant savings have already been made and more are possible. Examples include the use of restricted drug lists; requiring high levels of generic prescribing; payment for the care of long-term illnesses (eg diabetes) based on following standard protocols of care; setting restrictive budgets for very costly new drugs; and requiring proof of cost-effectiveness for these drugs before they will be reimbursed. All of this could save as much as one-fifth of the total public drugs bill, about €240 million.

Improving acute hospital efficiency is certainly possible. A study of the economies, and the diseconomies, of scale in our system, should guide future decisions on hospital size and location. Measuring the efficiency of hospitals against their peers would be a powerful motivation for change. Requiring hospitals, as well as other service providers, to make more use of shared purchasing and shared services could save a lot of money. Setting up a unified management and budget structure within each of the eight new hospital networks would be a major step forward. I do not know how much this might save.

A decision to stop subsidising private healthcare would save a lot of money. Private healthcare in Ireland receives very large annual subsidies. These include €260 million in tax relief on insurance premiums; €90 million for the National Treatment Purchase Fund; €50 million to €100 million in the subsidy for private patients in public hospitals; and millions more in payments from insurers that never get collected. The tax relief on new buildings costs tens of millions a year at least; the costs of the co-location project are unknown, but might be as much as another €30 million a year. At least €20 million is the cost of training for staff from public institutions. Personal indemnity insurance for private practice by consultants and the two private maternity hospitals is an unknown cost but might be another €20 million annually. The opportunity cost of having consultants working off site is not known, but is probably high. This all costs at least €500 million a year and perhaps as much as €700 million.

A final source of income for the HSE is consultants’ fees. Private health insurance premium income is probably €1.4 billion this year. At least €350 million is paid to people who also hold public contracts. This could be levied directly by their employers, say at a rate of 50 per cent per year, bringing in a very useful €175 million a year.

These are drastic actions, but we live in very hard times. These measures would not be enough to avoid all the problems, but they would be a start. If the State does not do something radical, all health service users will suffer. These are, largely, the elderly, the disabled, the poor and the sick. While services will (still) be inadequate, at least they will be evenly inadequate. Is there any other hope?

Yes there is. It lies in the people who work in our truly awful healthcare system; the people who make it work, day in, day out, despite the problems; the people who do their best for their patients morning, noon and night. The film-maker Alan Gilsenan, writing in this paper on Tuesday, said of a nursing home in central Dublin, “Real care does not reside in the building or its facilities, but rather in the spirit of the people within.” The same is true of the HSE.”

This entry was posted in Health.

5 comments on “HSE needs a programme of rapid, focused cost savings

  1. Peadar McMahon says:

    Sorry for delay. We have a problem with elective services being located a distance from our homes but the emergency is the cause of our real fear. For those with money, own transport and health Insurance it is possible to arrange to get to the services even though they are 70 miles away but for the poor, unemployed (increasing) and elderly it is not acceptable to have the services so far away that they will not attempt access until it is either too late or will cost mcuh increased costs to treat. Yes if there was a proper Primary Care system and proper Community Care it would be of assistance but we do not have that and with the current economic state we are unlikely to get there anytime soon. Re. emergencies – we were given an ‘enhanced ambulance’ and an advanced paramedic. The AP now has to cover two counties and cannot be the first responder. The Fire Brigade, (which is different from the Dublin Fire Brigade) has been the first responder for MIs. Added to that is the fact that we have witnessed and families have experienced the difficulty the ambulance crews have in trying to keep a patient alive as they traverse 40 miles of poorly surfaced, undulating, twisted, and narrow road system. Unfortunately this has not been possible in a number of cases in recent times which seems to indicate that, because we live in rural Ireland, we must accept that we take a major risk in times of emergency and that this country does not treat all its citizens equally. There are cost effective, efficient and modern methods of supplying those services to rural areas, as has been proven in other countries, but those methods have not been considered.

  2. astaines says:

    I understand exactly where you are coming from. I respectfully disagree. We need to consider both costs and patient needs.

    Part of our problem is the generally crummy state of primary and community care in Ireland. This isn’t mainly a resource issue, we actually spend lots of money in these areas. It’s about planning, intelligent use of resources, and smart provision of services.

    For my money we need to be much smarter about where we put stuff, and how we transport people to services. If there was a decent, reliable, local GP service, with a much wider range of resources than we have now, and a really good ambulance and patient transport service, would that be a runner for you?

  3. Peadar McMahon says:

    Hi Anthony,
    As I am from a rural backgorund and witnessing the severe difficulties experienced by family and neighbours in accessing services, since our own were removed, and suffering poorer service when they do get there, and living in fear of an emergency, I would hope that the patient need rather than economy would dictate the provision and location of services.

  4. astaines says:

    I agree with you, there are far wider issues, however I try to confine my writing to the issues I know a lot about! I don’t think, for example, that Colm McCarthy knows anything much about health services, as a brief glance over his writings will attest. I think what the current crowd are doing is insane, but I do have some sympathy, as they are operating in an insane system.

  5. Hi Anthony
    Read your article in IT. Agree with your criticisms of Drug costs and private care, but why not conclude that we get rid of 2-tier healthcare altogether rather than just subsidies? It was great to see someone drawing attention to the massive waste that is double-paying consultants in public hospitals. But, again, why just take half? Consultants are paid almost €200, 000 a year.
    My main criticism though is political-economy. You don’t criticise or really address the reason for the cuts (to bail out bankers etc) and this is important in recommending ‘savings’. Real savings ie waste like private hospitals/insurers and drug profits should be spent on health not bailing out the super-rich. Voluntary academic self-confinement from these issues is all too common today but is not really justifiable in the end. If your opinion becomes relevant for political reasons, I think it is important to raise your voice and opinion on this issue in the debate. Do you honestly think Colm McCarthy’s opinion on these issues is better than yours because he is an economist?
    I think there is a left-wing opinion there and it would be nice (and helpful) to hear more of it.


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