© Nuffield Trust 29 April 2015 Trends in health spending & productivity Anita Charlesworth, Chief Economist, Nuffield Trust

© Nuffield Trust The scope of the research It provides an overview of the annual accounts data for all primary care trusts (PCTs), NHS trusts and NHS foundation trusts in England for each year from 2003/04 to 2011/12. It includes information from acute hospitals, specialist hospitals, ambulance services, community services and mental health providers. The figures are shown in real terms (i.e. allowing for inflation) in 2011/12 prices, adjusted using the November 2012 GDP deflator. Labour productivity is measured using an estimate of cost-weighted activity and spending on workforce. Labour productivity is calculated for the 110 acute hospitals which have operated continuously since 2006/07 and have not merged with a community health service. This measure of productivity has several drawbacks – in particular it doesn’t take account of quality of care or the appropriateness of treatment.

© Nuffield Trust Government spending on health in the UK

© Nuffield Trust Spending on health in England 2011/12

© Nuffield Trust Percentage changes in spending by type of care: 2010/11 to 2011/12

© Nuffield Trust Distribution of surpluses/deficits: 2011/12

© Nuffield Trust Spending changes by staff numbers and cost per head: 2003/04 to 2011/12

© Nuffield Trust Spending on private finance initiative (PFI) interest in England: 2009/10 to 2011/12

© Nuffield Trust Changes in UK health care productivity (NHS and non-NHS providers) – ONS measure: 1995 to 2010

© Nuffield Trust Variation in labour productivity at selected providers in England: 2006/07 to 2011/12

© Nuffield Trust Variation in labour productivity by region: 2011/12

© Nuffield Trust Summary – spending patterns Health spending in England in 2011/12 was £105.4 billion – a 0.3 per cent increase in real terms. There was a £1.4 billion underspend on the health budget in 2011/12. The number of hospitals in deficit has been rising steadily since 2007/08 – 32 out of 250 trusts ended the year in deficit in 2011/12. The financing costs of PFI scheme are a small proportion of the total health budget (less than 1 per cent) but they have increased rapidly. Seven hospitals are now spending more than 5 per cent of their income on PFI financing costs. Spending on community health services has grown most rapidly in recent years in line with the policy of shifting more care into community settings. Spending on hospital care has also grown very rapidly, with spending on GP services falling.

© Nuffield Trust Summary – labour productivity There appears to have been relatively little improvement in labour productivity in NHS acute hospitals since 2006/07. Measures of NHS productivity are likely to systematically underestimate the overall performance of the services, as the NHS has no measure of the output of community services. Labour productivity varies across the country and seems to be higher in the South and lower in the North. London appears to have below average labour productivity but this may be explained by the lack of quality adjustment in our measure and the importance of teaching and research in London hospitals. Hospitals with a higher proportion of medical and dental staff are more likely to have higher productivity despite the higher labour costs of a richer staff mix.

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