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Last Updated: Wednesday, 12 April 2006, 14:09 GMT 15:09 UK
NHS struggles with harsh medicine
By Jane Dreaper
BBC News health correspondent

Patient demand continues to surge
Headlines mentioning NHS job cuts and deficit problems have been gathering pace in recent weeks.

But the government's line is: "Crisis? What crisis?"

Wednesday's specially convened meeting, in a majestic State Room at Downing Street, was an acknowledgement of some of the turbulence and uncertainty being faced by many organisations in the health service.

And it was a recognition that the public have become concerned.

It was also an opportunity to hear about the work of the "turnaround teams" - these are special teams of management consultants which have been sent in to advise the NHS trusts with the biggest deficits.

Reform opportunity

But above all, the meeting was designed to present the financial situation as an opportunity for reform.

One thing is for certain - leaner times lie ahead in financial terms

Sixteen NHS managers gathered around the table to chat to Tony Blair, Health Secretary Patricia Hewitt and Sir Ian Carruthers, who recently became the acting chief executive of the NHS.

The health service bosses had been invited because all of them were able to share their experience of financial woes.

Some had managed to get past the problems, while others are still very much grappling with them.

Sir Ian's Powerpoint slides gave reminders of three principles that are becoming increasingly important for good financial management in the health service.

Cut hospital stays

First, try to reduce the length of hospital stay - and if possible, treat patients with day surgery.

One hospital boss revealed how he had saved money by increasing the number of patients who were discharged in the morning - allowing them home at that time of day made it easier to get new patients in later in the day and was therefore more efficient.

The second rule involves staffing costs, which are a big part of any trust's overall spending.

Managers are advised to cut back on temporary staff, which are supplied by agencies and are often more expensive - and also to take a firm line with sickness and absence.

And the third area is procurement - ministers believe big savings can be made in the way that hospitals purchase drugs and equipment.

The background to this advice is that NHS managers can't expect any handouts if they run into trouble.

Managers' challenge

It is down to them to manage their way out of any problems.

The government's already dramatically increased health service funding - and Patricia Hewitt pointed out that her department wasn't sitting on a secret pot of money.

Moves to close or slim down hospitals are politically difficult

The Treasury has tightened rules on how funds can be moved around within organisations, and this has made some of the financial problems show up more clearly.

As one health authority boss candidly admitted at the meeting: "I used to fix problems by shifting money round the system - now I fix them by implementing reform."

"The reforms are biting - and it is working. The pain is part of going through the change."

Another hard reality facing NHS managers is the need to clear any deficits while also making efficiency savings during the coming financial year - for those already in trouble, this will require a lot of concentration and effort.

The future

How will all of this shake out in a few years' time?

It is difficult to tell at the moment. A report published today by the think-tank Reform suggests the NHS workforce could eventually end up 10% lighter - but with staff of a higher calibre.

That picture is disputed by the government, which has been steadily recruiting more doctors and nurses since it came to power.

But one thing is for certain - leaner times lie ahead in financial terms, because in 2008 the current high level of NHS funding will return to a more traditional scale.

And big hospitals could particularly feel the pinch - because of the government's stated aim to move more treatment outside hospitals.

Moves to close or slim down hospitals are politically difficult, though, and often hit opposition.

This was demonstrated recently when hundreds of angry doctors protested about uncertainty over plans to redevelop the Royal London and Bart's hospitals in East London.

Ministers called the scheme in for a closer look, but then gave it the nod.

And today, Patricia Hewitt announced the go-ahead for two more redevelopment schemes in Birmingham and St Helens, under the Private Finance Initiative.

But some experts believe that England has a few too many big hospitals - particularly in the areas where there are financial problems.

They predict it will become harder to fend off hospital closures in the future.

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