NHS spends 640 million on management consultants

23 December 2014 Consultancy.uk 6 min. read

The NHS spent £640 million on private sector management consultants in 2014, up from £313 million in 2010. The new figure, obtained by Professor David Oliver in a Freedom of Information request, shows that, contrary to the government’s 2010 vow to reduce the external consultancy costs, management consultants at the NHS are having a “field day”. Whether or not external consultants actually add long term value, still remains an open and hotly debated issue.

The costs associated with hiring in external consultants to manage aspects of restructuring and running the NHS has been flagged as an issue for some time, even in 2010 when costs were half today’s at £313 million. At the time, Tory Health Secretary Andrew Lansley stated “I am staggered by the scale of the expenditure on management consultants in the NHS.” Lansley blamed labour for the blooming costs and vowed then to “reduce their management costs by 46% over the next four years” and promised “every penny saved will be reinvested in improving patient care”. Today that cost of hiring external management consultants has ballooned to £640 million, with expenditure on management consultancy equivalent to employing 20,000 nurses.

NHS - Healthcare

That consultancy costs would balloon was already predicted by the 2010 Shadow health secretary Andy Burnham, then saying: “We [Labour] were already acting to bring consultancy spend down by one-third, but Mr Lansley's reforms will give consultancy firms a field day. What he seems not to understand is that the NHS needs good managers. By wiping away the expertise currently in primary care trusts, he is opening the door to consultancy firms who know that hundreds of new, untested GP groups won't have the experience to go it alone.”

NHS privatisation
The causes of the increased expenditure on management consultants is tied to the wide scale introduction of market forces into the essential structure of the NHS, and the chaos the implementation of the reforms have thrown the NHS into claim critics. One of the problems critics refer to is that the new bodies set up to oversee the changes, don’t know what their tasks are and need to hire in external advisors to help them.

The practice of hiring in consultants is heavy criticised by a number of high level figures in NHS trusts and doctors organisations. Their concerns echo Burnham’s 2010 concern that hiring in third party managers undermines the ability for the NHS to run itself autonomously.

David Oliver, Alan Leaman and Clive Peedell

Writing in the British Medical Journal Professor Oliver, who until last year was the Department of Health’s national clinical director for older people’s services, has asked NHS executives to justify all consultancy spending and explain why – given the number of “well-paid and experienced clinical and organisational leaders” the management skills did not exist “in-house”. Oliver: “If these well-paid individuals lack the skills to solve most local problems in-house, or by learning from other NHS colleagues, perhaps they shouldn’t be leading at all.”

Dr Clive Peedell, a consultant oncologist and co-leader of the National Health Action Party, a political party set up to oppose the health reforms, says the money “should be spent on patients”. Adding, “This government’s disastrous and wasteful NHS reorganisation has enabled management consultants to cash in on our NHS and syphon off millions that should be spent on patients while hiding behind a cloak of unaccountability.” The problem he believes it that relying on third party consultants “[disempowers] those best placed to make decisions about how to run the NHS to deliver high quality patient care - doctors and NHS staff on the frontline - and it’s speeded up the revolving doors culture between civil servants, politicians and management consultants, which perpetuates the problem.”

Medical help

Does management consulting add value?
When the furore over the costs associated with hiring private sector consultants broke in 2010, the then head of the Management Consultancies Association (MCA), Alan Leaman, said: “The NHS spends 0.3% of its budget on management consultancy and the vast majority of this goes on projects that save the NHS money and improve patient care.” According to a research from the MCA, spending on consultants actually benefits business on the long-run. “On average, for every £1 spent on management consultancy, benefits worth the equivalent of £6 are returned to the client. And the amount spent per employee on management consultancy by the NHS is roughly one-tenth that spent by private sector organisations,” Leaman adds. “An organisation as complex and fast-changing as the NHS is entitled to benefit from the high quality advice and delivery that is offered by MCA member companies.”

Still commentators, such as Professor Oliver, question whether this applies to the consultants advising the NHS and whether it justifies their exuberant fees, with management consulting firms sometimes charging £4.000 per day. Stating that he had “lost count” of the number of reports he had seen by management consultants in the NHS suggesting money can be saved and demand reduced “based on no credible peer-reviewed evidence”. He added: “Consultants often sell back the solutions offered to them by the staff they speak to. Or, in glossy reports, they tell service leaders what they want to hear when they haven’t the courage to take ownership of their own decisions.”

The Value of Consulting

“In times of war arms, dealers and racketeers profit from chaos. ‘Disruptive innovation’ has led to similar spoils for management consultants, with taxpayers’ money diverted from already struggling health and care services.” Professor Oliver calls on a review of the value added by consulting firms. “Let’s ensure that all consultancy is subject to a rigorous audit of value and impact and whether it needed to be contracted out at all.” Adding, "it’s time for management consultants to face the same transparency and accountability as the rest of us.”

Related news: Management Consulting adds value to clients.