Organisation objective
- NHS Long Term Plan
- NHS Mandate from Government
Executive Summary
This paper providers an update on NHS productivity.
Action required
The Board are asked to note the information provided in the report.
Background
1. The NHS England Public Board Paper on productivity in May 2024 and update in December 2024 set out the effect of the pandemic on NHS productivity, NHS England’s estimates for the drivers of the loss of productivity observed and latest estimates for productivity delivery in 2024/25.
2. This paper provides an update to these estimates based on latest data which incorporates an updated method for measuring acute productivity which bring the in-year measurements of productivity in line* with how the Office for National Statistics measure annual healthcare productivity.
* The updates to method include: using more recent costing data to weight activities (including weighting similar activities together, such as the same procedures carried out in outpatients or inpatients); counting activity growth at a more granular level to better capture changes in complexity; expanding the coverage of activity to include adult critical care, diagnostic imaging, non-consultant led outpatients, advice and guidance and high cost drugs.
2024/25 month 7 acute productivity update
3. Overall, using the updated method for measuring productivity, acute productivity is estimated to have grown by 2.4% in the first 7 months of 2024/25 compared to the same period in 2023/24. This is comprised of 6.3% output (cost weighted activity) growth and 3.9% input (inflation adjusted spend) growth.
4. The pandemic reduced acute cost weighted activity by around 18% in 2020/21 which consequently reduced productivity by around 24%. Following this initial shock to output and activity as the NHS responded to the early stages of the pandemic and subsequent waves of covid variants, overall output surpassed its pre-pandemic level in 2022/23, by which time output was 2% higher than it was in 2019/20.
5. At the same time inputs have also grown as the NHS invested in growing the workforce. Overall this means the level of productivity is now estimated to be around 8% below the level it was in 2019/20. However, there has been positive productivity growth in each year since 2020/21, and acute productivity is averaging above 2% for the last 3 years (22/23, 23/24 and YTD 24/25).
6. Tables 1 and 2 show activity growth and workforce and other spend growth YTD M7 2024/25 compared to YTD M7 2023/24. Activity growth is highest in elective settings, with non-elective and A&E growth lower. The largest % reductions in spend are being driven by a continued reduction in the use of agency staff.
Table 1 – Cost weighted activity growth by points of delivery, YTD M7 2024/25
Activity Category | Cost weighted activity growth |
|---|---|
Elective spells | 8.8% |
Outpatients o/w First attendances o/w Follow-ups | 5.8% 6.8% 5.1% |
Non-electives | 4.5% |
A&E attendances | 5.0% |
Other | 7.8% |
Total | 6.3% |
Growth rates have been adjusted for differences in working days between 2023/24 and 2024/25
Table 2 – Input Growth by category, YTD M7 2024/25
| Input Category | Real terms spend growth |
|---|---|
| Non-pay | 6.0% |
| Pay o/w Substantive o/w Bank o/w Agency | 2.2% 4.5% -5.2% -36.0% |
| Total | 3.9% |
Non-acute productivity
7. In the non-acute sectors including mental health, primary care and community services, data quality issues have to date prevented more timely measurement of productivity in-year.
8. Even using lagged national data, ONS and York University have had difficulties measuring annual outputs for some community health services and mental health activities given the new and changing categorisations of data in recent years, which has led to some services and some providers being excluded from these calculations. For example, community mental health activity, amounting for around £6bn of care, has not been included in these national estimates for a number of years.
9. Despite these challenges, NHS England is developing measures in each of these service areas (community, mental health and ambulance) and is currently testing these with providers to assess the initial outputs and methodology. Due to data quality constraints, it will take several months to improve accuracy. Initial outputs of this work suggest non-acute productivity growth is slightly higher than the 2.4% acute growth for 2024/25.
10. The measures have also been extensively discussed with University of York and ONS at regular working group meetings with NHS England and DHSC and the underpinning methodology is in-line with how the acute measure has been developed.
11. Following successful testing, we will begin to release these estimates later this year, but they will likely require careful interpretation given the data quality issues and will likely need continued refinement throughout the year. However understanding the in-year productivity position of non-acute services will be a big step forward in understanding and helping drive continuous improvement in productivity across all of the NHS.
Drivers of improved productivity
12. The improvement in acute productivity so far in 2024/25, and average productivity delivered since 2021/22, is more than double the historic productivity delivery of the NHS pre-pandemic – and above the 2% productivity target set for the NHS as part of the HMT Autumn Budget. This has been achieved through:
Reforming care delivery through:
- a marked improvement in elective productivity beyond pre-Covid level the proportion of elective procedures with a same day discharge (84.2% in October 2024 compared to 81.4% in October 2019).
- a reduction in the average length of stay of overnight non-elective admissions by 2.3% in 24/25
Tackling agency spending: Progress on reducing expensive agency spend, from £3.5 billion in 2022/23 (4.5% of total pay) to £3.0 billion in 2023/24 (3.7% of total pay), and is currently forecasting to brought down to £2.2 billion by end of 2024/25.
Boosting retention of experienced staff: A reduction in the leaver rate and sickness and absence rates. Supported by the National Retention Programme, we’ve seen retention improving – In November 2024, leaver rate was at 6.80%, which is below the Long Term Workforce Plan target range for 2023/24 and below the stretch scenario for 2024/25, helping to support workforce productivity improvements
Tech & Digital transformation: Continued investment in technology-enabled transformation and are making good progress, including digitising providers and are on track to achieve 92% of secondary care trusts having an EPR by March; the NHS App which has already freed up millions hours of staff time.
2025/26
13. The 2025/26 priorities and operational planning guidance has set out that next year will need to build from this foundation of improved and improving productivity growth since covid and deliver a 4% year on year improvement in productivity and efficiency in order to deliver the Mandate from Government.
14. Our ambitious plans to drive increased productivity must continue to focus on delivering the best value for every pound spend, including:
- Every system delivering a 30% reduction in agency spending and reducing bank spending by 10%. This should be accompanied by a review of establishment growth and a reduction on support functions back to April 2022 levels.
- Continuing to drive clinical and operational excellence with further reductions in the length of stay by improving processes and optimising system capacity; reducing the amount of low value activity undertaken and further increasing the amount of activity per WTE, back towards pre-covid levels and ensuring patients are receiving care in the most cost effective settings for their health needs, including maximising the use of same day acute services (for both elective and urgent care) and more care delivered in the community.
- Harnessing improvements driven through technology, including the use of teledermatology, expanding the use of the NHS App and completing the roll-out of planned EPR upgrades.
15. To support organisations, NHS England has sent each provider and system an individual productivity and efficiency data pack, calculated through benchmarking information across the themes set out in Planning Guidance, to help systems identify savings and plan for 2025/26.
Conclusion
16. This paper has updated the Board on the latest estimates of NHS acute productivity and shown that the NHS has delivered an average of circa 2% productivity p.a. over the last 3 years.
17. This will need to continue into 2025/26 and the overall requirement of 4% productivity and efficiency delivery.
18. Work is under way to support systems and providers to deliver the requirements in 2025/26, while planning for the next stage of Spending Review to achieve sustained growth in productivity and efficiency.
Publication reference: Public Board paper (BM/25/03(Pu)