Nigel Edwards, Director of Policy at the NHS Confederation, looks at why the NHS is constantly being accused of inefficiency - and provides some insight into why the picture isn't as black and white as it may first appear.

The NHS is frequently accused of being inefficient. There is a well known catalogue of complaints about delays, high costs, financial problems, staff reductions and difficulties in accessing expensive new drugs.

It is the view of critics that large amounts of additional money have been spent on the NHS, but there is little sign of the improvement that might have been expected. These are serious charges - and ones that are also made about health care systems in many other countries.

Not only is there reason to be considerably more optimistic than the headline figures might suggest, but there is also the potential for major improvements in future.

The NHS is improving on a large number of fronts - and has been for some time. Of course statistics can be used to try and prove otherwise but these will not fool the users of the service - the patients.

Polling by MORI shows significant improvements in patient satisfaction with most aspects of the service. In 2004, 90 per cent of patients rated the care they received as excellent, very good or good.

The public, however, are much more sceptical and pessimistic than people who have recently used the NHS. This is not surprising given that there is a general assumption that the NHS is old, crumbling, slow and unproductive - and this has been the assumption for some time. There is a tendency to say that 'my treatment was great but I suppose I was lucky'.

Assessing how productive the actually is NHS has proven rather challenging. The current measure of productivity used by the Office of National Statistics (ONS) assesses outputs such as operations, prescriptions or ambulances trips divided by inputs, for example, the cost of this work. This measure shows that productivity in the NHS has fallen over the past decade by between 0.6% and 1.3% a year. This poses the question 'is output divided by input really a useful measure for assessing how productive the NHS is?'

This form of measurement does not take into account how well the NHS is performing and it doesn't provide information for NHS trusts on how they can change and adapt to become more productive. It is, in effect, completely worthless, and furthermore rather unhelpful as it paints an unhealthy, and untrue, picture of how well the NHS is performing.

For services such as elective surgery ONS's way of measuring health service productivity works well. Performing more surgical procedures, which generates more income for the hospital, can clearly be interpreted as an improvement in productivity. However, this is not true for the majority of NHS activity.

For many patients, particularly those with long-term conditions such as asthma, angina or mental health problems, admission to hospital does not represent success - just the opposite in fact. The objective when treating these types of patients is to try and manage their condition. Success needs to be measured on prevention of episodes, not on how many times they are admitted to hospital. Unfortunately, measuring events that have not happened is very difficult.

This means that productivity measures which only concentrate on the number of encounters patients have with the service fail to take into account what patients need and what from their health service.

They also seem to imply, rather bizarrely, that the most successful health care system is one that admits the most patients to hospital. This would imply a very unhealthy population - not a usual measure of success for a health system.

One of many examples of how the current ONS measure of productivity is unhelpful for the NHS is expenditure on preventative drugs heart conditions. From 1997 to 2004 the expenditure on Statins - lipid lowering drugs -- has increased by £607 million. These drugs have been very effective in reducing emergency admissions for heart attacks, reducing the demand for major cardiac surgery and have undoubtedly lead to increased survival rates of many patients.

Under the current measure, this very remarkable NHS achievement represents a double loss in productivity. Not only are the costs of inputs increased because of the high level of expenditure on new drugs but the activity measure is reduced because patients are healthier and therefore not being admitted to hospital.

At the heart of the problem of calculating productivity in the NHS is that measuring quality improvement rather than just increased activity is very difficult and contentious.

Even if the measures for productivity were a better reflection of the work of the NHS there might still be reason to expect some reductions in NHS productivity as spending increases on the service.

Secondly, it is important to acknowledge that the baseline data for measuring changes in productivity starts from a period where the NHS was running on low levels of funding and managing an unsustainable level of work. This meant that staff were working very hard but the NHS was weak on systems to improve quality.

Staff pay and the recruitment of key staff had fallen behind. Other spending such as maintenance, capital improvements and other discretionary spending were cut. This inflated the apparent productivity of the service. However, what we were left with was a time bomb waiting to explode in areas that have needed to be improved such as health and safety improvements, backlog maintenance and investment in new drugs.

As new money arrived, inevitably much of it had to be used to deal with these long term problems. Of the extra money spent in 2004/05, 30 per cent was spent on pay, 48 per cent on extra staff, activity and new drugs, 18 per cent was spent on capital and training and 5 per cent on other costs.

There is much more to do in improving productivity in the NHS - no-one is disputing that. The NHS has been set a target of 2.5% per annum based on the review of efficiency by Sir Peter Gershon. This review looked at the way staff are used, how procurement has improved and how sharing back office services can improve efficiency. These measures are fine as far as they go, but they are likely to have a limited effect on care for patients or for overall efficiency. What needs to be done is to redesign the way that care is delivered in the NHS and remove the steps that add no value to the patient.

This sort of change can not be driven from the centre. It can only be done by clinicians and managers working together to build new systems that fit local circumstances and the needs of local patients.

Changing the way we work because the NHS needs to improve productivity is unlikely to win hearts and minds of staff; this is not why they come to work. Fortunately if we ask staff to improve quality and patient outcomes they will be happy to oblige, all we need then is for ONS to find a way of measuring productivity that shows the great strides the NHS is making in this area.

Achieving value for patients and the public is the theme of this year's NHS Confederation annual conference and exhibition in June.

Whitehall and Westminster - May, 2006