Cutting management costs – implications for Interims

The Department of Health published the revised operating framework for the NHS last week which set out some new policy direction. Of potential concern to the NHS interim management community will be the targets for Strategic Health Authorities and PCTs to cut their management costs so they “do not exceed 66% of the 2008 / 2009 management costs”, which is particularly bad news if your management costs grew quite significantly from 2008 / 2009 to 2009 / 2010. In terms of the numbers, that means a reduction from 1.8B to roughly 1B over the next two years.

Of course, often the most obvious solution is bringing to an immediate end all interim contracts, and in fact I spoke to two PCTs last week who are doing just that, one was finishing all interim contracts at the end of July including the contract of their interim Director of Finance, who might be considered to be fairly secure in covering a board level statutory position. The solution imposed by the SHA is to share a substantive Director of Finance with a neighbouring PCT, but you do wonder in such scenarios when the internal resource will be stretched that little bit too thin? The other PCT was ending all interim contracts, or asking interims to consider fixed term contracts on a salary appropriate to the band at which they have been working, but I imagine the uptake will be low, given the drop the potential drop in income between a daily rate and a salary but also because the semi permanent characteristics of a fixed term contract will not sit well with purist interim managers.

Clearly there will be two competing forces at work, on the one hand PCTs will be under pressure to reduce those management costs and finish interims, but so often I speak to clients who admit that interims are operating in vital roles and on pieces of work that they do not have the internal capability or capacity to deliver. My hope and expectation is that although there may be a short term drop in demand for interim resource as PCTs identify way to cut management costs, ultimately demand will return as the use of interim managers is seen as the only way to drive through business critical pieces of work.

Steve Melber is Senior Consultant, Health at Interim Partners.

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