HSE could miss costs target by €228m, says confidential consultancy report

The health service could miss its target for costs savings this year by up to €228 million, according to a confidential consultancy report provided to Government.

A growing reliance on agency staff, the ageing of the population and the reduction in private health coverage are all factors driving up costs in the HSE, according to the report seen by The Irish Times .

Higher absenteeism rates and the departure of staff may result from short-staffing and continuing attempts to control employment numbers, it suggests.

The report, by PA Consulting, says €212 million of the €398 million in savings originally targeted this year can be achieved but this requires immediate action. It applies a +/- 20 per cent margin to this estimate, meaning the amount of savings actually made could be as low as €170 million and the resulting shortfall €228 million in a worst-case scenario.

However, the impact of other changes, such as cuts in the working hours of non-consultant hospital doctors, means these savings are not easily identified in spending trends.

Of savings now targeted, €72 million is projected to come from hour-related savings (from Haddington Road), €22 million from the graduate nurse and intern schemes, €10 million from section 39 organisations, €53.6 million from pay reductions and €54.6 million in pay-related adjustments.

'Bottom line'
The report says the assessment of how savings under the Haddington Road agreement are affecting the "bottom line" of the HSE must be set in the context in which the health system is operating and that "other factors may be driving increases in actual costs".

For example, the European working time directive, which limits excessively long working hours by hospital doctors, is leading to new demand for agency work. There has been a “marked increase” in agency spend in the medical and dental category, which may be due to changed working conditions for junior doctors.

“There has so far been no attempt to quantify the effect of the directive and this may have a significant impact on the actual gain from Haddington Road.”

Staff numbers
Reductions in staff numbers are also affecting on the ability to maintain services and control costs, it says. The report points out that the health service is required to reduce its workforce to 98,000 this year, a drop of 2,600. But when account is taken of 500 new posts being filled, the effective reduction in frontline staff is 3,100. This comes on top of a 12,500 reduction in staff numbers since 2007.

“Changes in the health employment market are also impacting on the HSE, with increasing difficulties attracting staff to fill vacancies, leading to wider increases in spend on agency and overtime.” This is an “acknowledged problem” in smaller organisations and in some regions.

The effect of the controls on staff numbers, the lack of staffing norms and short-staffing could lead to increased rates of sickness and absence, and of staff choosing to move to work elsewhere, the report also suggests.

Another factor driving cost increases is the rising demand from an ageing population and the reduction in private health coverage.