Investing in Direct Patient Services

If you were running a factory and not a health facility how much of your capital asset base would you devote to unproductive uses? How much would you devote to the staff canteen? How much to offices? How much to meeting and training rooms?

In reality you would probably have to spend something on these items bit it would not be by choice. If you were responsible for the factory remaining in business you would do all you could to devote floor space to profitable business activity. If you failed to do so because you wanted your workforce to be happy and have access to all the unproductive overheads they wanted your shareholders would quickly replace you with someone more in tune with their thinking.

The same would be true of a shop a manager. Every shop manager is judged on his or her sales revenue of floor space. If he/she chooses to take out some selling space to create offices he/she will have to compensate by increasing the sales per square metre of the remaining sales area. The rationale behind such measures lies in the shareholders desire to invest in productive assets not unproductive overheads. The managers office makes zero contribution to sales so the “switched on” shop manager decides to do without one. They engage their brain and find other ways of doing what they have to do. There is always a way. Administration in modern shops is handled at the sales desk. Modern shops don’t have large stock rooms. They display just about everything they have in the sales area (just about the whole shop) and order a replacement on point of sale or deliver direct to your home from a central warehouse serving many stores.

Any health service manager could do this. But the moment we apply the word health we have to hold huge stocks of everything, everyone wants their own office, all departments want staff areas. There is no shareholder making sure we “sweat the assets”. A CEO will lose their job for failing to follow the letter of the law in every matter of detail relating to the Health and Safety at Work Act but not even be noticed for wasting fortunes of tax payers money on unproductive buildings. A Finance Director may be fired for not observing every detail of a set of standing financial instructions yet no one would notice that they had paid £millions from the healthcare budget in capital charges/rents on property that didn’t deliver outcome or was in a virtually derelict condition. Why do businesses drive productive asset bases but in health we have no idea of levels of productivity. Note: a typical community hub has 40% clinical space and 60% common and shared space. Designing in the problem?

It would be comforting to have a set of polished and convincing arguments setting out the reasons why the patient, service and tax payer had nothing to lose from this absence of asset management – but there aren’t any! This wasted productivity could have treated more patients and delivered better value for money for the taxpayer.

So does anyone care or even recognise that the return on value for huge capital investment is so diminished, buildings are unproductive? Perhaps those of us who do care should publicise how unproductive assets can be and how much additional healthcare this couldprovide. Perhaps we should let the people know that no one in the higher echelons of public sector cares enough to even find out how much we spend on unproductive assets.

There are many reasons why it would be difficult or inconvenient to tackle the problem of unproductive capital assets. We can’t upset the clinicians. The professions have an innate conservatism. We would have to invest in systems to record the data. And we have to get the data. This has historically been a man and a clipboard but the Internet of Things has allowed us to develop a cost effective solution to mass data collection and analysis. The time has come, the economics demand it.

Here’s an action plan:

  • Look closely at the capital asset bases and ask challenging questions concerning precisely how each building (or portion) makes a genuine contribution to direct patient care. And measure it.
  • Adopt a policy governing who has access to non-clinical facilities and under what circumstances.
  • Identify service outputs for every function and conduct a formal open-minded option appraisal to select the best possible means of delivering them.
  • Stop piecemeal developments that are in a strategic vacuum, that have not stated that existing assets are high performing.
  • Stop approving business cases that do not show the investment will deliver a five-fold increase in patient throughput.
  • Good things have happened recently. The Naylor Report and Carter Review have helped get some of these issues on the table. But it’s time for action. If you can’t measure it you can’t manage it. And it’s time to deliver.

With thanks to David Jones MBA for his inspirational thoughts on asset management.

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