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Frontline staff must get on top of NHS finance

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Andy McKeon on why nurses need to understand how NHS finance works

Evidence dictates that in the long run, or even in the relatively short run, better use of the money in the NHS leads to better healthcare and better outcomes for patients. And it’s a fact that on a day to day basis, nurses and doctors are responsible for where most of the money is actually spent. So it’s only right that those on the frontline ought to understand the basics of how the money works in the NHS.

Of course, NHS finance is a complex business, understandably given it is a £100bn organisation.

What the Audit Commission and the Academy of Medical Royal Colleges has tried to achieve is to cut through the complicated financial arrangements that keep the cogs of the health service turning, by providing a practical guide to the way NHS finance works.

We are encouraging frontline staff, like ward sisters, to become more engaged with finance and more involved in management. The evidence is that when clinical professionals do this, they can bring about a significant difference to the quality of patient care. The guide includes some case studies demonstrating just what can be achieved if clinical staff get more involved in managing money with help from finance colleagues. They are, after all, the ones who really know what patients need.

‘When nurses become more engaged with finance and more involved in management, they bring about a significant difference to the quality of patient care’

That’s why the RCN joined the academy and the Audit Commission - along with the Department of Health, the NHS Institute and the Healthcare Financial Management Association - earlier this year in calling for such involvement and setting out some practical steps to make that happen.

The guide is timely. These are financially insecure times. People and organisations are looking for ways of tightening their purse strings. At home, consumers are looking for bargains and better value for money and to do this requires a good understanding of finances and personal and household budgeting. And at work we all ought to be thinking similarly.

Hospitals, like individuals, will need to make their money go further and get better value for it if they are to continue to provide and improve quality healthcare. Lord Darzi’s report, High Quality Care for All, requires improvements in the quality of care and more responsive services for patients. His vision can only be achieved if there is strong involvement of local clinicians in the management of services. For this to occur, nurses will need an understanding of how the money works in the NHS, how budgets work and how to make the best use of the money available.

What do nurses need to know? We are not suggesting they should develop an in-depth knowledge of financial issues, or turn into an army of pinstriped, BlackBerry carrying accountants. But we do think they should know the basics, recognise and understand their role in committing resources and how good use of them will lead to better services.

It helps to know: how money is allocated by the DH to PCTs based on population and health needs; how PCTs commission, or buy, health services from a range of providers, including acute hospitals, mental health trusts and private healthcare providers, as well as from GPs; and the basics of how the system for paying hospitals for the treatment they provide, known as Payment by Results, works.

In addition, nurses should have an understanding of the financial constraints under which their trust operates. Essentially, this means not spending more on staff, buildings and equipment, and consumables than they receive in payment from PCTs.

Nurses should also understand the basics of how budgets are set and their management.

Finally, nurses need to know how to make the best use of available money. Achieving value for money is about getting the right balance between economy (the price paid for resources used to provide care), efficiency (how well the resources are used) and effectiveness (how good the outcomes are).

At ward level, economy would include having the right mix of staff, efficiency would include how well rotas work and effectiveness would include how satisfied patients are with their stay and treatment.

How much nurses need to know will depend on their level of seniority. A ward manager will be responsible for the budget for their ward and therefore needs to have a good understanding of budget management, in addition to a basic understanding of how NHS finances work and making the best use of the money available. A director of nursing would need more detailed and extensive knowledge of how the trust is funded, where cost increases are likely to come from, how to construct a business case, as well as the experience to go with these things.

The ambitious nurse, from trainee upwards, would do well to have a working knowledge of the basics. Whether they wish to develop their career into management or improve the quality of care that they provide.

So, in this time of increased financial constraints, knowing how to make money go further is essential in order to keep delivering high quality care.

Visit to see the Guide to Finance for Hospital Doctors, produced by the Academy of Medical Royal Colleges and the Audit Commission.

Andy McKeon is managing director of health at the Audit Commission

  • 1 Comment

Readers' comments (1)

  • Most nurses DO understand the financial situation especially where I work at the moment- we have lost beds even though we are in a remote,rural & with a predominantly elderly population,also ALL training-mandatory and for practice improvement- has been stopped. We are a mixed bunch of trained staff with huge experience gained across Great Britain and the world- several having been in management but not one of us has had any of our suggestions listened too or implemented- we are just told this is stopping,or this is not allowed or you cant order that anymore and it is EFFECTING our ability to offer good effective,compassionate care which we all strive to do and have always been very proud to provide.
    I personally stepped down as a charge nurse just because of this attitude 5 years ago and I changed country's and worked for a private company and as a practice nurse for 4 years before returning to the NHS and am disgusted to find the situation just as bad- in fact worse as it appears to be almost bullying to achieve the aims of the Trust and as usual we as nurses on the front line get
    all the blame.
    Mr McKeon can suggest that we as nurses should have a working knowledge of how budgets and finance work and in the real world that would be lovely but nurses have no say what ever in how the budget is spent or savings made we are just told what to do/ what will happen. I can assure you all that we as a team have tried every thing to make our voices heard.
    So we as nurses can go on and have a PHD in finance -if that would make the situation any better and save NHS millions of pounds BUT it wont make any difference to our situation of being stopped from providing evidence based,compassionate,appropriate care for ALL our patients.

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