Parkinson's first law states that 'work expands to fill the time available for its completion'. His second law can be summarised as 'the time taken to discuss expense is in inverse proportion to its value'. There is ample illustration of the first law in the management and bureaucracy of the NHS, but it is the second law that prompted me to think about small value transactions in the NHS and public sector in general, and apply the accounting concept of materiality.
As an example, an NHS primary care trust was recently invoiced for £24 by a county council for teas and coffees supplied at a joint meeting. The estimated cost of raising an invoice is about £50 for the sender, and it costs the recipient about the same amount to process it. Internal invoicing within the NHS for small amounts is also common, as are requests by budget holders to move small amounts between budgets.
What is achieved by this? In short, nothing. Budget reporting, on which action is taken, is usually to at least the nearest thousand pounds, and absolutely no benefit in terms of the primary objects of the organisation – patient care – is achieved. In fact, money that could be spent on patient care is wasted. A complete ban on invoicing or transferring of individual transactions of less than £100 would save clerical and other administrative time, IT resource and stationery. Regular small transactions could be aggregated until a value of at least £100 is reached before invoicing.
Large businesses have taken action to eliminate small value transactions, and achieved significant savings. Start with NHS, and apply to the whole public sector, and the savings would run into modest millions. Staff would also be freed up to deal with other matters.
There has been some publicity about the Gershon and James proposals to eliminate public sector waste, whose reports look at the big picture. But do you have ideas of cost savings to enable more money to be spent on patient care? Contact us at 2020health via feedback!
Peter Myers
BSc (econ), FCCA, RD*
