Do health and efficiency targets really measure up?

But what does it mean in practice? Well, if the health service is anything to go by, it means exactly what the government wants it to mean. For many years the NHS has been labouring under this cosh: ministers announce extra funds but simultaneously demand that hospitals and other providers make efficiency savings of 2% or even 3%.

In crude terms, this has meant flogging existing resources harder – for example, by driving up bed occupancy levels to more than 90%. In some mental health hospitals they have been known to run at 110%, a feat achieved by more than one patient occupying the same bed in one day – although not, I am assured, at the same time.

For years health service managers have complained that these demands were counter-productive; trying to squeeze more out of an already-overstretched system is not the same as running an efficient organisation.

Now that NHS funding has risen to record heights, those voices are quieter but still the question is asked: what does efficiency, or indeed productivity, really mean?

The latest requirement is for NHS organisations to show they have made 2% efficiency savings – 1% through improved outputs and 1% through improved quality.

Improved outputs sounds straightforward but, sadly, is not. Take, for example, the recent row over public sector efficiency, which included claims that school productivity had actually fallen in spite of extra funding. The reason was that employing extra teachers reduced the pupil-teacher ratio, which of course made the school seem less efficient. The same would apply to increasing staff numbers on an overstretched ward – patients may experience better care but, in theory, the hospital is less productive, with higher costs and more staff employed to treat the same number of patients.

Perhaps surprisingly, the way we measure public sector efficiency has always been a bit hit and miss. Until recently, the NHS had a crude way of calculating its output: it involved identifying 16 broad areas, such as the number of ambulance journeys, outpatient attendances and inpatient operations. Within each of these, every “activity” was counted in the same way, so in this bean-counter world one inpatient operation was treated like any other. Only when all operations were counted was a weighting applied to each category based on its share of total NHS spending.

Trying to squeeze more out of an already over-stretched system is not the same as running an efficient organisation

Given the complexity of healthcare, everyone from the chief executive down recognised this did not provide an accurate picture of what was happening. So now there is a new system with no fewer than 1700 categories of activity.

The effect has been dramatic. By moving from one set of measures to another, NHS output has miraculously increased by nearly 9% in the past seven years.

Yet even the new system is hardly comprehensive. For example, it doesn’t reflect lives saved, the reduction in suffering caused by shorter waiting times or any care provided to people at home. Nor will it tell us about improvements in the quality of care, which is supposed to produce another 1% of efficiency savings.

So how will NHS managers know whether they’ve achieved a 1% improvement in quality? They’re still working on that. What we really need to know is more about the most important aspect of NHS activity: what happened to the patient?

Public services must be made more efficient but we need better measures to take us away from the “never mind the quality, feel the width” mentality, which simple output indicators can encourage.