The impact of NHS re-organisation on service commissioning costs - a Welsh Case Study

During recent years the NHS in Wales has undergone major structural change in relation to the commissioning of services. In a speech to the Welsh Assembly in February 2001 which outlined the planned changes, the then Welsh Health Minister stated that the restructuring of NHS Wales would “produce a health service in Wales in which bureaucracy is reduced, accountability is clearer and the system is made easier to understand.”

On the 1st April 2003 the five Welsh Health Authorities were abolished and their role in commissioning services transferred to twenty two Local Health Boards. These Local Health Boards share
geographical boundaries with the twenty two Welsh Local Authorities. The key functions of the Local Health Boards are to prepare strategies and plans to meet the health needs of their population, commission services from health care providers and make payments to primary care contractors.

Since 2003 NHS Wales has suffered increasing cost pressures and has struggled to meet a number of performance targets, including those relating to waiting list reductions.

In November 2005 a Welsh Assembly Government member publicly raised concerns about the level of spending by commenting that the creation of twenty two Local Health Boards had 'involved recruiting a high number of senior managers and executives for each local health board' leading to a significant increase in administration costs, and was 'another example of the Labour Assembly Government spending on bureaucracy, rather than front line services where it is most needed.'

Using information extracted from NHS Wales Summarised Financial Statements 1999/00 to 2004/05 (www.wales.gov.uk),this paper presents a review of commissioning costs within NHS Wales over the last five years and concludes that structural re-organisation has led to a significant
increase in administrative costs, particularly executive and non-executive directors remunerations.