Chris Grimes, Head of Public Sector for Matrix SCM explores why NHS Trusts will benefit from legitimising agency spend through neutral vendors under new government regulations.

The head of NHS England, Simon Stevens, has admitted that spending on agency staff is set to hit £4 billion this year as he condemned firms who are "ripping off" the taxpayer.

The soaring bill for temporary workers explains "the vast majority, if not all" of the record >£2 billion deficit which is set to be run up by trusts this year. A report by the National Audit Office (NAO) has revealed that the cost of agency staff within the NHS has risen to this alarming new figure, from £2.6 billion in 2013-14.

The NHS is faced with the almost impossible task of cutting agency labour costs without cutting corners on patient care. The reason that trusts are falling victim to sky-high rates is because agencies know that they have no other choice but to pay the price, else they face the risk of being short-staffed (even more so than usual), or unable to fill vital shifts. In many instances, agencies are effectively holding NHS trusts to ransom.

Increased temporary staffing spending is the largest contributor to the recently reported increase in deficits created within the NHS; agency firms that are not on government-approved frameworks are simply taking advantage of the health service by charging extortionate rates.

Nevertheless, Simon Stevens admitted, "The NHS is not blameless on this. We have got to get a collective grip."

At the end of last year, Jeremy Hunt announced new measures which mean NHS trusts will no longer be able to hire their agency staff through agencies that are not on an approved framework agreement, such as the Crown Commercial Service (CCS). This, in theory, will provide trusts with a legitimate, controlled, and cheaper way of procuring agency workers.

This mandatory use of frameworks sits alongside strict new rules announced earlier this year, which include an annual ceiling for total agency spend for each trust, and a pay cap on the amount individual agency staff can be paid per shift.

So, what do these new rules mean for trusts and how can they actually regain a ‘grip’ on their agency spend?  

Traditionally, NHS hiring managers will have a close network of agencies that they know will be able to fill their vacancies (albeit at considerable cost). Under the new restrictions, however, many of the agencies they so often rely on for urgent temporary workers will be forbidden from being used. This presents a new issue: how can trusts ensure the continuity of their service if many of their ‘go-to’ agencies have been banned from supplying staff?

The solution is actually a rather simple one: the use of a CCS-approved intermediary, such as a vendor neutral managed service provider, who acts as a primary contractor with the trust and then sub-contracts with any recruitment agency the trust wishes to engage with. In a nutshell, the primary contractor will procure all agencies down to a capped, agreed rate and then distribute the trust’s requirements for temporary workers to a whole supply chain simultaneously.

The key advantage to this is that, by contracting with an approved framework neutral vendor provider, it is possible to continue to work within the new NHS regulations, whilst still working with the trust’s favoured and local agencies (who may not be on the framework themselves).

There are clear parallels within the NHS temporary staffing market today with what local government was experiencing around 10 years ago in relation to agencies being able to dictate prices, at the severe detriment of the health service’s budget. It is evident that NHS trusts are calling out for a more structured and cost-effective way of procuring staff. The use of a vendor neutral provider offers a ‘win / win’ for all parties: the local recruitment agencies not on government-approved frameworks are able to remain supplying staff, whilst trusts will benefit from significant cost savings and whilst remaining compliant with the new government rules.

Furthermore, with the assistance of a neutral manged service provider, trusts will also have the assurance of knowing agency rates are capped at a fairer price to match the new government restrictions. Trusts will also be able to regain their 'grip' through having better visibility and control on their agency spending via management information provided by a managed service provider.

The introduction of frameworks to ‘legitimise’ spending will certainly go towards helping to solve the NHS temporary staffing crisis and we should be welcoming Mr Hunt’s forthcoming regulations with open arms.

Chris Grimes - Head of Public Sector, Matrix SCM

chris.grimes@matrix-scm.com