Cuts across the border

The coalition government has now told us how it plans to alter England's National Programme for IT (NPfIT): by making cuts. It is removing £700m from its budget, on top of the £600 proposed by the previous government last year, along with offering greater local control. The large majority of these savings will be achieved by allowing local trusts to extricate themselves from their local service providers – BT and CSC – and their provision of the Care Record Service. Instead, trusts will select their own software vendors. These organisations will now have more flexibility, being able to build on top of their existing systems instead of having to rip and replace them with largely proprietary systems like Lorenzo. This software package, offered by iSoft under the CSC contract covering the north, Midlands and east of England, has been criticised for limited retrospective compatibility. Trusts will also be able to decide which applications they really need and save money by leaving out redundant and costly functions. Lorenzo and Cerner's Millennium suite both include a vast scope of applications, which in the standard offering under NPfIT was not tailored to individual trusts. Such cost savings may actually have a positive impact on the dynamics of the health IT industry, prompting trusts to open up their supplier list and focus on essential applications. The care record environment will become competitive, innovative and diverse as new players enter the marketplace. The political situation in Scotland is different, but cuts will similarly lead to changes in how health service organisations buy IT. The country's Independent Budget Review (IBR) panel has sent shudders through the country's health service with a recently published report on the financial outlook. This made clear that the cuts demanded by the UK government – which will be passed onto Scotland through a reduction in its grant from Westminster – will place a lot of pressure on the Scottish NHS. The paper discussed pay freezes for nurses, a halt on the phased withdrawal on prescription charges and even dropping the ring fencing on healthcare spending. It is not yet clear whether the Scottish government will pick up the report's more radical proposals, but the situation highlights the need for IT suppliers, even for the supposedly protected NHS, to react to the changing landscape in public finances. Scotland already has a very poor poor performance in many key health areas, such as a highest mortality rate in the UK for major diseases including stroke and heart conditions. It is also behind in terms of NHS modernisation, with no ICT initiative close to the scale of England's NpfIT – although it is ahead on emergency care records and use of telehealth. Most innovative initiatives are locally driven by the more sophisticated health boards. Slashing the budget of an already strained system could have serious implications, threatening patient care and causing many organisations to wait years for the introduction of basic applications such as electronic health records, patient administration systems and picture archiving and communication systems. It is also unlikely that organisations will go in for large outsourcing contracts or expensive customised products. This leaves the main opportunities in supplying less expensive products that are proven to work for specific processes. The Scottish market will not seize up completely, but organisations will be cautious with their investments, and vendors will do better to focus on cost-efficient, off-the-shelf solutions that are more likely to satisfy the buyers up-front. Victor Almeida is Kable's senior health analyst. Click here for more information on Kable's market intelligence services.