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HTN EPR: Apira on EPR affordability

At HTN: Electronic Patient Records, we were joined by a team from digital consultants Apira.

Alan Brown (director of professional services), Richard Scowen (managing consultant and procurement practice lead), Claire Doughty (clinical lead and transformation manager) and Kiran Dave (managing consultant and requirements practice lead) joined us to discuss finances associated with an EPR for an NHS trust, and how EPRs can (or should) be affordable.

To begin, Claire provided some background on Apira: “We have helped over 100 NHS trusts and other healthcare organisations on their digital journeys over the past 26 years. We have a large team of over 70 consultants and we work with a number of partners including KPMG on several EPR programmes. We’re commissioned by trusts and other clients to support additional capacity and capability, to bring our knowledge and expertise to help de-risk and help accelerate their digital journeys. We cover all elements of the system lifecycle from strategy development through to benefits realisation.”

She also shared information on Apira’s pathway: justify, specify, buy, deploy, adopt, realise. “We typically support trusts along all stages of the pathway,” she said, “but we have some clients where we are only involved in a particular part of the digital journey.”

What does affordable mean?

Richard started off by sharing a business case definition of affordability: “If the cash-releasing benefits exceed the costs, then we have no affordability challenge. If we have realised fewer benefits, then we have an affordability gap that we need to close.”

At 07:03 on the video below, a graph is displayed to illustrate how affordability relates to the lifetime of the programme. The graph demonstrates how the relationship between savings and costs as the project progresses in time. “There is always an affordability challenge at the beginning of the project, but then when we start to realise our benefits, we can breakeven,” Richard said.

Another example is shown where the costs are higher and the affordability challenge more pronounced, which results in the project struggling to breakeven as time progresses.

“The challenge here is around funding those early years,” Richard explained.

Richard shared the NHS checklist on affordability, which asks:

  • How is the incremental cost of the scheme for the first few years of the operation funded?
  • What is the impact of the project on the organisation’s ability to meet statutory financial duties?
  • It must cover the capital and revenue consequences over the life of the project.
  • There should be adequate proposals for managing a shortfall.

Next, Richard noted that going forwards the discussion will make a number of assumptions; the focus would be on EPRs in acute settings, and non-cash releasing benefits and societal benefits would not be included. This is the Financial Case part of the business case. On costs, Richard said, “We’re using EPR costs that are aligned with the Frontline Digitisation Rough Order of Magnitude costs. We’re assuming that implementation costs are going to be a lot of money, particularly in the first three years, and that there will be no major infrastructure improvements needed.”

How do we make EPRs more affordable?

Reducing the cost can be challenging, but there are several strategies that can be implemented to achieve cost savings,” said Kiran. “In my opinion, one of the first things to focus on is consolidation of systems. This can reduce your licensing and maintenance costs and it can also improve data quality and reduce risk of error.

“Another key aspect is spending time defining the scope of your EPR. Which systems are going to need replacing with your new EPR, which systems will stay but require integration? Integration is a key element of an EPR programme and you’ve really got to think of your strategy as a whole.” You also have to consider the potential impact on clinical workflows and patient care when making changes to your EPR systems, Kiran pointed out, to ensure that safety is not compromised.

On the human factor, Kiran said, “”From a team and resourcing perspective, EPR programmes require many staff members. The contractor market is high cost and high demand at the moment with limited availability. Once implemented it’s important to ensure that you still have in-house resources to maintain the system and ensure that knowledge stays in the trust.”

A final tip in this area from Kiran: “Don’t use your EPR as a bandwagon for everything that needs doing – infrastructure and integration, for example, are separate projects and need to be treated as such.”

Next, Alan discussed the role of cash releasing benefits in EPR programmes.

“Benefits are great, and if you can increase them, that’s great too – but they take years to realise,” Alan noted. “You can’t start to realise benefits until you’ve gone live, and some benefits will take another year or two after that to reach their full potential. You’re changing the way that people work and changing processes, and that takes time to bed in. That limits the ability of benefits to make a case affordable, particularly in the early years where you still need funding to cover those early costs.”

Benefits also depend on the starting point, Alan pointed out; if you start with nothing, you have to put in a significant amount of effort to get the project underway but you also have a large number of benefits available to you. If you already have some benefits realised at your starting point from existing systems (such as EPMA), then you still have significant effort to expend to implement a new EPR but fewer benefits to gain.

Moving onto sharing instances as a method for making EPRs more affordable, Claire said, “There are two ways to share an instance – one is starting from scratch, with two or more trusts starting at the same point without an existing EPR and designing it together. The second option is to join an existing trust with an instance that they have already created.”

Claire commented on some of the factors to consider for sharing instances; for example, there is a potential EPR supplier discount of around 10 to 15 percent, and there is a need for a shared programme vision and scope, necessitating effective leadership and communication along with robust governance and risk management. It allows for better support for shared pathways, but it is important that some decisions and processes are aligned.

In terms of challenges, Claire noted that it is still resource heavy and there is a risk of one trust becoming more dominant than the others. “Trusts do work differently, even though they are working towards national guidelines,” she acknowledged.

Next, Richard led the discussion to focus on longer asset life, residual value and depreciation.

“One thing about EPRs, as we all know, is that they last for a long time,” Richard said. “So it’s perfectly reasonable to say you’ve got a 15 to 20 year life. This can help you with your depreciation and also the longer the lifespan the more benefits you will hopefully see.”

The long span helps EPR programmes to break even, Richard noted, even if it doesn’t happen for a while; and it also gives space and time to spread capital early on in the project.

The conversation turned to the topic of impairment, which Richard described as “an accounting tool that allows you to decrease the asset value in one go”. It’s typically used for capital assets in the NHS, he said, such as MRIs, CTs or sometimes buildings. “It’s not been used often in the EPR world, but it’s starting to develop.” When colleagues in NHS England are receiving and reviewing business cases with significant affordability challenges, they are starting to ask trusts if they would potentially consider impairment.

Richard described how impairment means reduction in capital value, which reduces the ongoing depreciation and interest. It improves revenue affordability in the long-term, but there is a short-term hit to consider. “Can you manage that affordability within the year? If you can, then you have a much-improved cash position moving out, because you’re not paying public dividend capital interest.”

There are trusts using impairment as a tool; it is a legitimate method in line with the DHSC accounting manual and principles. Richard advised, “If you’re thinking about doing this, you need to bring your financial advisors in early, you need to get your external auditors comfortable with the approach. ”

From here, the conversational turned to funding.

“The other side to this is the income side,” Alan said. “Obviously there is a lot of frontline digitisation funding around that will help some organisations. I would say that the timing of this doesn’t always align with the actual cost, so when the agreements have been made on how much you get at specific times, that decision is being made before you’ve run your procurement and got all your costs and payment milestones. Also, frontline digitisation funding is mostly capital but there’s some revenue as well, so there’s that to consider.”

It’s also worth considering how fair and equitable it is, Alan said. “There are lots of different ways of deciding who gets what funding and it can be hard to make sure that it is entirely fair and equitable.”

Funding is never guaranteed beyond the current financial year, he added. “It’s agreed, but you don’t know for sure until you get to the next financial year, put the bid in and see. This is especially relevant at the moment with the uncertainty of the economy.”

Alan continued: “Funding doesn’t help with long-term affordability – your benefits still need to exceed the costs. It helps in the short-term because it helps fund those first few years.”

Some trusts may have other sources of funding, he acknowledged, such as banks; but there are challenges there too with interest charges. “A lot of work goes into figuring out what the real affordability is,” Alan said.

“There is a more constrained capital environment for trusts generally,” Richard said. “It’s hard to look across your capital plan and decide that you’re not going to purchase an MRI, for example, because you need that capital for your EPR programme. The money just isn’t there. I wonder if we will see more of a role for the ICBs to play in terms of funding allocations and deciding priorities as we move through the next two to three years.”

Alan raised another challenge: “Some trusts don’t have an asset base, for example if their buildings are a PFI, and the amount of capital a trust gets is defined by their asset base. So if you don’t have lot of assets, such as your own buildings and estates, then that limits the amount of capital you can have and spend. Then you’re potentially looking for a revenue model supplier. Some of this is bookkeeping and playing with numbers, but it’s really important if you’re trying to figure out the affordability.”

Many thanks to Alan, Claire, Richard and Kiran for joining us.