The NHS is a significant estate and infrastructure owner, occupying over 29 million m2 at a cost of more than £10 billion per annum. Healthcare infrastructure is critical to the delivery of safe, high-quality clinical services and a key enabler for transformational change and quality improvement.
However, the NHS is under significant financial pressure. As one of the largest areas of expenditure, its property portfolio also presents a substantial opportunity for cost savings.
The Challenge
The NHS estate is vast, encompassing hospitals, community health centres, offices, and other facilities across the country. Maintaining this extensive portfolio requires significant financial outlay, including costs for utilities, maintenance, and property management. This expenditure is necessary to ensure that facilities are safe and functional, but inefficiencies and under utilsation can lead to substantial waste.
The financial burden of vacant spaces within NHS buildings has long been a pressing issue. Recent revelations have brought to light the significant scale of this problem. According to data obtained by the Health Service Journal (HSJ) through a freedom of information request, three ICSs alone spent £21 million on empty space leased from NHS Property Services (NHSPS) last year.
The need for strategic estate management is therefore critical for identifying potential savings and efficiency improvements.
Identifying Opportunities for Savings
From our experience of helping clients to improve the value from their estate, we set out five areas for organisations to focus on.
1. Establishing a comprehensive property schedule
A thorough understanding of the property portfolio is a key first step towards cost savings. Establishing a comprehensive master property schedule, which includes key information such as building location, age, size, condition, tenure and annual running costs, is essential. This ensures a single, accurate source of truth for the estate, enabling effective reviews of cost-effectiveness and facilitating comparisons against benchmarking data.
2. Tight management of leases
A significant portion of the NHS estate is leased. Managing these leases strategically can lead to cost reductions. For example, taking advantage of breaks in leases allows the NHS to exit or renegotiate terms for underutilised or non-essential properties. Additionally, consolidating services into fewer buildings can further reduce overhead costs.
3. Identifying and categorising core, flex and tail properties
NHS organisations must take a proactive approach in identifying and categorising their properties into core, flex, and tail:
- Core: Good quality, fit-for-purpose and future-proofed estate that align with the clinical strategy.
- Flex: Estate that is of an acceptable quality, or provides unique access to services, but does not fully enable the ambitions of the clinical strategy. With sufficient investment and improvement, they have the potential to be recategorised as ‘Core’.
- Tail: Poor quality estate that is not fit-for-purpose or for patient-facing services and should be phased out. This includes properties that are underutilised, surplus to requirements, or could be disposed of.
This categorisation can help to pinpoint areas where cost savings can be made.
4. Developing options
Properties identified as part of the flex and tail estate can help to inform the development of options for the future. This includes:
- Assessing the required additional investment in the short and long term
- Understanding what the options and plans are for property or land that is no longer required, or needs repurposing or acquiring
Options for repurposing buildings could involve converting a surplus building, thereby reducing the need to lease or build new facilities. Alternatively, options for disposing by selling or leasing out unused properties can generate revenue and reduce maintenance costs. Every square metre of space that is no longer needed represents an opportunity to cut costs.
5. Enhancing cost-effectiveness and sustainability
Improving the cost-effectiveness and sustainability of retained properties is also crucial. Implementing energy saving measures, adopting proactive maintenance practices, and continuously monitoring space utilisation can lead to significant cost reductions. Digital tools, such as space utilisation sensors, can help to provide real-time insights into property usage and inform decisions on space optimisation.
In Summary
The estate is a significant part of the NHS’s expenditure, but it also presents a considerable opportunity for cost savings. By understanding and optimising the use of their estates, NHS organisations can reduce costs, generate additional revenue, and ensure that more resources are available for patient care. Understanding the property portfolio, strategic management of leases, repurposing or disposing of unused properties, and enhancing the cost-effectiveness of remaining buildings are all vital steps towards identifying savings opportunities.
Photo Credit: NHS Property Services
