Chartered Institute of Management Accountants

25 October 2005

With the NHS constantly under pressure to maximise resources and demonstrate sound financial management, the Chartered Institute of Management Accountants (CIMA) - has issued a discussion paper proposing a radical solution and urging financial managers to propose initiatives that will help NHS organisations improve patient services. The proposal comes as recent NHS financing developments, such as Payment by Results and the introduction of a national tariff, have added to the pressure on NHS organisations.

In its discussion paper, titled ‘Reforming the NHS from within’, CIMA, which is leading the debate on whether the NHS could reap some of the benefits already available to successful manufacturing and service based companies, proposes a radical step for financial management in the NHS: the introduction of Target Costing.

The concept of Target Costing originated in Japanese manufacturing industry in the 1970s and has been used to improve the performance of manufacturing companies such as Toyota.  Benefits of Target Costing include:

• An improved understanding of the costs of products and services, enabling issues to be identified early in the service development process and action to be taken
• A focus on the final users of the service or product – in this case, patients
• Taking a multi-disciplinary approach that involves staff from all areas in service design and cost analysis and encourages them to take responsibility for managing quality and costs
• Enabling service organisations to look at the impact new services will have upon existing ones
• Highlighting problem areas that affect the cost of a product or service

Commenting on the radical proposal, Stathis Gould, CIMA’s technical specialist said: “Maximising productivity from available resources is critical to improving performance in the NHS, and for Trusts trying to enhance their performance under Payment by Results. ‘Reforming the NHS from within’ is a constructive initiative, designed to encourage financial managers to work effectively with clinicians and service managers by delivering care that is affordable and at appropriate quality levels.”

A copy of ‘Reforming the NHS from within’ is available online at: www.cimaglobal.com/NHStargetcosting The deadline for responses to the discussion paper is 31 January 2006.

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For further information, please contact:
Lynda Hardy Maskell, CIMA
+44 (0) 20 8849 2347
lynda.hardymaskell@cimaglobal.com

Notes to editors

1. CIMA (the Chartered Institute of Management Accountants) is the only international accountancy body with a sole focus on business.  It is a world leading professional institute that offers an internationally recognised qualification in management accountancy, focusing on accounting in business, in both the private and public sectors. It is the fastest growing UK based accountancy body, in terms of members, in both the UK and worldwide and is the voice of over 85,000 students and 65,000 members in 158 countries.  CIMA is responsible for the education and training of management accountants who work in industry, commerce and not-for-profit and has more members in the public sector than any other UK based body.  CIMA prides itself on the commercial relevance of its syllabus, which is in tune with the activities of high performance organisations, and evolves continually to reflect the latest developments in global business.  It is committed to upholding the highest ethical and professional standards of members and students, and to maintaining public confidence in management accountancy.  For more information about CIMA, please visit www.cimaglobal.com