Editorial Monday 27 February 2012: EXCLUSIVE - Paul Baumann to be NHS Commissioning Board director of finance

The NHS Commissioning Board's director of finance-designate is Paul Baumann, currently director of finance of NHS London.

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Baumann has held that position since 2007: it was his first in the NHS. Previously he was a vice president of Anglo-Dutch retail giant Unilever. His previous role with Unilever (which he joined as a management trainee) had previously been in Unilever's animal feed business (don't tempt me).

Baumann's degree was in Modern and Medieval Languages at St Catharine’s, Cambridge. Such linguistic skills will be handy on a Commisisoning Board which will have a lot of storytelling to do.

A capital G&T on the estate
At NHS London, Baumann hired management consultancy Grant Thonton to help in the estates rationalisation programme across the capital.

Baumann gave GT the following testimonial for their case study: "This work was challenging due to the need to achieve buy in from trust chief executives and estate directors, the logistics of visiting a large number of trusts within a tight time period and the need to rapidly interpret a wide range of data. The Grant Thornton team met these challenges head on and delivered a very high standard of work. The team responded with agility to new issues and requests and worked effectively with a range of partners, including the Treasury's operational efficiency team, and took an innovative and pragmatic approach to support NHS London in addressing a longstanding challenge of significant economic impact".

Grant Thornton report that they "developed a outline delivery plan for unlocking value in the London estate ... Importantly, this assignment enabled us to identify a core cohort of major opportunities across the London estate to be realised through the sale of surplus properties and land and release capital as well as encouraging more productive use of assets".

In September 2007, Baumann appeared on a panel giving evidence about Lond Darzi's 'Healthcare For London' framework to the London Assembly's Health And Public Services Committee - a transcript of which is here.

Baumann told the 2007 committee "there is a lot of money we spend in the course of normal business in the health service on capital schemes of one sort or another. Part of the task that we have got going forward is making sure that all of that money is channelled into schemes which are directed towards Healthcare for London-type solutions assuming the consultation takes us in that direction. ... Clearly what we have to start doing is aligning this stream of things, some of which are many years in the making, with the direction that we are trying to go strategically. Part of it is using the resources we already have for that sort of thing in a much more judicious fashion.

"Ruth [Carnall, NHS London CEO] mentioned the position about the financial strength of London and I guess I can have a bit of a reflection on this as someone who has only got three months in the health service and looked at this from an external perspective until then. Certainly when I first started discussions on this we had a deficit in London which was, when I first arrived, about £135 million. Last year, the service in aggregate in London got a surplus position of about £90 million. Putting that in context, by the way, that is a very small swing for a super tanker, less than 1%. Our task for this year is to at least sustain that surplus.

"I think perhaps more importantly though there are two-thirds of our organisations, whether you look at trusts or whether you look at PCTs, who will by the end of this year be in recurrent balance and free of all debt. A large part of London can get on unencumbered by that particular task with all the things that we have just been talking about and many of them have the surpluses with which to do that.

"Clearly a lot of my attention is on the remaining third, particularly the PCTs, which is my particular performance management patch, making sure that they have sustainable plans going forward, that they all get, as all of them will do, to a point where they are in in-year balance, but secondly that they deliver on the repayment of that debt. In fact all but two of the PCTs will, again according to our current projections, be clear of debt within the next five years and the majority of them within the next one or two years. So for the PCTs I can see a relatively – in health service terms – quick route through to being able to do this ...

"I am certainly not going to second guess what the CSR is going to bring up. We are about to start on our medium -term financial strategy which we will obviously factor in once we know what the growth is going to be. As Ruth [Carnall] has said, we have not modelled extravagant levels of growth going forward in the preliminary work on Healthcare for London. It would be foolish to do so. Really what we have got to go on is the sustainable balance that we have got in the majority of our organisations going forward and the fact that as we sort out the legacy debt and the problems that we talked about in the remaining third, that will release the money which is currently tied up in deficits and debts in those units ...

"The one-third (of London NHS trusts) which have inherited or legacy debt from previous years, they fall into three main camps. I am taking here PCTs and trusts together, but I can be more specific if you wish. That amounts to 23 organisations. The first third, seven of them to be precise, will be paid off within the next two years according to our current plans. Seven of them will take between three and five years to pay off those debts that I have just talked about. That leaves us with nine, two PCTs and seven trusts, which have got more structural financial issues which are going to take longer to sort out. The seven trusts are part of the process which the Department of Health, I think you will have read about or heard about, is coordinating on what they call ‘financially challenged trusts’ and are looking for longer term solutions to things that cannot just be sorted out through routine savings programmes. The two trusts we are working intensively with to get recovery programmes accelerated, so that they can get themselves out of quite substantial accumulated debt ...

"I have got a team in the SHA (Strategic Health Authority) that is now intensively working with, in my case, the ten PCTs who are part of that recovery process. There is a similar team in the provider agencies working intensively with the seven financially challenged trusts and a few others who have deficits to clear.

"I think that process is starting to work. We are having intensive interaction with them. I spent a day yesterday with one of my team in one of those PCTs really getting into depth with that organisation as to how they best move themselves forward. I see at the moment a good deal of pace and momentum behind getting those PCTs back out of the difficulties which they have had which, as you rightly say, have all sorts of origins either structural or management in nature. Will we have every single one of them progressing along the trajectory that we have set for them without any slip-ups? Of course not; these things happen. I feel confident we have got them moving in the right direction".

Baumann and Carnell were back before the same committee in 2010, talking about progress. The transcript of that 2010 session is here - it is too long to quote from exhaustively, but well worth reminding yourself of the London issues' immutability.

One key passage from Baumann is "When you start something up and for the first few months it is operating at less than full efficiency, as we all know from starting anything up. The savings that come out of those polysystems are at least twice the maximum of that, in other words, about £24 million per polysystem which it gets set up. We set it up in a year. It will cost us £6 million to £12 million to get it set up but it will immediately start liberating the £24 million of savings that come against it. As long we can execute with the discipline that is needed, so that from day one it is getting quickly ramping up to the level of activity and the efficiency that it is required to operate at, that all works.

"There is a different challenge which is how the hell do we get - excuse me - the capital for all of that because, to the extent that we need capital for polysystems we are running up against capital constraints which are - depending on how you look at it - growing or decreasing, in other words, less capital, more constraint. Clearly the art of that is, as Ruth [Carnall] referred to earlier, wherever possible using buildings that we have already got in our set up, where they can be adapted for this purpose. It is clearly not a question of using wrong buildings for the new purpose.

"It is partly liberating the value from our estate. We have got an estate which is conservatively valued at about £6 billion of real estate around London. Now, clearly, there are inefficiencies in any estate portfolio. To the extent we can realise some of that it will help. It is partly about using the funds that are available centrally but they are quite limited. It is partly about private finance initiatives, where appropriate, and it is partly about partnerships with local authorities. In some ways I can see that as being one of the biggest sources of opportunity. Some of the schemes we see coming through at the moment, some of the more imaginative ones, are combinations of local authority and health funding of one sort or another. There is a challenge of capital funding for all this but it is, in my own judgement, a manageable one if we are creative enough about how we do all of that".

In 2008, Baumann told BBC News that London PCTs' plan to eradicate the city's NHS deficit through pooling meant that "PCTs should be congratulated for taking this bold and decisive action. Failure to deliver this proposal would mean that a number of organisations would be unable to deliver the improvements promised in healthcare for London and healthcare across London would remain patchy".

More recently, HSJ's Ben Clover found that Baumann was co-author with NHS London starategy director Hannah Farrar of a report, using McKinsey modelling data, which concluded that just six of London’s 18 non-foundation hospital trusts will be financially viable for the long term in their current form in 2014-15. Their Sustainable and Financially Effective Review can be read here.

Th following biography from the HFMA website gives further detail.

Paul Baumann grew up in Dorset and studied Modern and Medieval Languages at St Catharine’s College, Cambridge, before joining Unilever as a management trainee in 1984.

This was the beginning of a 22 year career with the Anglo-Dutch business, which has operations in virtually every country in the world, covering a wide variety of consumer needs – from soup to soap. Paul began his working life in Unilever’s UK animal feeds business, undertaking a variety of Finance and general management roles. He was involved in the eventual sale of the business to one of its leading competitors, and at the end of this process, he moved to Unilever’s Corporate Centre to work on the restructuring of head office functions.

Over the following years, Paul undertook financial leadership roles in operating companies in Germany and Ireland, culminating in the position of CFO of Unilever’s largest European subsidiary, based in Hamburg, Germany. Key themes of each of these roles were bringing transparency to business performance, driving turnaround, leading strategic and organisational change programmes and building Finance teams with real impact on business decision-making.

In 2001 he was invited by Unilever’s CFO to develop a strategy for the corporation’s Finance function – entitled Finance of the Future – and to be the founding director of the global Finance Academy, a small team of high potential Finance managers brought together to support this transformation by providing leadership in the creation and deployment of leading edge Finance capabilities around the world.

Paul joined the NHS as Finance and Performance Director of the new pan-London Strategic Health Authority on 1 May 2007, focusing on creating sustainable financial balance across the health economy, delivering immediate service targets and health improvement goals and contributing to the transformation programme implied by Healthcare for London. He has been Director of Finance & Investment since 1 September 2008, focusing this new directorate on priorities such as financial strategy, investment appraisal, performance management and management of the estates strategy and capital programmes across London.

He is a Fellow of the Chartered Institute of Management Accountants. Paul lives with his wife and three children in Surrey and spends most of his time outside work accompanying them in their various musical pursuits.