HOSPITALS (LAUNDRIES) (Hansard, 31 May 1967)

§ Sir Ronald Russell (Wembley, South)

I asked for this debate on the cost and costing of hospital laundries following a talk I had some weeks ago about something quite different—Selective Employment Tax—with the managing director of a well-known laundry in my constituency. I thank the Parliamentary Secretary to the Ministry of Health for being here and apologise to him if I have given him somewhat vague notice of some of the things I intend to raise. If I raise anything in detail of which I have not given notice sufficiently, I shall not, of course, expect an answer this morning.

I have had correspondence and conversations with other laundry experts, most of whom are anxious about the growth of hospital laundries and group and regional laundries in the hospital service in recent years, together with the effect of this on the taxpayer and on established commercial laundries. The question we have to ask is whether the growth of hospital laundries is in the national interest.

I have asked Questions of the Ministry of Health on 23rd January, 20th March and 13th April about various aspects of this problem. The first Question concerned the amount of capital invested in the past two years in building laundries 50 to serve hospitals in the National Health Service and the interest charged. I wanted to know how much had been saved in the cost of laundering compared with charges made by existing independent laundries. The answer in relation to capital investment was £3.6 million, including the cost of machinery. I was told that this had been financed from the general revenue—the taxpayer—and a notional calculation of the cost of borrowing would give current interest charges of about £230,000 a year.

I was also told that information about comparisons with independent laundries was not readily available in the form I sought. But it should be available. The taxpayer's money is involved and the taxpayer is hard pressed enough today. His money should not be spent on building laundries specially for hospital use unless it can be shown beyond doubt that they can do the work much more cheaply than commercial laundries when costed on exactly the same basis or that commercial laundries are not conveniently available.

The sum of £3.6 million in two years is not an unappreciable amount of money when one considers the other things that need doing in the N.H.S. I realise that, in some parts of the country, commercial laundries may not be available but in most areas they are and there are some with spare capacity. There are also some with no spare capacity but which might be expanded with help from private capital at much less cost than the building of a whole new laundry for the National Health Service. There does not seem to be enough investigation into the costing of hospital laundries. They vary enormously, as the figures contained in Part II of the Hospital Costing Returns show.

Incidentally, this must be one of the largest documents in area ever produced by the Stationery Office. It is about 15 inches by 10 inches. It only just goes into the normal briefcase and all three volumes probably would not. The Minister of Health, in answer to a supplementary question from my hon. Friend the Member for Essex, South-East (Mr. Braine) said in relation to this subject: … it is much more economic to run a laundry with a very large turnover than a small laundry."—[OFFICIAL REPORT, 20th March, 1967; Vol. 743, c. 1020.] 51 The N.H.S. laundry with the largest turnover is the South-West Regional Hospital Board's laundry at Carshalton. Its turnover in 1966 was 144,736 items and the unit cost—per 100 items—was £2 3s. Id. The fourth laundry down the list, the Hope (Salford) laundry, had 53,357 items at an average unit cost of £1 1s. 9d.

Another point is that the number of articles laundered per operative week in the case of Carshalton was only 1,035 whereas in the case of Hope it was 1,769. A laundry with a much smaller turnover, Halifax General, which was 63rd in the list, had a turnover of 23,071 units, the average cost being only 19s. 5d. The number of items laundered per operative week was 2,728—nearly two and three-quarter times that of Carshalton. I wonder why.

This discrepancy does not fulfil the Minister's statement that it is much more economic to run a laundry with a very large turnover than a small one. On 13th April, I asked about the different unit costs at two teaching hospitals, St. George's and Guy's. I asked why the cost was £2 6s. 9d. per unit for St. George's and £1 8s. 9d. for Guy's. Both these figures are given in the Returns. The difference, apparently, is due to higher transport costs because the St. George's laundry is at Wimbledon. But there is also a lower output per operative week at St. George's—only 1,133 compared with 1,895 in the case of Guy's.

Such variations show that there should be a thorough probe into the whole costing on a national and not only a regional or group basis, particularly into the differences involved in the number of items laundered per operative week. Presumably there is more incentive and less disincentive at Halifax and Salford, for example, than at Carshalton, and more incentive at Guy's than there is at St. George's. There should be a proper comparison with commercial laundries.

I also have a figure relating to commercial laundries used by one of the London teaching hospitals, St. Mary's, Paddington. It is £2 4s. a week. I understand that the Whitley scales for the employees of hospital laundries are higher than the minimum rates agreed 52 with the Laundry Council for commercial laundries. Most London commercial laundries, however, pay more than the minimum rate. Some hospital laundries do not include all the items of cost which should be included. For instance, if there is a hospital administrator responsible for a laundry, is a proportion of his salary charged in the costing of the laundry? Is the rent of the land used by the laundry charged, together with the cost of the building? If the boilers serve the whole hospital, is that included?

According to the Returns, the cost of boilers per unit item is £2 9s. 9d. in the case of Loughborough Genera] Hospital, but only Is. Id. for two other hospitals, Ipswich and South-East Northumberland. There must be a very great variation in the way that costing is carried out. Commercial laundries, being independent undertakings, have to include all these items and more, and hospital laundries should be costed on the same basis. What proportion of laundry work is done in hospital laundries and what proportion is done by contract? I hope that the hon. Gentleman will be able to give me that answer. I wonder how many hospital laundries obtain commercial quotations as a check against their own costs.

Finally, without wanting to be dogmatic about this, is not this really a problem of private enterprise versus nationalisation in the form of group or regional laundry units? Surely the test should be cost and efficiency. The hospital service should not be allowed to spend public money on building laundries unless no commercial laundries are available and unless it can be proved beyond any doubt that hospital laundries can do the work more cheaply, after being properly costed.

§ The Parliamentary Secretary to the Ministry of Health (Mr. Julian Snow)

I am grateful to the hon. Member for Wembley, South (Sir R. Russell) for his acceptance that he may have asked me certain questions of detail to which, without notice, I would not be able to provide answers. However, I must say that I agree with his general case that there should be the maximum possible publicity to the statistics upon which the costing and costs of laundries are based.

53 At the inception of the National Health Service, there were more than 1,000 hospital laundries, mostly of small capacity. During the early years, resources were used mainly on maintaining existing plant and machinery and it was not until the end of the 1950s that the hospital authorities began a programme of replacing uneconomic plant and improving productive efficiency and quality standards. The main development lay in the closure of some of the smaller and less efficient units and the concentration of work in larger hospital laundries where improved facilities would achieve economies of scale. This process of rationalisation, the establishment of group laundries serving neighbouring hospitals, has resulted in the closure of about 450 smaller hospital laundries since 1948.

The planning of hospital laundry services rests with regional hospital boards and with the boards of governors of teaching hospitals as part of their responsibility for hospital development programmes. To assist hospital authorities in their task, the Ministry issues guidance about the design, equipment and cost limits of hospital laundries. In addition, the Ministry has a small staff of professional laundry engineers who are available to visit hospitals on request from hospital authorities who are contemplating reorganising their laundry services and to advise on technical and other questions affecting the efficiency of operations.

Furthermore, by virtue of the Ministry's membership of the British Launderers' Research Association both the Ministry and individual hospital authorities have available to them facilities for keeping in touch with modern developments in the industry. Hospital authorities have access to the Association's library and advisory service and full information is made available to the Ministry on the results of relevant research carried out by the Association.

Separate figures for laundry investment are not maintained centrally, but in the financial years 1964–65 and 1965–66 hospital authorities in England and Wales spent a total of £3.6 million in building and equipping hospital laundries. Any forecast of future expenditure must necessarily be tentative since priorities are kept under continuous review and the total capital resources available from year to year are subject to the prevailing econo- 54 mic circumstances at the time. However, the present plans of hospital authorities envisage spending £10 million on laundries up to 1970, slightly more than half on the provision of new and the remainder on the improvement of existing laundries.

Hospital authorities are, of course, conscious of the need to take full account of local circumstances, including transport costs, the local labour available and, not least, the possibility of using commercial services for hospital laundry. As I shall show the hon. Gentleman later in my observations, this is a dominant consideration when examining these problems. But decisions whether laundry should be done by direct labour or contractual services, assuming that it can be done satisfactorily either way, must depend on the economics of each case.

Hospital costing arrangements are governed by the relevant Statutory Instrument, No. 1414 of 1948, which requires hospital authorities to prepare cost accounts in such form as the Minister may prescribe. A working party set up by the Minister to devise a full Departmental costing system for hospitals reported in 1955 and from 1956–57 onwards laundries have been costed on the basis of the cost per 100 articles laundered. The costed expenditure includes all the direct costs—salaries and wages, steam, materials and so on—and depreciation on plant and equipment. It does not, however, include interest charges on capital expenditure on land and buildings, nor any allowance for general hospital overheads.

This is because the primary purpose of the costing system is to assist hospital authorities themselves in the day-to-day management of hospital laundries by keeping costs under continuous review and to provide a common basis for comparing performances with other hospital laundries. It is not designed to provide a straightforward comparison between the cost of hospital laundry services and contractual services. Nevertheless, hospital authorities can readily adapt their existing costing system in cases where they would find it useful to assess the relative costs of hospital laundries against the cost of commercial laundry contracts.

In 1965–66, the latest year for which information is available, the average 55 cost per 100 articles laundered for a sample of 183 laundries serving more than one hospital was £1 11s. 8d. The costs ranged from 17s. to £3 13s. 3d. The lower costs occurred mainly where the scale of operations was greatest and also because there is some employment of patients in laundries attached to mental illness hospitals. In case the hon. Gentleman thinks that the cost of such labour is included, I should say that it is, but payments to mental patients are not on a commercial scale, for obvious reasons. Conversely, the highest costs were mainly in those laundries operating on a relatively small scale. There is also a wide fluctuation in efficiency measured by the average number of articles laundered per operative per week, and this is a reflection mainly of the extent to which modern laundry equipment is in use.

The hon. Gentleman may like to know that an alternative cost unit "per 100 lb. dried weight" has been introduced on an experimental basis in cases where weighing facilities are available, and the value of this unit of measurement will be assessed when the 1966–67 cost accounts become available later this year. The costed expenditure covered will be the same as that used to produce the cost per 100 articles laundered.

Both the measurement units can be criticised, because they do not reflect the size of laundry or the particular laundering process involved, but any improvement would mean using a complicated system of weightings for the many different articles laundered and the costing process would consequently be more time consuming and expensive. Furthermore, it is not clear whether there would be any consequential advantage for hospital management, and we consider that the present arrangements are adequate for the purposes of financial control.

Since the present hospital costing system does not include items such as interest on capital, it might be contended that the costing figures do not reflect the real cost of the work done in hospital laundries and that in some cases it would prove advantageous for hospitals to use the services of commercial laundries instead of investing in laundries of their own. However, boards are conscious of 56 the need to plan laundry services taking account of local circumstances, geography, communications and transport costs, local labour supply and availability of commercial laundries able to provide reliable and economic services. Indeed, the latter is considered, as part of a board's submission, when it seeks approval of individual building schemes including a laundry. I emphasise that before approval is given to the building of a new laundry, or substantial re-equipment, the whole position of local availability of commercial services is investigated.

Comparisons between the cost of providing direct labour services and contractual services very widely in different parts of the country. It would be wrong to compare the costs of the least efficient of the former with the most competitive of the latter, especially when they are not in the same locality. There is no doubt, however, if only because of the physical limitations of space as well as capital resources, that some hospitals in built-up areas will need to continue to rely on the services of commercial laundries for some time to come.

Hospital authorities, wherever possible, obtain competing quotations from commercial laundries before entering into contracts for laundry work. Although the position has improved, we have had the experience in the Department of not being able to obtain competitive tenders. Not all commercial laundries have the necessary capacity to provide a satisfactory service to hospitals at competitive rates. The capacity varies widely in different parts of the country and at different periods not unrelated to the state of the domestic economy.

Thus, in a cool atmosphere, economically speaking, as is normally commercially to be expected, there are more offers by commercial laundries to service hospitals than in times when their facilities and capacity are fully absorbed by other work. In 1965, for example, several hospitals in the London area without their own laundries experienced some difficulty in obtaining competitive tenders for laundry work from London firms. The position has now improved.

Another factor which might have some bearing on the willingness of commercial laundries to undertake hospital work is the problem of fouled and infected linen. 57 I hope that the hon. Gentleman will pay close attention to this. Hospitals with attached laundries are generally better equipped to cope with this problem by means of segregation, preliminary sluicing and disinfection of the soiled work before the normal laundering process is undertaken. This work is reflected in the costing of these hospital laundries. On the other hand, hospitals which use commercial laundry services must themselves carry out the preliminary sluicing and disinfection before the work is passed to the laundry contractor, which process inevitably involves some double handling.

In 1959, the Central Health Services Council issued a Report on Hospital Laundry Arrangements which was circulated to hospital authorities with the Minister's commendation. The Report recommended, inter alia, procedures designed to minimise the handling of fouled and infected linen to prevent cross-infection. Articles in these categories should be segregated in impermeable bags from ordinary soiled linen and subjected to preliminary sluicing and disinfection as appropriate before being laundered. Sluicing should be done with mechanical sluicing equipment and disinfection is achieved by means of soaking in a recommended solution of disinfectant.

I wanted to emphasise that point because the public should know all the factors involved, and the question of cross-infection from hospital to public, and even vice versa, has to be very seriously considered. The information about the proportion of hospitals with or without their own laundries is not readily available. However, if the hon. Gentleman would say what sort of statistics he would like, we could produce the information, although it would not be easy because of the complications and the variations in practice. For instance, some hospitals contract outside and also have their own laundries.

No one would disagree, however that, given a completely reliable commercial service, the criterion of choice between the one method or the other should continue to be efficiency combined with economy of expenditure. Although there is perhaps a natural tendency for capital investment by hospital authorities to be devoted to urgent projects more directly affecting the well-being of patients, the 58 total capital investment in hospital laundries is by no means insignificant. It must be our continuing aim to ensure the maximum returns from such investment, and hospital authorities as well as my Department are fully conscious of this responsibility.

With the advent of new and larger machinery and the increasing use of automation the future trend is in the direction of larger group laundries to take full advantage of the economies of scale which they can achieve. The Ministry's professional engineers are keeping abreast of technological developments in the industry and taking active steps to encourage the use of advanced techniques in hospital laundries. In this way productivity and efficiency are continually being improved.

Moreover, benefits which are essentially long-term can be expected to derive from the efforts of the specification working groups set up by the Ministry's Supply Division primarily to examine the requirements for, and the most suitable methods of purchase of, items of equipment and commodities widely used in the hospital service. These benefits are likely to accrue from greater standardisation of textiles used in hospitals.

The report on bed linen, for example, which has recently been circulated to hospital authorities, not only recommends articles of standard quality, but also of standard size. The latter consideration, in particular, may be regarded as of incidental, but, nevertheless, welcome advantage in the laundering processes. Similar developments may be expected with other textiles in due course.

Of more immediate concern, perhaps, a working party of chief O & M and work study officers of regional hospital boards has recently prepared a draft report bringing together the practical knowledge and experience gained from surveys and studies conducted by them in almost 100 laundries in the hospital service. The report, which is expected to be published shortly, is concerned with managerial and operational aspects of hospital laundries and suggests possible improvements with a view to increasing productivity.

Methods are also suggested whereby individual laundry managers can readily measure standards of performance. An important part of the report deals with 59 the future planning of hospital laundries, and sets out data for determining the optimum size of laundries taking account of variations in size and location of the hospitals to be served and other local circumstances.

The hon. Member asked about the present position at certain specified hospitals. In 1965–66 the costs per 100 articles laundered were: £1 8s. 9d. at Guy's; £1 15s. 3d. at St. Bartholomew's; £2 6s. 9d. at St. George's. Transport costs are incurred at St. Bartholomew's and St. George's because the laundries are situated at Swanley and Wimbledon, but the main reason for the higher costs is the lower output per operative per week as compared with Guy's Hospital where an incentive bonus scheme is in operation.

The lower output at St. Bartholomew's Hospital is mainly due to the inadequacy of its worn-out boiler equipment—which was inherited—and which is to be replaced under a £50,000 scheme in hand; some new machinery is also due to be installed. An experimental bonus system for increasing the productivity of operatives at the St. George's Hospital laundry was introduced last month, but it is much too soon to judge the results.

In 1965, the Minister authorised six experimental studies designed to reveal the extent to which different types of incentive schemes could contribute to increased productivity coupled with enhanced remuneration. One scheme has been operating since the beginning of this year, and three are in course of introduction, including the one at St. George's. After a trial period of operation each scheme will be evaluated to see 60 whether it will be possible to extend some type of bonus scheme more widely.

It is to be noted that Report No. 29 of the National Board for Prices and Incomes entitled "The Pay and Conditions of Manual Workers in Local Authorities, the National Health Service, Gas and Water Supply", recommends the introduction generally of schemes of payment relating earnings to performance for all manual workers in the National Health Service. In the short term, this would be on a fairly rough and ready basis, directly relating increases in pay to overall savings in manpower. In the longer-term, say after two or three years, any bonus scheme would depend on accurate work-study measurement and control; but this will need a large increase in trained work-study staff.

During the debate, I have dealt with many aspects of a part of the work of the hospital service which, although important, tends to receive perhaps less public attention than it deserves. Therefore, the House is indebted to the hon. Gentleman for initiating this debate. Although the hospital laundry service may cost a lot of money in terms of capital investment, I can assure the hon. Member that we are fully conscious of its importance. I hope that he will agree that I have set out in my reply a convincing case that the Minister and the Department are conscious of the economic requirements of the situation, and of the need to make hospital laundry services as efficient as possible. However, when commercial laundries can be shown to be more economic, they will be seriously considered.