NHS chief executive David Nicholson is encouraging the health service to make greater use of shared services as London’s primary care trusts prepare to set up their own commissioning support organisation.

Nicholson wrote to trust chief executives last week to encourage them to use NHS Shared Business Services or other shared services for back-office functions.

Repeating the message of the Operating Framework for the NHS in England 2009-10, he says that “in the current economic climate” the NHS needs to plan “in recognition of the funding levels it is likely to receive over coming years.”

The NHS is likely to see increases in funding fall back when its current settlement with the Treasury ends in 2010. The Operating Framework warns that it will also be expected to make “very substantial efficiency savings.”

In his “dear colleague” letter, Nicholson says that using shared services for back office functions could also free up cash for patient care.

“Where corporate services are currently retained in-house, I would encourage NHS management boards to be clear that the decision to retain them represents better value for money than alternative options such as NHS Shared Business Services, or other shared service or outsourcing solutions,” the letter says.

NHS Shared Business Services is a partnership between the NHS and Steria. It is already used by more than 100 health service bodies for finance and accounting, payroll and e-procurement.

It also manages the family health services records of London PCTs. Nicholson’s letter says that trusts have achieved operational savings of between 20% and 30%.

In London, the capital’s 31 PCTs have given the go-ahead to the London Clinical Business and Support Agency, which will be established from 1 April this year.

The LCBSA is intended to support commissioning across London, delivering tasks that individual PCTs would find difficult or very costly to do on their own.

The agency’s functions will include informatics. It will supply data warehouse storage and business intelligence reporting tools. Other functions will include predictive modelling of disease risk and comprehensive and consistent quality and performance reporting.

The agency aims to reduce the cost of provision through identifying coding errors and poor clinical practice to challenge provider claims and aims to improve outcomes through better allocation of spend to the most effective, clinically-proven forms of treatment and intervention.

Services are to be introduced over a three year period and a number of NHS London functions will transfer to the agency, including Healthcare for London and the London Health Observatory.

The cost of the LCBSA is estimated at £32.4m in 2009-10, with funding coming from NHS London and each of the PCTs. However, the business case identifies net benefits for each PCT of at least £1.5m in 2010-11 and £2.1m in 2011-12. The agency will be based at Camden PCT.