Comment

Strengthening financial resilience – alternative therapy for the NHS

Paul Hughes, NHS provider sector lead at Grant Thornton UK LLP, which has been working with the NHS for over
30 years, discusses the financial challenges facing the NHS and the need to deliver cost improvement plans in a fundamentally different way.

The financial challenges facing the UK economy are combining with ever-increasing demand, through an ageing population and increasing patient expectations, to raise the threat to financial resilience in the NHS.

The requirement for the sector to deliver substantial efficiency savings has increased and will clearly continue for the foreseeable future. Delivering such a level of efficiency savings, while sustaining financial resilience, will become increasingly difficult. The issue here is not just a reduction in income and funding; this year the political and media focus has rightly shifted towards quality and patient care, as the system also copes with new structural changes. Winter pressures, increasing demands on services and balancing the books in a tougher climate are factors combining to create the ‘perfect storm’ for the NHS.

In November 2013 Grant Thornton published its report ‘Alternative Therapy: Strengthening NHS financial resilience’. The report provides insight into how resilient NHS finances are and gives a summary of the key themes and best practice that have emerged from the firm’s national programme of financial health reviews. The report is based on a review of the delivery of 2012/13 budgets and planning for 2013/14 at 62 NHS trusts and foundation trusts (FTs), supplemented with interviews with finance directors and consideration of the financial challenges facing the new Clinical Commissioning Groups.

The report reveals that in the last financial year 44% of trusts did not achieve their intended cost improvement plan (CIP) aims and their quality, innovation, productivity and prevention (QIPP) targets. Half of trusts relied upon non-recurrent financial support to achieve their targets. Another 50% had unrealistic future savings plans and almost a fifth (19%) fell into all three categories.
These figures indicate concerns about the long-term financial resilience and suggest that CIPs and QIPPs need more rigour in planning or execution.

Of the non-foundation trusts (non-FTs) reviewed, 89% did not meet their own sickness absence targets; in fact the level of sickness absence rose in 43% of trusts over the year. The report found that trusts with workforce issues were far more likely to be in deficit. Numbers of temporary employees increased at 60% of non-FTs and at 69% of FTs, indicating an NHS that is working to fill gaps to secure quality of patient care.

Crucially, with an operational and financial challenge of this scale, trusts will need a motivated and effective workforce to achieve financial resilience and deliver a high quality of patient care. Smarter trusts will be working hard to ensure that staff play a positive role in improving quality and efficiency.

Better joint working is key to overcoming the financial challenge. More effort needs to be put into the development and implementation of savings schemes, with providers and commissioners planning jointly for the long-term rather than just the year ahead. Notwithstanding the issues surrounding the introduction of Clinical Commissioning Groups, they must now strive to give clarity on demand and affordability of the services they plan to commission over the next three to five years.

It will also become increasingly important to ensure effective joint working with local authorities and other non-NHS providers, not just in social care, where arrangements for the effective care of the elderly will be key, but also in other service areas that have an
ultimate impact on health, such as social housing and transport. This, in part, requires greater incentives, such as the £3.8bn Better Care Fund, designed to take forward transformational change to improve integration of health and care services.

Importantly, and as will be highlighted in Grant Thornton’s forthcoming NHS Governance Review 2014, public service leaders will need to be sufficiently dynamic to learn from an emerging bank of good practice and to mitigate any barriers that threaten to stifle innovation.

The NHS can no longer balance itself in the medium term through traditional savings measures. Rather than upping the dosage of current approaches, trusts should employ alternative therapies, delivering savings in a fundamentally different way. Above all else, partners working together in health economies need to aspire to delivering the best quality of patient care within available resources. This is unlikely to be sustainable through existing pathways, in existing settings.

Difficult decisions involving disinvestment and organisational reconfiguration will need to be made and implemented. Local leaders will need to challenge the notion of ‘What is best for my organisation?’ – replacing this with ‘What is best for the patient?’

(Image: c Dominic Lipinski and PA Wire)

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