News

Facing future financial challenges

 Paul Briddock, director of policy at the Healthcare Financial Management Association (HFMA),discusses achieving the financial savings necessary by 2020.

NHS finance and those working in it have faced monumental challenges over the past year and the worrying situation looks set to continue. Results from HFMA’s latest Temperature Check found that finance directors within the NHS are increasingly concerned about the future quality of patient services, as well as expressing a lack of faith in new financial support measures.

For the third year running, the financial performance of the NHS has declined, with NHS trusts and NHS FTs reporting a deficit, and for the first time CCGs also reported an overspend in 2015-16.

Financial struggles have led to a combined trust deficit of £2.45bn at the end of the 2015-16 financial year, compared to a planned deficit of £1.99bn. The main drivers for trusts ending the year in a worse position than planned were the cost of agency staff (51%), the under-achievement of savings plans (33%) and an increase in fines, challenges and deductions (23%). 

Following the control totals being set by NHS Improvement, we surveyed 200 finance directors on whether they feel their organisations will be able to deliver on the targets. Over three fifths (63%) of trust finance director respondents have signed up to control totals, but of those doing so, only 60% expect their organisation to meet the conditions set.

For 2016-17, 63% of CCG CFOs and 79% of trust finance directors are very or quite confident that their organisations' non-recurrent savings plans will be achieved. However, there is much less confidence about achieving the high levels of recurrent elements of savings plans. It’s clear that while finance directors are feeling the pressures of the current financial situation, many also feel like short-term gains such as cash injections and non-recurrent savings are merely storing up more problems for the future.  

Lack of confidence in implementing effective STPs 

Furthermore, two-thirds (67%) of CCG and almost half (48%) of trust respondents reported a high degree of risk associated with achieving their organisation’s 2016-17 financial plans. The biggest risks to trusts achieving planned savings were identified as slippages in cost savings (78%), spending on agency staff (72%), the impact of social care financial constraints (56%) and increasing demand (52%). The key risks to achieving financial plans in CCGs were identified as increases in emergency care activity (76%), continuing healthcare (69%), increased demand for services (67%) and slippages in cost savings (65%).

Although the finance community fully supports positive initiatives to revert the current outlook, they lack confidence in whether they can achieve the control totals set and implement effective STPs, as acknowledged in the recent letter issued from NHS Improvement. Just 16% of finance directors are ‘very’ or ‘quite’ confident that organisations in their STP footprint can deliver a connected strategic plan covering the period up to March 2021. Potentially, this is a trend we should expect given the development of these plans are in such an early phase.

Fears around the impact the current financial turmoil in the NHS could have on quality are a real cause for concern and we may start to see more of these predictions come true in the year ahead.  To avoid this, there is a need for NHS organisations to work together to address these financial and operational pressures by the efficient redesign of services and to put an end to the shifting of financial problems between sectors. Although many see the STPs being key to future sustainability, finance directors highlighted that better leadership and clearer lines of accountability to drive the implementation of plans, are needed.

In an effort to tackle financial obstacles, CCGs are planning closer integration or redesign of care pathways they commission across other NHS organisations, such as community, acute and mental health trusts (82%), reducing unnecessary clinical variation (76%) and investment in primary care (69%). To meet trusts’ financial challenges, finance directors plan to make savings on agency staff (95%), procurement costs (80%) and through estate rationalisation (60%).

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