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18.02.16

NHS trust deficit bill set to hit £2.3bn

For the first time since this King Fund’s analysis began in 2011, around half of trust and CCG finance leaders said the quality of care in their local area has worsened in the past year – while trusts now forecast an end-of-year deficit of £2.3bn.

The staggering findings in the quarterly monitoring report from the influential think tank underlines the risk that the Department of Health will breach parliamentary protocol by overspending its budget.

Along with major national health bodies, the department has been imposing a series of strict financial controls in an effort to bring the deficit down to £1.8bn by the end of the year, despite trusts already being £1.6bn in the red three months ago.

But based on the King’s Fund survey of 83 trusts, finance directors are already expecting a £2.3bn funding hole for 2015-16.

More than two-thirds of trusts and 90% of acute hospitals are not expecting to balance their books. The majority of trusts also currently rely on extra financial support from the department or need to draw down their reserves.

Another major issue highlighted in today’s survey revolves around the swollen national agency bill, which had already hit £4bn at the end of January. More than half of trusts are worried they will not be able to meet nationally-imposed caps on their agency staff, while one-fifth of them say caps could impact their ability to recruit vital staff.

This quarter’s survey also identified the highest-ever level of concern about meeting productivity targets, with over half of trust finance directors echoing fears previously highlighted in the Healthcare Financial Management Association’s (HFMA’s) poll of over 200 chief finance officers.

John Appleby, chief economist at the King’s Fund, said: “These findings are further evidence that the NHS is facing a huge financial challenge. Even with the additional funding recently provided by the Treasury and a big switch from capital to revenue spending, it is touch and go whether the Department of Health will be able to balance its budget at the end of the year.

“At the same time, performance is deteriorating with key targets being missed with increasing regularity and increasing concerns being raised about the quality of patient care. This is shaping up to be a make or break year for the NHS.”

Regular data analysed in the quarterly report also showed deterioration across the board. Perhaps most strikingly were the waiting list figures, with the total waiting list for planned hospital admissions in December estimated at 3.5 million patients – or the total populations of Greater Manchester, Bristol and Southampton combined.

Almost 10% of patients waited longer than four hours – the standard waiting time ceiling – in A&E over the quarter up to the end of December, representing the worst quarterly performance since 2003.

As previously revealed by NHE, delayed transfers of care remained a major problem, with more than 5,000 patients awaiting discharge from hospital at the end of December – the highest figure since 2007.

The only figures that actually improved were for cancer waiting times, with 16.5% of patients waiting more than 62 days for treatment following an urgent GP referral – but this was still the eighth consecutive quarter that this target has been missed.

‘Actual year-end deficit will be even larger’

Paul Briddock, director of policy at the HFMA, who wrote for the last edition of NHE, repeated claims made by finance directors in the organisation’s last Temperature Check in November: that it was already time to “start thinking about a Plan B” for finances or “quality could start to suffer”.

“Today’s figures show this prediction may be coming true,” he continued. “Six months ago finance directors were relatively confident quality standards could be maintained despite the pessimistic outlook – at least for the remainder of this financial year – but as the situation has gone from bad to worse in the meantime, it’s clear from the new figures that the unprecedented pressure to meet financial targets is taking its toll.

“Finance directors have warned that their financial plans for the year are at medium to high risk of not being met and that there is slippage against their savings plans so our hunch would be that the actual year-end deficit will be even larger.

“With speculation mounting about whether or not the Department of Health will overspend its budget, we’re seeing increasing top-down pressure on finance directors, and their teams to make further savings and productivity gains. But we can only bring about change if they are kept engaged and the whole health and social care system works in a collaborative and open way.”

NHS Providers also speculates that the true year-end deficit will exceed the King’s Fund £2.3bn estimation, with providers entering 2016-17 “with a substantial recurring deficit”.

Its head of analysis, Siva Anandaciva, said: “It is welcome that we are finally moving away from financial policies based on punitive contract fines and marginal payment rates to a more credible system of tariffs that reflect increased costs, and greater support to control the costs of temporary staff.

“But these policies will take time to make an impact and in the interim the demand for services continues to escalate.”

Labour’s shadow health secretary, Heidi Alexander MP, went further, arguing that health secretary Jeremy Hunt MP must “come clean with the public” about the true scale of the financial crisis.

But health minister Alistair Burt MP defended the government’s priorities, arguing that despite “being busy”, the NHS “continues to perform well”.

“There should never be a choice between providing safe care – our top priority – and balancing the books, which is why we're investing £10bn to fund the NHS’s own plan for the future, including nearly £4bn next year,” he added.

Sustainability and transformation plans

While the National Audit Office had already argued that national strategies to rescue trust deficits for 2015-16 “might have come too late”, the department and its arm’s-length bodies are intent on balancing the books by pressing ahead with major operational reforms.

At the top of these are the ‘sustainability and transformation plans’ (STPs), designed to help trusts recover and then transform how they deliver services.

The first leg of this two-pronged plan, or the ‘sustainability’ aspect of it, will see trusts analyse their performance and service gaps before Easter in order to devise reformed and shared operational plans for 2016-17.

These plans, which will be steered by single local leaders, are strictly mandatory if trusts wish to receive a share of the government’s £1.8bn bailout fund. They must also be regarded as ‘year one’ of the five-year STP scheme, meaning NHS England and NHS Improvement expect to see “significant progress on transformation” through it.

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