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No ‘convincing plan’ in place to close £22bn NHS efficiency gap – PAC

There is not yet a convincing plan in place for closing the £22bn efficiency gap by 2020-21 and avoiding a ‘black hole’ in NHS finances, an influential group of MPs has stated.

In its ‘sustainability and financial performance of acute hospital trusts’ report, the Public Accounts Committee (PAC) said the Department of Health (DH), NHS England and NHS Improvement “have not taken action soon enough” to keep trusts in financial balance.

The MPs also stated that the target for trusts to make 4% efficiency savings is “unrealistic” and was based on “seriously flawed” data.

As NHE has been reporting, the financial health of NHS trusts and NHS foundation trusts has significantly worsened in the last three financial years. In February, for instance, Monitor’s financial figures for the latest quarter revealed that the NHS made £741m efficiency savings in April to December 2015, but trusts still had a £2.3bn deficit.

Only last week, Chris Hopson, CEO of NHS Providers, told the Commons Health Select Committee that it is ‘unlikely’ trust deficits will be eliminated by the end of 2016-17, and could still total around £500m.

Meg Hillier MP, chair of the PAC, said: “Acute hospital trusts are at crisis point. Central government has done too little to support trusts facing financial problems with the result that overall deficits are growing at a truly alarming rate. Crude efficiency targets have made matters worse.

“The Department, NHS England and NHS Improvement have not taken action soon enough to keep trusts in financial balance. The target for trusts to make 4% efficiency savings across the board is unrealistic and better data is needed for more informed savings and efficiency targets.”

The committee added that it backs plans by NHS England and NHS Improvement to support and challenge the local sustainability and transformation plans which each part of the country will produce in June 2016, but it has not yet seen “the overarching and convincing plan for where and how the £22bn savings needed by 2020-21 will be made”.

Recently, the NAO has also commented on the lack of a detailed plan and made various recommendations in its report to help work towards achieving long-term sustainability.

Report back

PAC has called on the DH, NHS England and NHS Improvement to report jointly to the committee in September 2016 on their progress with implementing the recommendations.

The MPs also claim that the current system of paying providers through a national tariff does not support financial sustainability nor incentivise joined-up services. They sharply criticised the NHS and ministers for failures in workforce planning, contributing to a 24% increase in spending on agency staff by acute trusts between 2012-13 and 2014-15.

NHS England told the committee that spending on temporary staff was the largest driver behind trusts’ increasing deficits. However, the MPs added that NHS England and NHS Improvement should be clear that spending on agency staff is only one contributing factor to the deficit. They should set out how they will support providers to secure the collective action that is needed to get value for money from the use of agency staff as a matter of urgency.

A DH spokesperson said: “We know some parts of the NHS are under pressure due to our ageing population, but we disagree with the claim that we are not acting quickly enough.

“We are intensively supporting challenged trusts to improve finances, while clamping down on rip off staffing agencies and helping hospitals become more efficient.”

Last week, Monitor and the NHS Trust Development Authority launched the ‘Financial improvement programme’ designed to help trusts find expert financial and operational support to make immediate and long-term savings.

Paul Briddock, director of policy at Healthcare Financial Management Association (HFMA), said: “The PAC report into NHS finances echoes what HFMA has been saying for a long time.

“After reviewing the evidence of the current disappointing position of NHS finances, the consensus is that a recovery plan needs to happen faster than its current rate.”

Rob Webster, the outgoing CEO of NHS Confederation, said: “To their credit, the government, NHS Improvement and NHS England have begun to address some of the issues our members face.

“Through front loading of the finances in the NHS, targeted allocations to acute hospitals, a reduction in the efficiency factor to two per cent next year and the creation of three to five year planning, we are seeing the conditions improve.”

Chris Hopson, chief executive at NHS Providers, added that the report confirms what members have been saying for the last 18 months: “the financial crisis in NHS hospitals and other providers is due to the fundamental mismatch between what NHS providers have been asked to deliver and the resources they have been given. It is not a function of the performance of individual foundation trusts and trusts”.