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‘Too late’ to rescue 2015-16 trust deficits – NAO

The response to the ever-growing trust deficit by NHS Trust Development Authority, the Department of Health and Monitor “might have come too late” to improve providers’ 2015-16 financial position, the National Audit Office (NAO) has warned.

Many trusts are letting “poor financial performance” become the new normal, it suggested, because they see it as “the least worst option compared with poor healthcare provision”.

In a report reiterating the decline of the health service’s economic standing, the auditor said the revisions and resubmissions of trusts’ financial plans for this year created an “unsettling” and “turbulent” planning period that might make it difficult for regulators, trusts and foundation trusts to meet targets, measure progress and manage resources effectively.

It is also not yet clear whether the two regulators, the department and NHS England have a coherent plan of the scale needed to rescue trusts’ failing finances, despite the government committing an extra £8.4bn to the NHS in this Parliament.

Interventions from the DH and its arm’s-length bodies also risks creating “perceived or actual competing priorities” for providers, the NAO said.

This could already be the case with safe staffing, with the department’s interventions to reduce agency spend on nursing staff coming at a time when acute trusts needed to hire more nurses to meet safe staffing guidelines and when nursing vacancy rates were soaring.

Head of the NAO, Amyas Morse, said: “The department, NHS England, Monitor and the NHS TDA must take a rounded view of how to improve trusts’ finances. The government’s commitment to give the NHS more funding, with almost half of this coming upfront, could be a significant step towards financial sustainability, if this funding can be devoted to improving the financial position of trusts rather than dealing with new costs.

“Continued demand for healthcare services means that the pressure on acute trusts will not go away. Until there is a clear pathway for trusts to get back to financial sustainability, we cannot be confident that value for money will be achieved.”

The auditor also warned that “effective oversight” by the department and its arm’s-length bodies will become increasingly difficult if the amount of trusts in financial distress rises further.

While the department and its bodies have taken steps to learn how trusts could slash costs, the NAO said the wider use of this learning is still not clear – or even how it will help improve trusts’ finances overall.

Today’s report also analysed the new models of care being developed around the NHS, often perceived as one of the health service’s only chances to save itself from a financial collapse.

But the auditor argued that making savings through these redesigned healthcare models will be challenging given that they are “relatively new and untested”.

“NHS England has made some assumptions about the savings it expects from the new models of care and when these will be realised. But achieving savings through redesigned healthcare is not easy. Acute trusts have fixed costs and, in many cases, large-scale changes requiring investment are needed for them to make savings,” the report said.

“This suggests that closing the efficiency gap is ambitious.”

‘Endemic financial problems’

The NAO also clarified the scale of provider trusts’ deficits, claiming their economic deterioration “has been severe and worse than expected”.

Overall, it said, NHS bodies’ financial position worsened in 2014-15 as commissioners, trusts and foundation trusts together shifted from a £722m surplus in 2013-14 to a deficit of £471m.

“We said in November 2014 that the trend of NHS trusts’ and NHS foundation trusts’ declining financial performance was not sustainable. We repeat this view today,” Morse said.

“Running a deficit seems to be becoming normal practice for acute trusts. There is a risk that poor financial performance is seen as the least worst option compared with poor healthcare provision.”

But despite the auditor’s stark warnings about this financial year, NHS Improvement’s CEO, Jim Mackey, recently guaranteed that next year will be the right time for all providers to “sort themselves out” and create stability in spite of the deficit.

They can do that, he said, by using the cash allocated in the Spending Review to develop new operational plans and ultimately overhaul how the NHS works.

Monitor is set to publish its planning guidance this week.

On this, NHS Confederation’s chief executive, Rob Webster, said: “The NAO report published today shows how bad the current situation is and helpfully recommends actions for the national bodies to take. These include measures our members have wanted to see implemented for some time, such as payment reform and longer term planning cycles.

“Hopefully, guidance and allocations published this week will reflect these asks and support the NHS to get on with the most important thing, which is planning for how to change care locally.”