Comment

Finance directors need upfront investment to meet nhs savings targets

Paul Briddock (pictured), director of policy at the Healthcare Financial Management Association (HFMA), discusses the mounting financial pressures facing NHS trusts and CCGs.

The results of our biannual NHS Financial Temperature Check research always make for interesting reading, even if I do say so myself, but it’s fair to say we awaited the latest figures – released on 1 July – even more eagerly than usual. With the new government in place and a demanding set of targets set out in late 2014 in the Five Year Forward View, it was time to find out what pressures those managing NHS budgets on the ground are feeling; how are their organisations faring and where will the next 12 months take them?

The short answer is that things are tough, and likely to get tougher. The NHS’s financial performance continues to go downhill at an ever more alarming rate, with increasing numbers of our members expecting to end the year in the red. This is especially the case in the provider sector, where 78% of finance directors expect to be in a worse financial position at the end of March 2016 than they were in 2014-15. Almost two-thirds are forecasting a deficit for the end of this financial year, up by a third compared to the half that finished 2014-15 in deficit.

But it’s not only trusts who are worried about hitting their targets.* The vast majority of finance directors across both providers and CCGs in England – 92% – don’t feel the health organisations in their local area have sufficient financial resources available to implement long-term financial plans, without needing additional support. This includes realising the objectives set out in the Five Year Forward View, which commits the NHS to £22bn of efficiency savings by 2020. Given that the government has made it clear further cash injections are not on its agenda, we have a deeply worrying picture of continuing financial deterioration exacerbated by concerns about not having sufficient resources and capability to meet some of the most challenging savings goals the NHS has ever faced.

When asked about the risk associated with achieving plans set out for the current year, most finance directors assessed this as either ‘high’ or ‘medium’, with only 16% of CCG and 10% of provider finance directors rating risk as ‘low’. We examined what the biggest of these risks were and savings was highlighted again, with 74% of respondents citing slippage in cost savings as a top risk factor, followed by increased demand (64%), emergency activity (55%) and spending on agency staff (50%).

In contrast to the foreboding picture presented by trust respondents, on the surface at least, things look more positive for their CCG equivalents. 83% expect a surplus at the end of this financial year and half predict they will be in a similar or better position than they were at the end of 2014-15 by April 2016. Our CCG members also told us they are responding to the current financial challenges in quite different ways to their trust counterparts, with CCGs concentrating on integration, redesigning pathways and investment in community services, while trusts prioritise reducing agency costs, procurement cost savings and reducing clinical variation.

But while on the face of it CCGs appear to be doing relatively well, at least compared to a trust sector in further decline, what is expected to be a fairly small overall net CCG surplus is likely to be dwarfed by a much larger net trust deficit.

Looking at the overall situation, the message we’re getting from our members – in both sectors – is that they do have ambitious plans to save through improving efficiency, from procurement savings to supporting staff to work in different ways. But, while this will certainly help protect and maintain services, these measures alone can’t be relied on to plug the remaining £22bn gap in NHS finances. Increasing demand for services and an ageing population mean transformation of service provision is the key to a sustainable, fit-for-the-future NHS. This will require short-term investment before long-term benefits are realised.

And this is where those NHS general election manifesto pledges come into their own. The recent Summer Budget saw the government make good on the £8bn of funding promised, but what we desperately need now is clear detail on how and when this funding will be deployed. HFMA is calling for the funding to be front-loaded to enable the service to make the investments needed to start realising those savings. The longer we go without clarity and the funding kicking in, the longer it will take for efficiencies to be achieved in a health service already facing huge financial challenges.

*NB: Of the 196 finance directors in England contributing to the research, 47% are from provider trusts and 37% from CCGs. CCGs use the terminology of chief finance officer (CFO), whereas NHS trusts and foundation trusts generally use finance director. In this release we sometimes use the term finance director to mean both finance directors and CFOs together, when describing the views of all of our survey respondents collectively.