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NHS providers rack up ‘massive’ deficit of almost £1bn in Q1

NHS trusts and the foundation trust (FT) sector accumulated an unprecedented £930m funding hole during the first three months of 2015-16, according to analyses published today (9 October) by Monitor and the NHS Trust Development Authority (TDA).

Foundation trusts missed a number of national waiting times targets, struggled to deal with diagnostic tests and recorded a deficit of £445m in the first quarter of the financial year.

Monitor analysis found that, in just the first few months of this financial year, the sector recorded a deficit £90m worse than planned and £96m more than the full-year deficit for 2014-15.

This marked the second successive financial year during which providers recorded a funding gap already in the first quarter, which trusts justified with “higher than expected” pay costs due to expensive agency staff.

Dr David Bennet, the regulator’s chief executive, said the findings reiterated that the sector is under “massive pressure” and must “change to counter it”.

“The NHS simply can no longer afford operationally and financially to operate in the way it has been and must act now to deliver the substantial efficiency gains required to ensure patients get the services they need.

“Monitor has already taken action to help the sector improve operationally and financially and continue to offer our support and guidance. But the FT sector must realise that a radical and lasting change is required.”

Most FTs (78%) ended the quarter in deficit, of which 75% were acute or specialist providers, and trusts made £64m less savings than expected.

The FT sector’s wage bill was also £59m higher than planned.

And this sector as a whole missed vital waiting time targets, including in A&E, for routine operations and some cancer treatments.

The size of the waiting list for routine operations increased by almost 170,000 compared to the same period in 2014-15 and now stands at almost 2 million patients.

Nearly 11,000 patients also waited longer than the recommended six weeks for diagnostic tests, while almost 30,000 waited on a trolley for more than four hours until they were admitted to A&E and arrived on a ward due to bed shortages.

The regulator also had to intervene or agree on regulatory action at 37 trusts – or one-quarter of the sector – because of operational or financial problems.

Deficit in trusts

According to a report by the NHS TDA, the trust sector also ended the first quarter in a black hole with a funding gap of £485m against the planned £412m.

The TDA associated this financial position with “a number of pressures” on providers, including agency backfill costs (racking up a £380m bill just in the first quarter), continued pressure on hospital-based care and emergency services, and a reduction in the level of income expected by trusts.

It also cited “continued difficulties” with discharging medically fit patients to more appropriate care settings as a significant contributor to the deficit.

This brings the total deficit in the state service to almost £1bn during the first three months of the year.

Commenting on this, Richard Murray, director of policy at the King’s Fund, said: “This reflects a very sharp deterioration in financial performance among all types of providers, with 96% of acute trusts and more than half of mental health trusts now reporting deficits.

“On this basis, warnings of a deficit of at least £2bn by the end of the year are well-founded. The government and NHS bodies are already taking urgent measures to reduce spending and find savings from other budgets, but it is inconceivable that an overspend of this magnitude can be covered at the end of the year.

“Overspending on this scale cannot be attributed to mismanagement or waste among individual trusts. It reflects the impossible task of delivering high quality care for patients with inadequate funding.

“The government must now acknowledge it cannot continue to maintain standards of care and balance the books. Unless emergency funding is announced in the forthcoming spending review, a rapid and serious decline in patient care is inevitable.”

Unsustainable deficit: ‘We need to be realistic at this point’

NHS Providers boss, Chris Hopson, said the results are “not a surprise” as providers have been “flagging their rapidly deteriorating financial position for more than two years now” – but said they are doing “everything they possibly can” to avoid debt.

He said: “They are experiencing a triple whammy: rapidly rising patient demand, an extra £2bn unfunded staff cost they have been required to add, and the deepest and longest funding squeeze in NHS history, despite the NHS ring-fence.

“The fact that more than 80% of all hospitals are now in deficit and more than 50% of all types of trusts are projecting a year end deficit, shows that this is a system-level problem, not one of poor trust performance.

“Everything we see and hear suggests it’s going to be difficult to improve on the original £2.1bn deficit trusts were predicting at the beginning of the year. We recognise that this size of deficit will give the Department of Health a significant problem in making its overall 2015-16 budget balance.”

Hopson added that trusts believe “there is more downside risk than upside opportunity at this point”, especially with winter just around the corner – and members claiming they have less money to cope with that than last year due to how CCGs and resilience groups allocated their winter cash.

“The only significant extra new opportunity on the horizon is the introduction of an agency staff spending cap, but this will now come very late in the year and just at the point when demand for agency staff is likely to be at its greatest as extra winter capacity comes on stream. Everyone will keep doing all they can, but we need to be realistic about what can be achieved at this point.

“The NHS needs to come together to create a realistic and deliverable financial stabilisation plan that eliminates the provider sector deficit within a reasonable period of time and enables trusts to plan for a sustainable future. This is now urgent as running a £2bn annual provider sector deficit is patently unsustainable,” he added.

Calls for delivery of £8bn government funding

Paul Healy, senior economics advisory at NHS Confederation, said the state service needs “financial commitment” from the government in the upcoming Spending Review in order to “plan changes and become more sustainable”.

He also called for £4bn of Whitehall’s £8bn existing funding commitment to be available within the next two years.

“Hospitals and other frontline NHS organisations have all but exhausted their options for becoming more efficient. They are also increasingly affected by cuts in social care, local GP shortfall and a host of other challenges.

“We need an end to the short-term approach to finances which is causing financial instability in the NHS and acting as a hindrance to transforming patient care,” he said.

And Paul Briddock, direct of policy at Healthcare Financial Management Association (HFMA), called this bleak outlook the “most challenging financial environment in recent years”.

He continued: “It has now been 182 days since the government vowed to inject £8bn of much-neede extra funding into the NHS and we still await confirmation as to where and when this investment will be made.

“They now need to keep their promise and make their pledged investment a priority. As the new government’s honeymoon period comes to a close, this extra funding is critically important in order to help plug the severe decline in our healthcare finances, which is at unprecedented levels.”

Meanwhile, Unite’s national officer for health, Barrie Brown, blamed the deficit in the “ruinous and extortionate payments” from private finance initiatives that are “dragging the trusts in England into eye-watering debt”.

He called on the health secretary to both demand extra funds from chancellor George Osborne, as well as to accelerate the steps being taken to curb the “ballooning bill” for agency staff.