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Performance crashes as NHS racks up £1.6bn half-year deficit

Both trusts and foundation trusts are falling behind on finance and operational performance targets, with many providers struggling to achieve several key national standards as the sector racked up a £1.6bn half-year deficit, Monitor has said.

The sector was expected to end the financial year, six months from now, with a £2bn deficit.

The regulator warned that NHS providers are doing particularly poorly in terms of delayed transfers of care, which is in turn pulling down other standards – especially in A&E, where operational targets were not met largely due to bed shortages.

These delayed discharges are estimated to have drained providers of £270m just over the first six months of this financial year.

Agency staff costs are eating up increasingly larger portions of the healthcare budget and are having “extremely detrimental” effects on trusts’ financial positions. The sector spent almost double (£1.8bn) what it planned on contract and agency staff for the second quarter of 2015-16, for example.

While providers managed to make around £1.1bn of savings (around 2.8% of costs), they are falling behind on cost improvement plans. As a result, 190 of 241 providers were in the red during the second quarter of the year.

Jim Mackey, chief executive designate of NHS Improvement, said: “Today’s figures make for really challenging reading – not least for those NHS organisations that are missing national standards and going into deficit for the very first time.

“NHS commissioners and local authorities need to work in partnership with local providers to help significantly improve how they tackle delayed transfers of care – a significant nation-wide problem which is directly impacting on the amount of beds available to clinicians so that they can treat their patients in a timely manner.”

But Professor John Appleby, chief economist at the King's Fund, said hospitals across the country were not coping with the financial crisis.

“We have never seen anything on this scale before. There is a real danger that over the next year trusts will run out of cash to pay staff,” he said.

“This is everybody - even the best managed hospitals are in this situation, it is not something that any trust has been able to resolve.”

Financial directors lose confidence in improvements

Although Monitor claims clinicians and managers locally are working hard to limit the impact of these pressures in delivering safe care, those sitting in leadership positions at these trusts are not confident that they will succeed.

Paul Briddock, director of policyat the Healthcare Financial Management Association (HFMA), said the financial situation of providers was incredibly worrying, with this quarter's results showing the continuous economic decline observed since 2013-14.

"Alarmingly, this makes [this quarter's] position already £794 million worse than provider deficit for the whole of 2014/15, and the overall forecast deficit for 2015/16 is now £2.2bn, £0.2bn worse than the original plan of £2bn.

"With 79% of all Providers now in deficit, it is patently obvious that it is a systemic problem facing provider finances which needs urgent attention. The NHS is simply not living within its means, which has consequences."

HFMA's poll of more than 200 chief finance officers and finance directors published earlier this week also revealed that the majority of them think £8bn will not be enough to rescue the service, rendering £22bn planned of savings unrealistic.

Most of them also already know that they will not have enough resources to implement current plans unless the government’s £8bn top-up is frontloaded within the next 18 months.

But the regulator hopes that new hourly price caps for agency staff, being rolled out next week, will help mitigate the situation and improve providers’ ability to tackle performance and demand.

While the full benefit of this will take time to realise, Monitor and NHS TDA expect trusts will be able to turn the tide on the health service’s worsening financial position, and end 2015-16 “closer to where they expected to be” at the beginning of the financial year.

But trust and CCG finance officers disagree, claiming that the £2bn deficit already forecast for the end of 2015-16 is highly optimistic – especially considering that all 156 acute hospital trusts are already set to end the financial year in the red.

And responding to the stark news, NHS Providers head, Chris Hopson, said: “These figures once again show that giving providers an impossible task has led to the biggest NHS financial problem in a generation.

“More than three quarters (79%) of all NHS providers are in deficit at this point, as they are caught by a triple whammy of rising demand and cost; reductions in the NHS tariff and provider payments; and undeliverable savings targets. Our members tell us that this is being compounded by local commissioners levying fines on providers for failures that are beyond their control. Instructions to commissioners not to reinvest the fines in improving services are an additional worry.

“As we approach a difficult winter, with the prospect of strikes by junior doctors, and rapidly growing problems with delayed transfers of care, our members find themselves under pressure from every direction. 

“We need honesty and realism on how the NHS will address what is clearly an unsustainable position. We need the right spending review settlement; an urgent plan to reduce provider deficits and return the sector to surplus; and a way of sustainably matching what the NHS is expected to deliver to the NHS budget.”