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Trusts expect deficit of just £700m, but most relying on one-off savings

Estimates released by NHS Providers today have hailed an encouraging financial year as it forecasted that the year-end deficit for trusts in 2016-17 will be between £700 and £750m, significantly below last year’s outlook.

Prior to NHS Improvement (NHSI) releasing the full figures later on in the year, providers have stated that the midpoint of these figures, £725m, would be 70% less than the previous year’s whopping deficit of £2.45bn.

It would also mark a “substantial improvement” in financial performance for the NHS after provider deficit stood at £886m in the third quarter forecast released in February.

Chris Hopson, chief executive of NHS Providers, commented that increasing pressures on the NHS led to provider sector deficit ballooning to £2.45bn last year, which meant that reducing the deficit was made a strategic priority this year.

“Trusts agreed a detailed plan, with the full support of NHSI, to reduce this deficit to £580m and this has been largely delivered,” Hopson stated. “This is a significant achievement reflecting a huge amount of hard work by trusts to control costs, increase productivity and improve efficiency whilst continuing to provide outstanding patient care.”

Analysing third quarter trajectories, providers have estimated that the deficit decrease amounts to cost improvement gains of more than £3.3bn – more than 4% of turnover, and £200m (10%) more than 2015-16.

“Despite the challenge of seven years of stretching cost improvement programmes, trusts have managed to actually increase the cost improvement gains they are making this year,” Hopson added. “There are few, if any, other healthcare systems where providers are delivering this level of gain year in year out over such an extended period.”

The NHS Providers CEO also argued that reaching this target would be a “particularly good achievement” due to trusts also having to deal with immense operational and financial pressures caused by record demand over the winter period.

“Our estimate means that trusts have recovered more than two-thirds of that deterioration in the last three months – a very good result,” he said.

“NHSI and other national bodies have played an important role in devising a clear system-level plan and securing dedicated funding to support delivery of this plan.”

However, Hopson explained that this improvement had to also be taken in context. “NHS England funding in 2016-17 rose by 3.6%, this year that drops to +1.3%,” he warned. “Two-thirds of trusts told us at quarter 3 that they were very or fairly reliant on one-off non-recurrent savings to meet their year-end figures – we estimated this accounts for about £1bn of the estimated gain.

“It’s also clear that, with this 2016-17 year-end result, the sector will struggle to eliminate the provider deficit in 2017-18 as originally planned. In our view, given the drop in 2017-18 funding, providers will do exceptionally well to match 2016-17’s deficit.

“However, none of this should detract from the genuine improvement reflected in these figures. They show that, when given the right national framework and the right support, NHS providers can deliver a stretching target,” he concluded.

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