Where next for NHS finances - how can deficits be improved?
19 October 2018
Reflections on Q1 provider performance
Expectations from the health sector for the Budget are high. Additional money has already been forthcoming and a further boost is expected from the Chancellor. With a new 10 year plan in the offing and a renewed focus on digital solutions there are some grounds for optimism.
But the service remains one in some distress. Having finished 2017-18 with a deficit of £960m there are now 123 out of 133 (92%) acute trusts reporting a deficit at the end of quarter one 2018-19. Overall, Q1 saw a deficit of £814m compared to a deficit of £960m in the previous year and, for the first time, the underlying deficit has been estimated at a £4.3bn carry forward (£1.85bn net) into 2018-19 for the provider sector. Whatever the form of a longer term settlement for the NHS, it would appear that it is starting the first year of its long-term plan from a deficit position. The current planned deficit for 2018-19 is £519m - we ask if this is achievable in light of the Q1 performance, and what will it take to get there?
We are working with a significant number of trusts in distress across the whole country. The pressures facing the sector are familiar and well documented. Trusts continue to face ongoing and record emergency pressures, rising demand, an increasing prevalence of chronic conditions, shortages of doctors and nurses in some areas, and an ageing population.
Based on our experience we think there are three main actions that are important for trusts to focus on right now so as to give themselves the best chance of meeting their 2018-19 targets and get a head start on 2019-20.
A fresh perspective - a key first step is to give careful consideration to what is required to deliver the in year position, as well as how and who will do it. With slippage of efficiency savings being cited in the Q1 results as a major contributing factor to the financial challenges of the sector, and noting that one-off savings will do nothing to improve the underlying position of the NHS, trusts need to have a fresh perspective. This means taking stock of what they have successfully achieved to date and assessing what else they can focus on e.g. stretch of existing CIPs, tightening pay and non-pay controls, stopping discretionary expenditure.
Getting ahead with 2019-20 planning - trusts should develop a detailed 2019-20 planning process now, giving full consideration to the eight to ten big areas of focus that will drive efficiency. It is far better, and likely to be more effective, to have a few big programmes rather than lots of small ones. Trusts need to understand the fundamental causes of their financial pressure (whether within their control or not), as well as the key drivers (for example, rising pay costs year on year and the key drivers behind them). This understanding will determine which areas to focus on in the coming financial year. Our experience indicates that focusing on the ‘big ticket’ items, such as workforce, operational improvement and working closer within respective STPs, are important here.
Building capability - trusts need to ensure that they have sufficient capacity and capability to drive and deliver against the areas identified and changes planned. Having this in place is crucial for success.
There is no doubt that the situation for NHS providers remains challenging. But, we believe there are ways that trusts can mitigate against some of the challenges and get themselves into a position whereby they can make the most of the new funding due next year.
For more information on our approach to supporting trusts in turnaround see our report Road to recovery.