Key considerations to developing a credible and deliverable Financial Recovery Plan
23 July 2019
The continuing pressures on the NHS are well documented with increasing patient demand, changes in demographic and labour shortages, to name a few, contributing to persistent and growing financial challenges.
2018/19 provider financial performance showed that, whilst the sector achieved an improved financial deficit on the previous year, it carried forward an underlying deficit of £5bn, an increase of £0.7bn on the year before. The commissioning sector’s year end results are yet to be published but, for the ten months to 31 January 2019, Clinical Commissioning Groups (CCGs) had a collective year to date deficit of £323m. This is a challenging picture for the service as a whole.
Since the publication of the Long Term Plan (LTP), providers and commissioners have moved to manage financial challenges at a system level as well as at an organisational. The focus on financial recovery is as critical now as it has ever been, and NHS leaders facing financial stress or distress should consider how they can use a Financial Recovery Plan (FRP) to make a significant improvement in financial performance and if it should cover an organisation or several organisations within a system. If the Plan is for an organisation it will need to connect with the system and, if it’s for several organisations, it will need to be anchored in the governance of organisation level accountability. They will need to work out how to create time and space to develop one and how they balance that time alongside the focus on quality and operational performance.
We’re seeing a significant growth in System Financial Recovery Plans (SFRPs) that bring together providers and commissioners. SFRPs must make the most of the system financial resource and show how CIP and QIPP are maximised, leveraging the broad range of opportunities shown by RightCare, Model Hospital, GIRFT and many other sources of opportunities. SFRPs can achieve a greater and faster level of financial improvement through strong collaborative working although there remains a role for organisational FRPs to drive improvement within an organisation’s own four walls.
There are some key considerations, much of which is referenced in our recent Road to Recovery publication, that our experience has shown us.
- Choosing whether to have an organisational Financial Recovery Plan or an SFRP. This critical choice will depend on which organisations need to recover and whether the likely duration means an SFRP would be more beneficial as the direction of travel is towards a system. In our experience, answering questions such as “who needs to be involved in the development of the recovery plan?” and “what are the differences in an organisational FRP and an SFRP?”, are fundamental for leadership to get right.
- Understanding your underlying financial baseline and diagnosing why you are in the position you are in. A thorough and detailed understanding of the true financial challenge you are facing, accounting for non-recurring items and notwithstanding cost pressures which will arise during the recovery journey, is key. Producing one version of the truth that key stakeholders are agreed upon is a vital first step from which to build a sensible, deliverable and challenging recovery plan. Being clear on what is causing the deficit is the next step, as well as understanding what is and is not within your direct control to address. Performing this analysis helps ensure that the plan is targeted in the right areas to address the root cause of the issues, as well as informing who needs to be involved to ensure the plan is delivered.
- Engaging everyone. Each organisation should own their recovery plan and this should be dispersed throughout. That means not just the board and the executive/leadership team, but all individuals and teams that will be required to think and act differently must be part of the journey from the very beginning. Everyone should feel ownership of the recovery actions that they will be expected to deliver. For example, clinical and operational leads need to be given time and support to perform and understand the diagnosis set out in point two above, as well as assessing why services are in deficit, and what service reconfigurations may benefit both patients and the financial position. With this input, the recovery plan will gain legitimacy and ownership across the organisation which will make the deliverability of the plan much more secure.
- Keeping the plan focused and challenging, and having the right governance for success. The recovery plan should be concise, notwithstanding the fact that there will be a wealth of analysis supporting it. It should set a challenging timeframe to get back to balance - creating a sense of urgency can help to effect real and lasting change. The balance between getting back to balance as quickly as possible and giving the organisation time to recover properly and sustainably is an important one to strike. Getting the right governance in place is also key to ensure plans are robust, safe, suitably ambitious but credible.
- Embedding the right culture. This is vital and takes time. Leading from the front, with consistent messaging and support to the organisation is a key role that the executive team and senior leaders must take, as well as providing support to the operational leadership teams to deliver financial improvement.
- Engaging external stakeholders. There is no doubt that system working is here to stay. Whilst a focus on an organisation’s own recovery is vital, system working will be required to return to a sustainable financial balance both for individual organisations and for the respective system more broadly. A key barrier to success is failing to properly identify which organisations should form part of a system recovery plan. Knowing this is critical to then investing the time to build relationships and identifying the key areas of initial focus that can lead to financial sustainability.
Developing a credible, deliverable financial recovery plan is complex and takes dedicated time and effort, which is currently a scarcity in our NHS. The above represents some of our key thoughts for organisations to consider at a high level, and our Road to Recovery publications contain further content.
For a more detailed conversation with those trusts up and down the country that we have supported in this area, please do get in touch with Damien Ashford and Shamil Ganatra.