Facing the NHS funding issue - how we need to manage resources better

07 October 2020

by Mike Farrar PwC Health Adviser

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by Damien Ashford Partner, Business Recovery Services, PwC United Kingdom

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For most of its 72 years, the NHS has jostled with the government about the level of funding it needs to meet demand and rising costs. The coronavirus (COVID-19) pandemic has had an enormous impact and, despite £3bn of extra funding to fight the possible second wave, NHS leadership has made it clear it will need more money to deal with its consequences, most pressingly:

  1. the recent rapid rise in waiting lists, which will take significant and sustained investment to get back to pre-COVID-19 levels;
  2. a workforce in varying states of exhaustion, who now face rising waiting lists whilst also balancing working safe practices to prevent COVID-19 infection; and
  3. coping with the provision of safe care that prevents the spread of infection, with many additional safety requirements that understandably reduce the NHS’ capacity to cope with growing demands.

Looking forward, most expect that any extra funding will come with requirements regarding the NHS response to COVID-19, supporting the workforce and dealing with rapidly rising waiting lists. The funding is also likely to continue the recently increased level of capital funding, to help the NHS with capacity and an ageing estate. With all of this in mind, the question of how the NHS uses every pound wisely has never been more important.

Progress made on benefiting patients

Over the past few years, the NHS has made significant progress in becoming more efficient and making better choices about how money is used for the benefit of patients. Trusts have moved almost entirely to block contracts after years of increasing income on PBR contracts, shifting their focus to managing costs, and achieved varying degrees of success. COVID-19 has now completed the shift to block contracts for all, with arrangements in place to ensure that trusts have the money they need to respond to the pandemic.

However, for large teaching hospitals or specialist trusts, the aftermath of COVID-19 will bring funding into even sharper focus. Some have traditionally had a strong international and private sector business that has generated additional resources, allowing them some flexibility in smoothing their financial performance from one year to the next. Post-pandemic, it will become more challenging for large teaching hospitals and specialist trusts to manage their financial performance from one year to the next.

Whilst there are many challenges, COVID-19 has also presented many opportunities to improve how care is provided. The pandemic has accelerated the shift to virtual outpatient and GP appointments, which have significant benefits to patients and care providers and increase efficiency. These should now be sustainably hard-wired into how care is provided.

The emergence of integrated care systems (ICSs) presents a fresh opportunity to look at allocative inefficiency (e.g. not spending enough on mental health services and so driving up demand for physical health services) across the whole healthcare system to ensure every pound is spent wisely. The continued development of ICSs will also give significant opportunities to encourage acute collaboration to manage waiting lists across many trusts.

ICSs also create fertile ground for innovating to deal with the workforce challenge. By monitoring demand and workforce supply at a system level, there is an opportunity to best deploy the workforce where it is needed most and help deal with hotspots in either COVID-19 or where issues on workforce exhaustion are particularly strong.

But a renewed focus on cost is needed

Few would say that the NHS hasn’t had, through the years of austerity, to dig deep and try to manage costs and reduce waste. The value of the NHS is more appreciated than ever, but with a struggling economy and more hardship looming, we shouldn’t be lulled by a false sense of security that new income and sufficient funding will be forthcoming to fully tackle the workforce and waiting list issues.

Time will tell how much additional funding will be committed. But whatever the amount is, there needs to be a renewed mindset that we do everything possible to rethink how funding choices are made. And each provider must minimise waste, have tough control costs and maximise the value from every pound of funding for the benefit of everyone.

by Mike Farrar PwC Health Adviser

Email 1233434

by Damien Ashford Partner, Business Recovery Services, PwC United Kingdom

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