The NHS - embracing best practice in good financial management

July 21, 2016

The NHS is an institution we should all be proud of. Day in, day out, 1.7 million staff provide world-leading care to a fast-growing population with ever more complex challenges and higher expectations. 

But the NHS delivers its services with a budget of 0.4% of GDP less than our European peers. For those working in the sector, the challenges of delivering services within budget are real.

And they’re not going to go away: with the NHS looking at a £30bn funding gap by 2021 there is unprecedented financial stress in the system. Last week’s announcement that will relax the rules over waiting times, scrap fines for missing targets and place five trusts into financial special measures, underscores the magnitude of the challenge facing everyone striving to stabilise NHS finances and facilitate a range of wider changes.

The new measures are intended to help drive the deficit down after a £2.45bn overspend in 2015-16, but it’s going to take strong leadership at a national level to transform the NHS in order to meet the funding gap. Although the challenges facing leadership teams keep getting bigger, there’s much local NHS organisations and systems can do to help themselves and some of the new measures are intended to facilitate that. Local organisations aren’t always fully in control of their own destiny but addressing their own organisations financial health and preparedness for change is possible.

Every situation is different, but there are some lessons we have observed that will resonate with all organisations facing some form of financial challenge:

  • Get the right leadership in place. Strong organisations recognise they need people with the capability, time and commitment to lead and deliver financial recovery programmes, while also improving operational performance and the quality of care. In some cases this may require an injection of new skills and experience into existing leadership teams.
  • Find the underlying causes that support the financial challenges, share these widely and gain buy-in to these factors before acting on them.
  • Grip the organisation tightly, but safely, to ensure discretionary spend is under control.
  • Build a credible recovery plan focussed on addressing the underlying causes, then act quickly to halt further deterioration; target short-to-medium term gains, whilst understanding what needs to happen to achieve long-term, sustainable change.
  • Communicate clearly to staff about the extent and causes of the financial challenge and how they can contribute to achieving sustainable improvement.

Many organisations develop overly-complex financial recovery plans and often fail to grasp the basic building blocks of change. There are some critical first steps to either avoiding further decline or consciously planning improvement.

PwC’s ‘Road to recovery’ report, is based on our experience of working with NHS Trusts and outlines these first steps and how to develop them. It is a contribution to an issue that, while it was highlighted again last week, will continue to dominate the lives of many local NHS leaders for many years to come.

David Morris | Partner
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