Talk not targets should shape NHS finance

6 Apr 18

It’s not sustainable to keep setting stretching financial targets for the NHS. What the health service needs is some honest dialogue about the current state of play, says Adam Wright of NHS Providers.

There’s a sense of déjà vu as NHS trusts enter 2018-19. In November’s Budget, the NHS received a funding top up for the new financial year. In exchange, it was set some ambitious performance targets and told to make substantial improvements with the additional funding. As we set out in our report Tough Task, this is against a backdrop of increasing levels of demand and activity and a sustained and systemic workforce challenge.

What the last few years have told us is that this is not a sustainable approach for the NHS. Faced with another challenging year in 2018-19, NHS staff will continue to go the extra mile to deliver what they can for patients. But the further they are stretched, the greater the risk in terms of quality, safety and morale. In this current context, the task for trusts for this year looks impossible, and makes the road to recovery and sustainability even longer.

Take money for example. Trusts welcomed the additional £2.14bn that has been allocated to commissioners and providers this year, which represents 2.4% budget growth for NHS England. But it’s worth remembering the original spending review settlement proposed to increase the budget in 2018-19 by only 0.5% in real terms. That would have been the lowest increase over the entire spending review period, and well below the average 3.7% annual increase the NHS has received since 1948. Whilst the additional funding is welcome, it falls short of what trusts need to deliver.

In exchange for this extra money, the NHS trust sector has been asked to deliver a breakeven position, something that hasn’t been achieved since 2012-13. In order to deliver this, trusts have been set individual financial targets, known as control totals. To bridge the gap between the funding available and the required control total, trusts are expected to make efficiency savings. In recent years the NHS has been achieving productivity growth of 1.8% – around nine times what has been achieved by the wider UK economy. This year trusts are expected to make efficiency savings worth 5.7% of turnover, or £4bn across the sector – that’s 20% more than what was expected in 2017-18. This would be challenging in any normal year, but having gone through the longest financial squeeze in its history, the low hanging fruit is looking increasingly scarce. There are only so many times trusts can sell off surplus buildings and leave posts temporarily vacant.

In meeting control totals, trusts will unlock additional funding known as provider sustainability funding (PSF) – increased from £1.8bn to £2.45bn in 2018-19. As things stand, we know that fewer trusts intend to agree to their control total – only 54% in our Tough Task survey suggested they would be signing up, with a further 29% unsure. That could mean a smaller number will have access to PSF. This is leading to substantial variation across the sector and it is questionable whether the funding is reaching the providers in most need. The gap between winners and losers is widening, which is not good news for the long-term financial sustainability of the NHS.

We also know different types of trusts have different experiences. In the mental health sector, for example, the experience of recent years has undermined the confidence of trust leaders in receiving additional investment. The 2018-19 planning guidance stipulated that clinical commissioning group auditors would independently validate the nationally mandated mental health investment standard. But in our survey around 50% of mental health trusts were still not confident their local CCGs would meet the standard this year, with some continuing to question the definition of what constitutes mental health investment. Whilst national guidance says one thing, the reality on the ground does not always match up and we need to get to the bottom of this.

We need to be vigilant of the risks of asking trusts to deliver of savings they are unable to. We know from the recently published Kirkup review that “unless there are exceptional circumstances, an annual cost improvement programme of 4% is generally regarded as the upper end of achievability”. The 5.7% that trusts have been asked to deliver this year isn’t reasonable, and despite the best efforts of trusts and their staff, could have quality and safety implications. We are already seeing some worrying deteriorations: 12-hour trolley waits, mixed sex accommodation breaches and ambulance waits are all up. This slow worsening of patient experience is beginning to impact public perceptions of the NHS; the recent British Social Attitudes survey showed a 6% drop in satisfaction compared with last year.

Despite all this we know NHS staff are going the extra mile in every aspect of care. But it’s beginning to take its toll. The latest NHS staff survey results are particularly concerning; over half the workforce is working additional unpaid hours, with over a third feeling unwell due to work-related stress. The level of staff engagement has declined for the first time since 2014. It’s the NHS workforce that is holding the balance, but they’re overstretched. The situation is not sustainable.

As we start 2018-19 trusts need to be supported and encouraged to be honest about the current state of play. In Tough Task, we set out four recommendations. Firstly, there needs to be a change to the planning process that fully engages with frontline NHS organisations. Secondly, we need a new national planning framework that has realistic demand projections, contains proper contingency margins, and sets out realistic transformation assumptions. Thirdly, this framework needs to be matched with the proper funding for trusts to deliver it. And finally, we need a fully funded, effective, short- and long-term plan to address current workforce shortages. We warmly welcomed Theresa May’s recent comments on a “multi-year” funding plan but we need this to come sooner rather than later.

Looking to 2019-20 there are a number of other considerations that need to be tackled. The control totals regime needs to be reformed – what was conceived as a short-term measure should not become a long-term design feature for managing the provider sector. The allocation of PSF across the sector also needs to be revised to ensure funding is reaching the trusts most in need. This may also involve looking at the way trusts are paid on a more comprehensive basis through the payment system, to ensure trusts are properly reimbursed for the activity they undertake.

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