NAO sounds alarm on declining hospital finances

16 Dec 15

The financial health of NHS hospital trusts has “significantly declined” in the last year and is expected to worsen further to the end of 2015/16, the National Audit Office warned today.

In an examination of the finances of health service providers, auditors highlighted said the £843m deficit in 2014/15 across trusts and foundation trusts represented a sharp decline from the £91m deficit reported in 2013/14.

Given that providers have announced a £1.6bn deficit for the first six months of the financial year, this is expected to worsen by the end of 2015/16.

Measures taken by the Department of Health to place limits on some elements of trust spending, such as restrictions on agency staff, would likely come too late to improve the 2015/16 financial position, the NAO concluded.

Its Sustainability and financial performance of acute hospital trusts report found that revisions and resubmissions to 2015/16 financial plans had also created an unsettled planning period. This would make it difficult for the sector to meet targets and manage resources effectively.

Auditor general Amyas Morse said the NAO had highlighted back in November 2014 a trend of declining financial performance across trusts and foundation trusts, which was not sustainable.

“We repeat this view today,” he said.

“Running a deficit seems to be becoming normal practice for acute trusts. There is a risk that poor financial performance is seen as the least worst option compared with poor healthcare provision. The department, NHS England, Monitor and the NHS Trust Development Authority must take a rounded view of how to improve trusts’ finances.”

He added that the government commitment to give the NHS £8bn in extra funding by the end of the parliament, could be a significant step towards financial sustainability. However, this would require funding being devoted to improving the financial position of trusts rather than dealing with new costs.

“Continued demand for healthcare services means that the pressure on acute trusts will not go away. Until there is a clear pathway for trusts to get back to financial stability, we cannot be confident that value for money will be achieved,” he added.

The report also warned that interventions from both the DoH and its arm’s-length bodies risked creating “perceived or actual competing priorities” for trusts, for example on areas like safe staffing. The DoH’s interventions to reduce agency spending came at a time when acute trusts needed to recruit more nurses to meet safe staffing guidelines.

Responding to the report as the government announced a stability and transformation fund for the NHS, health minister David Prior said: "This government is committed to the values of the NHS, which is why we're investing £10bn in its own plan for the future - including £6bn upfront by next year.

“Hospitals must now show tight financial grip and fully introduce our measures to reduce expensive temporary staffing and drive through the productivity and efficiency improvements identified by Lord Carter. The impact of these measures will be reflected later in the year and NHS finances will be in a much stronger position in 2016/17.”

Anita Charlesworth, Health Foundation director of research and economics, said the state of the finances of the NHS was “truly dire”.

She added that something would have to change. “There appears to be no national plan or dedicated resource in place to enable the NHS to deliver the scale of efficiencies needed to dig itself out of this financial hole.

“There needs to be a new, dedicated transformation fund overseen by a single body to plan how the NHS will increase its efficiency and develop new models of care. Without dedicated resources specifically for transformation, the NHS will be unable to become more productive and the bill for running costs will only get larger.”

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