How to respond to the NHS financial reset

3 Aug 16

The plan by national NHS bodies to get NHS finances back on track is welcome. But there is a danger it could give the impression that the problem is all down to financial management

Last week, a financial 'reset' was announced by NHS Improvement and NHS England in an effort to help trusts and clinical commissioning groups operate within the resources available.

As the scale of the NHS deficit continues to reach unparalleled levels, hitting £2.45bn in 2015-16, the reset was announced to get NHS finances back on track. Our most recent Temperature Check survey found that finance directors are feeling the pressures of the current financial situation more than ever, and continuing to operate with the current level of provider deficits will inevitably impact on service quality.

The HFMA, and many in the NHS finance community, welcomes the reset as a clear statement of the fundamental importance of returning to financial balance. The measures that have been announced are designed to support the providers to bring about rapid financial recovery. That said, there is never an easy solution.

Although the measures outlined are a step in the right direction we still need to be cautious of the difficult challenge ahead. Financial recovery will not be achieved by shouting louder and raising performance requirements beyond what is realistically achievable. For example, the focus on 63 providers with ‘significant pay bill growth’ needs to be handled sensitively. Assuming this growth is excessive is too simplistic. Using it as a prompt to understand the root cause is helpful, but it should not be used as an unquestionable indicator of excessive spending. Other contributory factors, local demand and the starting place in terms of staffing levels, would need to be taken into account.

So what does all this mean for finance directors? There are still important factors to consider when implementing the new procedures in the effort to achieve financial recovery.

 

Close management of planned cost improvements

Introducing trust-specific incentives – one of the seven-point actions announced in the reset – is a sensible move. However, it is essential planned cost improvements are monitored and managed closely. It will also be important to ensure any as yet unidentified costs are factored in. If the NHS is serious about bringing the books back to balance, organisations need to be transparent about where money will be spent and encourage more sharing of information across organisations. Finance directors have had a difficult job to do, and where providers can learn from each other – they should do so.

 

Understanding impact of Sustainability and Transformation Plan (STP) funding

The vast majority of providers have agreed control totals for 2016/17 – the achievement of which is linked to the release of sustainability and transformation funds. But finance directors have told us that the risk level associated with delivering these financial plans is high.

The highly anticipated Sustainability and Transformation Plans (STPs) were welcomed by numerous in the healthcare finance community. Many support the concept of the new approach and see it as a way of driving better collaboration and reshaping services effectively. However, our research found that just 16% of finance directors are ‘very’ or ‘quite’ confident that organisations in their STP footprint can deliver a connected strategic plan covering the period up to March 2021.

It’s still early days, but openness will be key to helping the sector understand the impact of STP funding. As many are used to silo-working, there is currently little incentive for leaders to work together beyond organisational boundaries. With new control totals introduced, we could see all organisations within a footprint working towards one goal, eradicating individual winners and losers when it comes to financial risk.

 

Closer involvement with the agency staff agenda

The Temperature Check found that one of the biggest risks to trusts achieving planned savings was spending on agency staff (72%) and 95% of finance directors plan to make savings in this area. Therefore, finance directors and their teams need to stay in touch with the wider agency staffing conversation and future workforce planning.

Unsustainable agency staffing costs have impacted the overall deficit, but instead of focusing on a quick fix to reduce these costs, we need to work together to solve the much bigger workforce planning issues that ultimately lead to the need for agency staff in the first place.

As everyone adjusts to the reset, we have to ensure the public is fully involved in discussions about the NHS. The danger of the ‘reset’ is that it could give the impression that the problem is all down to financial management, which would be somewhat of a blinkered view. But if this initiative can’t close the gap, we need to have an open and frank discussion about what we can afford to deliver at the right quality within the resources available.

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