NHS finances: the reasoning behind the reset

24 Aug 16

NHS trusts need to reset their financial performance to tackle deficits, and NHS Improvement and others are working with them to achieve this

Completing records in an accident and emergency unit: trusts’ Sustainability and Transformation Fund allocations partly depends on progress on waiting times. Photo: Alamy

Completing records in an accident and emergency unit: trusts’ Sustainability and Transformation Fund allocations partly depends on progress on waiting times. Photo: Alamy


Last year, NHS trusts and foundation trusts reported an aggregate deficit of £2.45bn with an underlying figure of about £3bn. That is why national bodies such as NHS Improvement, working with partners, are taking action to ‘reset’ financial performance in 2016-17 so that patients continue to receive high- quality, sustainable care.

The last Spending Review in November included a £5.4bn cash settlement for the NHS in 2016-17, rising to £8.4bn by 2020-21. This included a £1.8bn Sustainability and Transformation Fund, released to trusts depending on their progress on financial performance, access standards (such as waiting times) and service transformation. Trusts’ financial plans, which take this fund into account, will result in an aggregate deficit of £580m in 2016-17.

NHS Improvement has an important role in helping trusts to stabilise and improve their finances, and assisting the whole sector to return to financial balance. We will also help trusts to improve service quality and provide the standard of care patients expect. So we are working with them to ensure each one achieves control total – the minimum financial position NHS Improvement expects trusts to reach in 2016-17, taking into account their previous financial positions and opportunities for improving efficiency.

Already, we have seen trusts, including financial and clinical staff, step up efforts to improve their financial position and care quality. Most trusts have agreed their control totals; we will hold their boards to account for achieving them, as well as provide support. However, some that have accepted their control totals are off plan and forecasting large deficits. Others have still to accept their control total, and some have rejected them and are planning a deficit for 2016-17.

NHS Improvement, working with NHS England, introduced financial special measures as one of a range of actions that reset expectations of the NHS on financial discipline and performance and sped up recovery. We expect trusts in financial special measures to rapidly produce a robust financial recovery plan, strengthen their financial control and demonstrate significant wins. These trusts are subject to additional oversight from NHS Improvement, such as needing our approval for key spending decisions.

Meanwhile, the NHS must also maintain and, where possible, improve care quality as well as operational performance. NHS Improvement is working with the Care Quality Commission to develop a combined assessment of quality and use of resources; to be deemed successful, trusts must deliver fully on both.

On top of these, we have asked trusts to tackle excessive pay bill growth, implement Lord Carter’s recommendations on improving productivity by consolidating back office functions and pathology services, and identify new ways of providing services that trusts know are financially unsustainable.

If trusts – with our support – rise to these challenges, we believe they can achieve our aim of reducing their combined deficit to around £250m in 2016-17.

In addition, we are making the planning process more supportive in the longer term. Sustainability and transformation plans, now being developed, will bring together commissioners, providers, councils and others to address communities’ health and care needs. Working with national partners, our aim is to provide certainty and stability for a two-year planning and contracting cycle, through early – and where appropriate, joint – publication of guidance. The action we are taking will stabilise providers’ finances in 2016-17 and set trusts on course for success in making longer-term improvements in health, care and financial sustainability.

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