HSJ’s expert briefing on NHS finances, savings and efforts to get the health service back in the black.
Third time lucky
In the absence of a sustainable long term financial plan, the NHS will brace itself for another firebreak year in 2018-19.
There will be a third attempt to fix the provider deficit, with NHS Improvement again agreeing to “plan and deliver” the breakeven position that has been elusive since 2013.
The regulator’s latest surge of hopeful thinking comes after £1.6bn of extra funding was announced in the budget, plus a not fully explained £540m from the Department of Health and Social Care.
Of the new money, around £950m will be added to clinical commissioning group and specialised commissioning allocations, while another £370m will be freed up from the commissioning risk reserve (which is not part of the new cash).
Providers will clearly want to get their hands on as much of this as possible, but will have to set “realistic” plans for emergency activity and watch much of the extra cash going to private hospitals that have the capacity to tackle the elective waiting list.
Of the rest, £650m will be added to the renamed sustainability and transformation fund – now more appropriately called the “provider sustainability fund” (with a similar fund worth £400m established for commissioners)
This £650m cannot be spent, which means it will provide a direct, pound for pound improvement to providers’ bottom line, and increase the chances of bringing the sector back into the black.
Even so, NHSI will have to hope it hasn’t just given itself, and trusts, another impossible target.
When the regulator agreed to target “run rate balance” by the end of 2016-17 it did so with the expectation of the deficit coming in at £1.8bn for the previous financial year.
Instead, the sector finished 2015-16 £2.5bn in the red (with a far worse underlying position), which made the starting position for the following year at least £700m harder than expected.
Lo and behold, trusts ended 2016-17 with a deficit of £791m (and similar underlying position) and without any hope getting back into full balance in 2017-18.
The lesson here is to get the starting position right.
So, it’s a little worrying that when NHS England talks about the breakeven target for next year, it references the deficit forecast of £620m that was set by providers at the end of September 2017.
This figure tallies closely £650m added to the PSF next year, and the thinking seems to be that trusts will be able to hold the reported run rate, and then clear the deficit with this extra bung to the bottom line.
The trouble is, as in 2016-17, the sector is likely to be starting from further back than £620m, and every trust that falls off plan over the next couple of months (the latest are here and here, with plenty more to come) will mean greater risks being crystallised into next year’s position.
Sign up or else
Although trusts’ control totals will be amended to take account of the additional incentive funding, the underlying targets will be largely unchanged (aside from some adjustments for clinical negligence premiums that had already been notified).
This means providers will again have to set cost improvement plans averaging around 4 per cent, and the scale of the challenge will remain broadly the same (though they may be able to plan for greater levels of income generation).
Those hoping to move away from the “sign the control total or else” approach are likely to be disappointed, with trusts that refuse their target facing “action under the single oversight framework” and having their bids for capital funding ignored.