HSJ’s latest analysis of trusts’ financial performance shows any chance of hitting the target agreed with the Treasury is disappearing quickly, writes Lawrence Dunhill
It now seems clear that the NHS trust sector will blow its Treasury agreed financial deficit for 2016-17, and will start next year struggling to catch up with a quickly disappearing recovery plan.
CCGs will have to wave goodbye to their 1 per cent contingency funding
Mid-year performance figures collected from providers by HSJ suggest the sector is now forecasting a deficit of £850m come March, against the HMT control total of £580m.
Discounting the £1.8bn sustainability and transformation fund, the forecast deficit is around £2.65bn, against the HMT control total of £2.38bn.
NHS regulators have been stressing the importance of these quarter two numbers in recent weeks, and the need to “give confidence” to the government that the finances are being brought under control.
The official figures from NHS Improvement, due later this month, will be spun as far as possible to that effect, but the reality makes for pretty grim reading.
There is still huge risk that the position will deteriorate further, due to many trusts “back-loading” their savings plans for the year, and some of the incentives around the STF allocations.
This means the underlying deficit is likely to keep on growing through the second half of the year rather than shrink.
It looks like clinical commissioning groups will have to wave goodbye to their 1 per cent contingency funding, which they were forced to hold back and equates to around £800m. This would all be needed to cover the trust deficits, rather than being available for often neglected priorities such as primary care.
It could also leave the Department of Health in a tricky position as it desperately seeks to avoid another embarrassing overspend.
We saw all sorts of clever accounting used last year, but it is not clear how much extra revenue is left to shake from the balance sheet.
Looking at the actual year to date position, it’s true that trusts have improved slightly in cash terms compared to the second quarter of last year.
It is not clear how much extra revenue is left to shake from the balance sheet
To make that comparison we need to strip out the £900m STF accrued for the half-year (the £1.8bn fund will not last forever remember), which gives us a year to date deficit of £1.56bn, compared to £1.61bn at this stage in 2015-16.
This is a cash terms improvement (so worth more in real terms), but this has come at a significant cost to commissioning budgets due to increased tariff prices.
Not to mention trusts in financial special measures, such as Maidstone and Tunbridge Wells Trust and Barts Health Trust, which are now forecasting much healthier outturns as a result of large amounts of additional income on top of the new tariff benefits.
Last year, NHS England (which includes CCG spending) delivered an underspend of more than £600m, but will get nowhere near that in 2016-17, and may even be at risk of an in-year overspend.
Let’s also remember that the trust sector has been set a “stretch target” deficit of £250m for 2016-17, with the added goal of achieving run rate balance heading into next year.
This ambition now seems dead in the water, and means many trusts will be required to deliver large additional efficiencies in order to catch up in 2017-18.
Exclusive: Trusts' deficit forecast more than £250m worse than feared
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Analysis: The NHS's financial plan is dead in the water