The constraints put on hospitals mean they are not going to become considerably more efficient anytime soon. Trusts will need more money to operate a balanced budget and keep up with standards expected of them, writes Robert Royce

The basic problem with policies influencing the acute sector is that they result in too many trusts getting into serious financial and performance difficulties.

‘It has been apparent for years that the foundation trust pipeline has all but dried up’  

Far from helping these challenged organisations to recover, the system has been compounding trust problems by continuing to promulgate non-solutions such as “it needs to become a foundation trust” and “it has to become an upper quartile performer”.   

This is a cul-de-sac and it has three entry points:

  • An obsession with foundation trust status;
  • tariff deflation coupled with an increasingly demanding regulatory regime; and
  • viewing mergers as the solution.

It is been apparent for years that the FT pipeline has all but dried up.

Moreover, a number of the trusts that achieved FT status, shouldn’t have.

The (supposedly) required supervisory infrastructure is burdensome and expensive - especially when one adds the NHS Trust Development Authority, an organisation that might be compared to a large jockey sitting astride a horse fit more for the knacker’s yard than to joining a self-styled “elite”.

Feeding bureaucracy

For years non-FT boards have been cajoled into a near Pavlovian state to demonstrate suitable ambition to become FTs.

A great deal of time has been wasted writing “milestones to FT status” documents which bore no resemblance to organisations’ actual, or likely future, positions.

Robert Royce

Robert Royce

All trusts were supposed to become FTs by April this year but that deadline was clearly nonsense, even to those charged with promulgating it.

The new deadline of April 2016 is no more realistic, but like “the ghost in the machine” boards, trusts have continued producing assurance documents that feed a bureaucracy dedicated to delivering the unattainable.

Given the perilous state of many FTs, and the underwhelming “achievements” of the FT initiative as a whole, one has to ask what is the point?

Have FTs transformed the healthcare landscape, significantly changed staff pay and conditions, or adopted radical new staffing models?

No, and upon reflection it was not realistic to expect them to do so.

‘Some FTs have prospered but this widens the disparity between the rich, influential few and “the rest”’

All of the above carry considerable risks, the rewards are uncertain, and no one wants to be a first mover.

Some FTs have prospered, but whether we should be celebrating a widening of the disparity between the rich, influential few, and the “rest” is debatable - especially as most of the population is served by “the rest”.

Tariff Deflation

Reducing tariff payments is the principal tool that the system has to compensate for the continued weakness of commissioning. If you can’t control demand very well, simply pay less for what gets into hospital.

The problem is most hospitals can no longer balance their books if they rely heavily on tariff income. The non-tariff elements on the income sheet are crucial, and trusts vary dramatically on what percentage of total income that accounts for.   

‘Most hospitals can no longer balance their books if they rely heavily on tariff income’

Hospitals are labour intensive and the bottom line is that labour costs (and increasingly, staffing ratios) are essentially fixed.

There is Agenda for Change, the royal colleges, National Institute for Health and Care Excellence, the Care Quality Commission, and even the health secretary, telling trusts what car park charges should be.

Buildings are not always as well used as they should be (theatre productivity comes to mind) but much of that is driven by a workforce that is more influenced by external parties (colleges, deaneries and unions) than trust management. The result is a cash crunch that trusts are poorly equipped to respond to - hence many quality, innovation, productivity and prevention plans do not bear much scrutiny.

Mergers are not the answer

The NHS record on mergers and acquisitions reflects international literature.

Most significantly underperform against expectations. Some fail spectacularly.

‘Enthusiasm shows a tendency to see solutions through a management change’

The enthusiasm for them in certain quarters demonstrates a tendency to see solutions to strategic problems through a change of management, and a capacity to re-frame evidence to match pre-conceived notions.

Thus failure is seen as some kind of vindication of the original idea. It will work - next time. 

Where does this leave us?

We are left with the unpleasant realisation that we need (most) of our hospitals running most of the services they run now, but that the constraints we put on them mean they are not going to become considerably more efficient anytime soon.

Many are going to need more money to operate a balanced budget and deliver the staffing and quality standards expected of them.

Can the nation afford this? Yes.

‘If things carry on, the population won’t be happy with the state of the hospital they’re most likely to end up in’

Moreover, the NHS can probably afford this within its current budget if it was more careful to ensure it was spent on actual service delivery.

The public expect safe and compassionate care when they attend hospital. 

They want hospitals to be financially viable, and while they expect obvious inefficiencies to be addressed, they don’t expect that it has to be at upper quartile performance just to survive.

If things carry on with hospitals generating so many negative headlines, a large percentage of the population will not be happy with the state of the hospital they are most likely to end up in. And that’s very bad news for the future of the NHS.

Dr Robert Royce is an independent healthcare consultant