Exclusive: Regulator to tell FTs to re-do overly optimistic plans

The foundation trust regulator is concerned that plans show the sector overall is projecting improvement in its finances in 2015-16, despite widespread recognition that this year will place unprecedented financial strain on the NHS.

In that year, clinical commissioning groups must transfer around £2bn from budgets into the better care fund. This will be used for joint commissioning of out of hospital and social care, at a time when trusts are running out of traditional ways to make savings.

In the face of another big financial squeeze, NHS bodies have made a concerted effort over the past year to improve the quality of short and medium term planning.

However, Monitor believes FTs have returned to an established pattern of acknowledging their finances will deteriorate this year, while forecasting rapid improvement, on the basis of little evidence.

A letter circulated by the regulator to all FT chief executives last week stated that its analysis of their annual plan review submission had in general been “reasonably accurate” when forecasting their first year but that their “expectations of sustained recovery in outer years have not been delivered”.

“In fact, the operating earnings of the FT sector have continued to erode,” it added.

“In aggregate, the two-year operational plans once again appear to demonstrate this pattern, with an expected continued decline in operating earnings in 2014-15 followed by a recovery in 2015-16.

“This profile appears somewhat optimistic, given the expectation that financial pressures will increase in 2015-16 and with little concrete evidence to suggest that delivered cost savings are likely to be substantially ahead of recent years.”

The letter does acknowledge that financial planning was “particularly difficult”, given “heightened uncertainties as to commissioning intentions, the impact of the better care fund and the ability to deliver large cost savings across the system year after year”.

HSJ understands that in a number of the plan submissions to Monitor providers have not explicitly modelled the impact of the fund, because providers did not have details of how local fund plans would work.

However, the letter stated that it was “vital” trust boards and the regulator had a “realistic view of the scale of the financial challenge” faced over the next few years”.

“[We] are inviting FTs to consider if their projections for 2015-16 need to be revisited and to encourage them to be realistic in their five-year plan submission due at the end of June.

It acknowledges that providers are worried that showing financial deficits or the “true level of strategic challenge” in their five year plans might bring increased regulatory intervention.

“Monitor will be most concerned by overly optimistic planning as a potential indicator of broader failures of governance,” the letter adds.