NHS trust leaders have called on the government to protect the £1.8bn sustainability fund beyond 2018-19, but say it should not be channelled into commissioning allocations until problems with the national tariff are addressed.

NHS Providers, the group representing trusts, says the funding should continue to be paid directly to trusts – but also warns that repeating the current central control on the payments would be “deeply corrosive”.

Chris Hospon

Source: Neil O’Connor

Chris Hopson said the STF and control totals had played a ‘key part’ in improving trusts’ finances

The £1.8bn fund, which is controlled by the Treasury and paid out to trusts meeting their financial targets, was introduced in 2016-17 as part of efforts to ensure the provider sector reached financial balance by the end of the year.

The pot is part of a bigger sustainability and transformation fund worth between £2.1bn and £3.4bn each year until 2020-21. Although the £1.8bn portion is commonly described as the STF, it only relates to the sustainability aspect.

The intention was for an increasing share of the pot to be freed up for transformation projects in subsequent years, but when it became clear that hospital deficits were not reducing to the extent expected, national leaders said £1.8bn would be deployed in the same way in 2017-18 and 2018-19.

Providers have had to treat the income as non-recurrent as there has been no guarantee it will continue beyond these years.

In a report shared exclusively with HSJ, NHS Providers says the funding should be confirmed as recurrent and paid directly to providers, rather than fed through commissioning budgets and distributed through payments made under the national tariff.

It says: “The STF has now become such a core income stream for the provider sector, it is difficult to conceive how the sector could continue without it from 2019-20…

“Looking to the longer term, there is no doubt that routing the STF through the tariff would be the natural direction of travel.

“But until the fundamental challenges with the tariff are addressed, in particular reimbursement for non-elective care, then there is a risk that the positive impact on provider deficits will simply dissipate if we move the STF away from direct allocations to providers.

“This is what providers widely reported when national resilience (winter) funding was mainstreamed into CCG allocations.”

When asked for its views on the proposal, NHS Clinical Commissioners, which represents CCGs, said that failing to ensure the “majority” of the STF is spent on transformation (as implied by the report) would be doing a “disservice to patients”.

The report is based on responses to a survey of more than 100 trust chief executives and finance directors.

It argues that government and regulatory controls around the STF should be relaxed, with providers being able to earn back some of the autonomy lost under the system. Currently trusts have to agree to centrally set financial targets in order to qualify for sustainability funding.

The report adds: “There is a danger that, because there is no immediately obvious solution to replace control totals and the STF, what was conceived as a short term solution becomes a long term design feature of the system.

“While it may be appealing to the national level to have this degree of control over individual providers, we believe it is deeply corrosive and incompatible with the principles of appropriate delegation and autonomy that should sit at the heart of the NHS.”

Julie Wood, NHS Clinical Commissioners’ chief executive said: “It is right that we look to stabilise the provider sector and that the sustainability and transformation fund be used in part to do this. However, as we have often said, the key is to ensure that the majority of this fund is used for the critical transformation that is so needed.

“This means investment must be moved away from simply supporting an individual organisation’s financial health to meeting the needs of the entire local healthcare system. We would be doing our patients a disservice if we simply seek to maintain the status quo rather than make change for the better.

“Clinical commissioners play a critical part of the transformation agenda, with CCGs leading the charge in many areas. It is vital that the STF is used as it was intended and support the whole system – including primary care and community services which along with the acute sector are also under huge pressure - to make the long term changes that are needed.”

NHS Improvement and the Department of Health were approached for comment.

Niall Dickson, chief executive of the NHS Confederation said: “We have not yet created a sustainable system and this is clearly hampering our ability to transform.

“We need the right level of baseline funding for trusts to be able to deliver high quality care. But we also need a separate transformation fund which enables local areas to recast and transform services across the health and care system. Without this twin track approach we will not deliver the transformation required.

”We also need to be careful we are not seen to be arguing about the division of spoils, which would not be understood or appreciated by the average patient or member of the public.”