HSJ’s weekly email briefing on NHS finances, savings and efforts to get the health service back in the black

The half time report

Jim Mackey says NHS trusts are “1-0 up at half time” in their bid to turn around a horrendous financial position.

Let’s for a minute forget the original demand for financial breakeven this year, and then the £250m deficit “stretch target”. Oh, and the maximum £580m deficit “control total” for the year.

It’s unlikely that NHS Improvement ever believed the first two targets could be met, and probably (rightly) thinks getting close to the £580m would be a major achievement.

The regulator’s real maximum is likely to be £800m, which is the amount that’s been held back by local commissioners as a contingency fund.

Once we allow for these caveats, one up at half time is perhaps a fair assessment on the headline numbers. But the detail in the regulator’s mid-year financial report suggests a very difficult second half ahead.

Not only has the star striker limped off injured, the team are down to 10 men after the stalwart defender was given a red card, half the remaining players are knackered from their all-out effort in the first half, and Lionel Messi and Cristiano Ronaldo have just come on for the opposition.

But back to the numbers. Although the outturn forecast deficit of £670m is well within the bounds of acceptability, and trusts are only £22m behind plan, there are convincing reasons to be pessimistic about the next six months.

Actual vs Forecast

By looking at the actual deficit position after quarter two (£648m) we remove potentially optimistic forecasting from the equation, and realise that trusts will have to deliver a tiny deficit of just £22m in the second half of the year to meet the forecast.

They will be helped by £900m of sustainability and transformation funding, but this was also the case in the first half of the year.

Forget “heroic” assumptions, this result seems completely unachievable. Unless there is widespread success in delivering huge back-loaded savings plans, the only way to get anywhere close to the forecast will be one-off accounting measures and raids on local capital funds like last year. This will just add to the problems being kicked into 2017-18 and beyond.

Extra optimism

Meanwhile, Q2 forecast figures collected directly from trusts by HSJ suggest the official forecast includes a significant dose of additional optimism.

This is illustrated by the outturn forecast for King’s College Hospital Foundation Trust, which NHS Improvement listed as £32m (once STF is discounted).

But the trust’s own mid-year finance report, published on 2 November, gave its year-end forecast as a £50m deficit.

NHS Improvement’s report suggests the trust may have been asked to reconsider its forecast, and came to the view that its original number was overly pessimistic. With its deficit already at £60m after Q2, it’s hard to see how this can be. I have contacted the trust for an explanation.

Another trust which was forecast to meet its control total in the Q2 report was Nottingham University Hospitals. The trust chief executive has admitted it could yet be £18m “adrift”, and has issued a plea to staff.

Growing stack of problems

Looking ahead to next year, problems already look set to include at least £400m of additional efficiency savings – due to the shortfall of recurrent savings predicted this year. Any more one-off savings needed to plug further recurrent shortfalls will add to that number.

This week, trusts have to sign up to their financial control totals for 2017-18, which are based on this year’s target being met, so I wouldn’t be surprised if many trusts are struggling to make the numbers add up.

Runaway train has stopped

Having said all this, I think NHS Improvement and NHS Providers are right to highlight some of the positive progress being made by trusts.

Chris Hopson points out, for example, that the sector has reversed the “runaway deficit train”, and has actually managed to shrink the deficit in cash terms in the first half of the year (though this is largely thanks to more generous tariff prices that shift the problem to clinical commissioning groups).

The problem is the Treasury is demanding much more than some positive progress. The NHS as a whole is being forced to work to unrealistic financial plans, which threaten to undermine a long term shot at sustainability.

Nevertheless, the Department of Health, NHS England and NHS Improvement will have to keep trying to come up with the answers, and they won’t be holding their breath for any additional cash in the autumn statement.

The National Audit Office remains unconvinced, saying in a report this week that the national bodies have “a way to go to demonstrate that they have balanced resources and achieved stability”.

End of life balance

A new report from the Institute for Fiscal Studies has highlighted how English NHS hospitals spend £1 in every £10 on patients in the last year of life, which is towards the top of the range found for other countries on similar measures of spending. Those that die account for only 1 per cent of the population each year.

This perhaps suggests huge potential for savings in this area, and the report adds that while total spending on the NHS doubled in real terms during the 2000s, reducing spending on end of life care by 50 per cent would reduce total spending on hospital care by a massive 5 per cent.

I’m interested to hear any views on this. How often is end of life care targeted in trusts’ cost improvement plans, and why might it be difficult/undesirable to reduce costs in this area?