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

Theresa’s good books

With Simon Stevens and NHS England currently in Number 10’s naughty corner, a window of opportunity may have opened for the provider sector.

As the financial problems of the NHS have become more glaring over the last few years, providers have appeared to be the number one suspect.

This was borne out in last year’s financial “reset” – led primarily by NHS England and largely aimed at whipping the wasteful trust sector into shape.

But with some balance restored in this year’s tariff prices, trusts have generally been making a pretty good fist of hanging on to their financial plans.

Forget the targeted £250m deficit for the sector – that was never going to be a realistic goal. It still looks highly unlikely that the planned £580m “control total” can be delivered either.

But according to the forecasts, the sector may well get close to the real control total deficit, which is to stay within the £800m held back as a contingency fund by commissioners.

Compared to what’s happened in recent years this would be a major achievement, and go a long way to restoring faith in the sector’s financial discipline.

So if (it’s a big if) the plans can hold together reasonably well, Jim Mackey and NHS Improvement will sense an opportunity to put themselves in Theresa May’s good books, and for their pleas for additional support to be heard.

Clinical Commissioning Group finances look increasingly shaky, while the bank of government goodwill towards Mr Stevens is seriously depleted, so much could now rest on NHSI.

Hands up for upside

NHS Improvement will be desperate to report acceptable numbers for quarter three, and if Q2 is anything to go by, will have a busy few weeks going back and forth with trusts over their year-end forecasts.

A key concern at Wellington House is a perceived herd mentality among providers, and the suspicion that one trust giving up on their plan encourages others to do the same.

No longer do trusts simply send in their forecasts to be collated NHSI; they are now routinely poured over and challenged when the regulator feels more could be done, sometimes involving personal calls from Mr Mackey. NHS England also appears to have ramped up the scrutiny of CCG forecasts.

There will undoubtedly be some large deteriorations reported at Q3 – see here, here and here for a few examples – but I’d still expect the majority of trust’s forecasts to cling on to their plans.

The big question is the extent to which savings that many trusts have back-ended until Q4 can be delivered. We are still a couple of months away from being able to answer that.

I’m not convinced NHSI’s new bonus scheme, to reward trusts that can improve on their control total, will deliver much upside. At a meeting of trust finance directors in London last week, apparently the floor was asked if anyone had any upside that hadn’t yet been reported. No hands went up.

Much will depend instead on what Mr Mackey has got up his sleeve, in terms of technical accounting measures that can be deployed to add a last gasp boost to the bottom line. It would be extraordinary if there wasn’t some sort of buffer, but will it be big enough?

Shifting risk to commissioners

Whatever the official numbers and political ramifications turn out to be, providers will still be left with a huge underlying deficit going into 2017-18, and absolutely no let up in the efficiency challenge.

Next year’s financial targets will require average cost improvement plans of more than 4 per cent – double what is generally seen as achievable – with some trusts expected to deliver significantly more than this.

One in four trusts have refused their control total (one in three acute trusts), but as we saw last year, the threat or consequence of financial special measures is likely to bring most of them into line. We can also expect trusts that plan to increase their pay bill be singled out again.

Where the control totals have been accepted and contracts agreed with CCGs (the contracting round has gone more smoothly than expected, with the vast majority agreed) – it’s likely that significant extra risk has placed on the commissioning side of the house.

Because short of delivering truly heroic cost improvement plans, meeting the control totals will often rely on trusts generating significant extra revenue, which will require greater efficiency savings from CCGs.

NHS Improvement seems to be comfortable with this idea, though, as they want other trusts to learn from the McKinsey led turnaround work at Central Manchester University Hospitals Foundation Trust.

Judging by the trust’s latest income and expenditure account, it seems to be doing a good job of maximising its NHS income.


Last month, we reported how the Department of Health had beefed up restrictions on short term cash support for NHS trusts, even where they were struggling to pay suppliers on time.

And the impact of these restrictions now seems to be filtering through, with Shrewsbury and Telford Hospital Trust telling its staff and patients that sandwiches will no longer be available in its retail outlets, due to a supplier rejecting a late payment plan and withdrawing its products.

Much more of this type of thing and the sense of crisis in the NHS will multiply pretty rapidly.

The trust is seeking to delay up to £8m of payments until 2017-18 due to cash shortfalls, but the expenditure will still need to be marked against the 2016-17 accounts.

Last week I asked the DH if it thinks this is acceptable, and a necessary result of its attempts to restore financial discipline, but I’ve still not had a reply.