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

Heavy load

NHS England will seek to breathe new life into the sails of the Five Year Forward View this week but can do little to reduce the drag beneath the surface.

The £22bn savings target was already an extremely hefty load for the forward view, but last year’s provider deficit created an extra burden not accounted for in the design.

The financial modelling that followed the plan’s publication assumed a provider deficit of £1.8bn in 2015-16, which was intended to be recovered this year with the help of additional government funding.

But as we know, the real deficit for last year was around £3.7bn, which effectively added almost £2bn to the £22bn challenge.

There appears little prospect of additional revenue being provided by the government to cut loose that load, and there is nothing that this week’s “forward view delivery plan” can do about that.

It means the “stretching but achievable” efficiency gains of 2 per cent that were envisioned in the planning have doubled to 4 per cent on average.

So long as a significant number of providers fail to achieve these gains (which is surely inevitable), the deficit will not only remain but will continue eating up valuable energy and transformation funding, which is needed to put more wind in the sails.

As opposed to starting 2017-18 in “run rate balance”, as was intended, it’s likely that providers will be ending the year with an underlying deficit of at least £1.5bn (the reported position minus non-recurrent savings).

This is a huge distance from the original control totals issued to trusts for next year (which summed to zero), so it’s no wonder that more than a quarter of trusts have refused to sign up to them.

Discussions with NHS Improvement, with various levels of heat applied, will probably reduce the gap to between £500m and £1bn, which sounds depressingly similar to the 2016-17 plan.

Commissioning side

From the sounds of it, NHS England is having similar problems on the commissioning side.

There have been examples in recent weeks of clinical commissioning groups reporting major deteriorations – see here and here, and the overall financial position at the end of month 11 will make for interesting reading. This should be published by NHS England ahead of its board meeting on Thursday.

Meanwhile, a helpful update from City and Hackney suggested that CCGs were £250m away from the aggregate control total for 2017-18, and there were £500m of unidentified efficiency savings.

Things have probably moved on a bit over the last few weeks, but it’s another indicator of just how difficult next year is going to be.

Private providers benefited most

Analysis by the Health Foundation has found that almost half of the £2bn funding increase given to the NHS in 2015-16 (announced shortly before the general election) has been spent on non-NHS providers.

It said non-NHS providers received an extra £900m from commissioners last year, along with about £150m extra from NHS providers. The bulk of this increase will have gone to private providers of elective care services, although social care services will also partially account for the rise through the better care fund.

An increasing share of elective work being delivered by private providers is clearly problematic for NHS trusts, as it’s elective work that generally brings in greater profits. But with many trusts overwhelmed with emergency pressures, their capacity is limited.

The Health Foundation argues that NHS Improvement and NHS England should urgently re-examine the application of the marginal rate tariff for emergency care and the lack of a similar system for elective care.

The disappeared

Three more acute trusts have been placed in financial special measures, including Northern Lincolnshire and Goole Foundation Trust, whose finance director is taking an unexplained “period of leave”.

The trust said Marcus Hassall’s absence was unrelated to the financial deterioration or the special measures announcement. “Personal reasons” are frequently cited after sudden departures of senior staff, but the trust declined to offer any explanation, or even say when the leave had started.

Another name for the “list of disappeared” perhaps?

Extra support… and additional kicking

NHS Improvement said the trusts going into special measures will get additional support to deal with their financial problems, but they can also expect an even harder kicking from the Department of Health.

HSJ has learned that special measures trusts are being charged interest rates of 6 per cent on some of their bailout loans from DH, which is up to four times higher than the typical rate charged to other providers.

The DH said this is designed to “reflect the additional risk in providing this finance” to trusts in special measures, but King’s Fund expert Richard Murray said it felt like “kicking someone when they’re down”.

Barts Health, for example, will face an annual interest payment of around £6m, making it even more difficult for its £200m underlying deficit to be cleared.

Social care funding

Councils will be required to report to the government on a regular basis to show how the extra £2bn of social care funding announced in the budget has been spent, Local Government Chronicle has reported.

The guidelines, due to be published shortly, are set to require councils to treat the new money as a local government contribution to the better care fund and spend on the integration of health and social care services.