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Rebasing control totals

NHS providers won’t be waving goodbye to financial control totals for a while yet, but they should at least get more realistic next year.

Regulators have promised to rebase the targets in 2019-20, which should bring an end to some of the blatant unfairness in the system.

The original control totals, introduced in 2016-17, were unreachable for dozens of trusts, because they were based on a combined deficit of £1.8bn the previous year when the underlying position was around double that.

In the two subsequent years, the control totals have ratcheted up regardless of a trust’s ability to keep pace.

In 2017-18, for example, University Hospitals of North Midlands Trust was given a surplus control total, but ended the year £70m in the red. It would be ridiculous to suggest it could have made savings of this order, without jeopardising patient safety.

A rebasing exercise should ensure trusts like UHNM are given a more realistic deficit target for 2019-20, and the chance to access their share of the enlarged “provider sustainability fund”.

More distortion

But in the meantime, 2018-19 looks set to be another distorting year in terms of funding distribution.

According to NHS Improvement’s mid-year performance report, almost £1bn of PSF money is expected to be unearned or uncommitted, which means a bigger bonus pot for those which can meet or better their control totals.

This process has already started with NHSI doubling the incentive for trusts to improve their position by offering £2 for every £1 of improvement. At this stage last year, NHSI was only offering to match any improvement with an equal PSF payment.

A proper analysis can be done at the end of the year, but this appears to favour trusts in the south of England which have valuable land to sell. Among those looking to benefit from the 2 for 1 offer are Surrey and Borders Partnership FT, Camden and Islington FT, and Chelsea and Westminster Hospital FT.

Backloaded plans

NHSI says the incentive offer has helped reduce the planned deficit from £519m to £439m, but the pattern of performance in previous years tells us the outturn is likely to be closer to £1bn.

As in previous years, there are some heavily backloaded savings’ plans, which means significant risk of further deterioration.

The table below shows the 20 trusts whose outturn forecasts look particularly optimistic based on their mid-year performance. Some of the trusts below (you can probabaly spot them) will end up improving their position dramatically in the second half of the year via land sales and non-recurrent accounting adjustments. But others won’t.

Provider NameForecast outturn (£m)Projected outturn based on Q2 (£m)
University Hospitals of North Midlands Trust -44.8 -79.5
University Hospitals of Leicester Trust -51.8 -84.6
Nottingham University Hospitals Trust -24.9 -56.8
Guy’s and St Thomas’ Foundation Trust -6.0 -37.9
University College London Hospitals Foundation Trust -6.2 -38.0
King’s College Hospital Foundation Trust -146.0 -177.9
St George’s University Hospitals Foundation Trust -29.3 -59.0
The Leeds Teaching Hospitals Trust -12.3 -40.6
Oxford University Hospitals Foundation Trust 10.4 -16.6
Royal Brompton and Harefield Foundation Trust -12.5 -36.5
Worcestershire Acute Hospitals Trust -42.1 -65.6
Buckinghamshire Healthcare Trust -2.0 -25.4
The Royal Liverpool and Broadgreen University Hospitals Trust   -39.7 -60.1
Imperial College Healthcare Trust -20.6 -40.6
North Cumbria University Hospitals Trust -49.2 -69.1
University Hospitals Coventry And Warwickshire Trust -25.1 -44.4
University Hospitals of Derby and Burton Foundation Trust -37.4 -54.5
Barking, Havering and Redbridge University Hospitals NH Trust -53.4 -69.8
Salford Royal Foundation Trust -9.3 -25.7
East And North Hertfordshire Trust -14.6 -31.0

Nuclear option

Sorting all this out is going to be quite a challenge, and the NHS has chosen perhaps the ultimate safe pair of hands in appointing a new chief financial officer - though one without direct NHS finance experience.

Julian Kelly has spent the last couple of years in charge of Britain’s nuclear deterrent at the Ministry of Defence, before which he worked for the Treasury.

Mr Kelly is expected to start in the joint NHS England NHS Improvement role in April.