Monitor chief warns: Providers can’t bear more than 2pc savings

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David Bennett has warned that NHS providers have little scope to get their deficit below £2bn in 2015-16, and that national bodies must ensure tariff prices for next year impose a savings requirement of no more than 2 per cent.

Outgoing regulator boss expects provider sector to record deficit around £2bn this financial year
Bennett says he warned this would be the case
Unclear whether this can be balanced by funds from commissioners and the DH
Says tariff must be balanced by reducing efficiency requirement

The outgoing Monitor chief executive also revealed that he warned more than a year ago that the £2bn of extra funding awarded to the NHS in the chancellor’s last autumn statement would not be enough to close the NHS’s financial gap in 2015-16.

Mr Bennett made the comments in an exclusive interview with HSJ, days after stepping down from his role at the health sector regulator.

Over past months, he has been at the centre of efforts by the DH and national NHS bodies to bring down the deficit of at least £2bn expected in the NHS provider sector this financial year.

Asked whether he thought the provider deficit would turn out to be £2bn, he told HSJ: “I think the provider organisations will really struggle to do better than £2bn. And by the way I’ve been saying this for over a year. Over a year ago I said I thought we were £4bn short for providers, but of course we got an extra £2bn in the autumn statement…

“Now of course we shouldn’t accept that… we’ve got turn every stone over to look for every opportunity [for further efficiencies]. But we’re now more than halfway through the year… I think the providers will really struggle, try as they must, to come in at less than around that £2bn deficit.”

He said he didn’t know whether there was “money floating around” in the DH or “in the commissioning system” to offset the likely £2bn provider overspend, but stated that: “Certainly the tariff puts pretty well all the pressure on the providers.”

Mr Bennett added that given tight spending across the public sector, “even getting the extra money they did get” in last year’s autumn statement “was a significant achievement on part of those negotiating for the NHS, and concession on behalf of chancellor”.

Tariff negotiation

As well as regulating foundation trusts, Monitor is jointly responsible with NHS England for setting tariff prices. Asked if he would have done things differently if he had the chance to set this year’s tariff again, he said: “It had to be a negotiation between Monitor and NHS England. I tried to get a more even balancing of the stress that the tariff would create – in a world where I didn’t think there was enough money – I tried to get a more even balancing between providers and commissioners.

“It looks as though I failed, doesn’t it?”

Asked if there were lessons in this for his successor Jim Mackey, he said that next year’s tariff should have a maximum “efficiency factor” of 2 per cent.

“The fundamental lesson is this,” he told HSJ. “When this period of austerity began [in 2011] and prices were set by the Department of Health, the philosophy was… that the providers control most of cost and were in the best position to find efficiency. Therefore, as far as the [last] CSR assumed that the NHS would find a 4 per cent annual productivity improvement, that had to fall entirely on the providers, and that’s why the 4 per cent deflator was factored in.

“With help from the centre by wage freezes, renegotiation of drug prices and so on, in first few years they largely managed. In the last few years of [the last parliament] they visibly haven’t managed. I think the actual technical efficiency that they’ve achieved at best is around 2 per cent.

“So… I think the maximum efficiency that the provider sector can bear, as is assumed in the [NHS Five Year] Forward View, from next year on is 2 per cent. That’s the maximum.”