Chill winds are blowing through acute and PCT forecasts for their organisations over the next year - with recruitment freezes the most dramatic trend. Sally Gainsbury reports on HSJ’s latest survey of finance directors’ outlook
They might work in the only part of the NHS whose income has not been explicitly cut, but primary care trust finance directors are the most pessimistic about their financial outlook.
The proportion of organisations with freezes will be 35 per cent at the end of March’
In the latest HSJ finance directors’ survey - based on detailed interviews by the market research specialists Explomarket in late February and early March - 65 per cent of PCT finance directors said they would rate their outlook for next year as either “moderately worse” or “substantially worse”.
It is acute trusts that will be hit with the so-called “two part” or “marginal” tariff which will see them paid just 30 per cent of the tariff value of unplanned admissions over their 2008-09 levels - leaving most with cash cuts in their income per patient. Yet 59 per cent of acute trust finance directors expect their financial health next year to be “the same” as this year or better.
Perhaps HSJ’s panel of 45 finance directors have all been reading the Audit Commission’s recent More for Less report, which found the full 4.1 per cent real terms difference between the 6.5 per cent increase in PCT allocations in 2008-09 and the 2.3 per cent tariff uplift was swallowed up by the seemingly inexorable rise in acute trust activity.
The two part tariff for next year represents the Department of Health’s attempt to penalise and stem that rise. But foundation trusts are busying themselves gobbling up community service provider arms to either diversify their income, or - if you believe the vertical integration sceptics - seize control of the onward referrals for their acute services.
And, as the Audit Commission noted, the “most telling” statistic in NHS activity data is the 7.8 per cent annual increase in outpatient numbers. The Audit Commission called that the “future order book” for inpatient care; and it is elective, 100 per cent tariff care at that. Indeed, asked what measures they were planning to control costs, only a quarter of acute finance directors said “reduce capacity” - down from a third when HSJ last surveyed them in September.
But it is not all rosy at acute trusts. According to the results of our survey, their staff have the least job security. Not surprisingly, non-clinical posts are the most precarious, with 58 per cent of finance directors at acute trusts saying they expect numbers working in administrative and junior management roles to decrease.
Our panel did not think their own level of management was immune. Fifty per cent of acute trust finance directors said they expected the numbers of senior managers at their organisation to fall.
A quarter of acute respondents say they expect to cut nurses and healthcare assistants, and a third say they expect to reduce their numbers of doctors and other clinicians.
By contrast - and this time in keeping with DH plans to oversee a shift of activity from acute to primary care - primary care clinicians have the most job security.
Almost a fifth of PCT finance directors expect to increase GP numbers - a trend that has increased steadily over the last nine months of our periodic survey. A quarter of PCTs also expect to increase their numbers of other clinicians such as physiotherapists.
However, the most dramatic trend over our three surveys is the rapid increase in the numbers of finance directors reporting recruitment freezes. In June last year just 6 per cent said they had a freeze somewhere in their organisation. That trebled to 18 per cent in September. By the first week of March that had increased again to 29 per cent.
It looks likely to increase further. A quarter of those who said they did not have a freeze by the beginning of March said they planned to introduce one before the end of this financial year. Assuming those with freezes already remain constant, the overall proportion of organisations with freezes by the end of this month will be 35 per cent.
Freezes are more common at PCTs - in keeping with the operating framework edict for them to reduce their management costs by 30 per cent. A third already had freezes by the beginning of March and a further third said they planned to introduce them by the end of March.
The iciest posts are senior managers: 37 per cent of finance directors said they had either already frozen, or planned to freeze, those posts this financial year. Administrators were next, with 31 per cent already frozen, or planning to freeze.
Clinical posts are again safer. But freezes in recruitment to nursing posts are already happening or planned at a fifth of organisations.
Finance directors are not just looking at their pay bill to cut costs. In fact, only 69 per cent of respondents said they were planning “increases in staff productivity” to make savings - down from 91 per cent in September. Just under a third also said they planned to increase headcount - up from just 9 per cent in September.
The majority of those respondents were at acute trusts and, perhaps tellingly, the second most popular cost cutting measure was to “review skill and banding mix of clinical staff” - an NHS euphemism for delegating more duties to lower paid and lower skilled staff.
But the cost cut of choice for finance directors is now to renegotiate supplier contracts. Eighty per cent said they had earmarked changes in that area.
The clearest trend in savings plans, however, is the receding optimism. In September, more than three quarters of respondents said they were planning cost reductions through procurement and prioritisation. But by the beginning of March - perhaps as the final evidence of all those cost improvement plans comes in - the proportion signing up to those approaches had slipped to 57 per cent and 40 per cent respectively. Those planning cuts in equipment costs had similarly fallen from 64 per cent to 37 per cent.
That does not sound like fantastic news for health secretary Andy Burnham. Last week he said the largest single chunk of the £4.35bn of efficiency savings he has promised the Treasury by 2012-13 will come from “driving down the costs of procurement”. “Up to” £1.5bn would come from that, he said - a qualifier he may want to rely on in future.