• Provider sector now forecasting a deficit of £661m, after the benefit of extra “donated asset” income
  • But this is still more than £250m worse than planned, and significantly short of regulators’ original breakeven commitment
  • Best and worst tables below

The provider sector is set to miss its financial plan by more than £250m, despite benefitting from significant extra “donated asset” income.

NHS Improvement’s latest forecast for 2018-19 suggests a year-end deficit of £661m, against the initially planned £394m.

The forecast would have been worse, at £917m, were it not for a £256m accounting adjustment which involved two private finance initiative hospitals being brought on to the government’s books as “part-donated assets”.

The financial performance of the sector falls well short of the commitment to clear the deficit in 2018-19, which was made by NHSI shortly after Ian Dalton became its chief executive. Last week, HSJ revealed Mr Dalton’s role will be taken over by NHS England’s Simon Stevens, who will lead both national bodies.

He had in recent months, following the government announcing an NHS spending boost in coming years, agreed a set of changes to financial rules from April which he and the trust sector said would enable them to improve their finances.

The ongoing provider deficit creates a significant risk that the DHSC will be overspend this year, and last month the department received a £600m bailout from the Treasury.

The actual year-to-date position after the third quarter suggests a slight improvement on 2017-18, but significant deterioration on 2016-17.

NHSI’s report said: “The reported deterioration among a small proportion of providers explains most of the overall deterioration in the sector.

“This requires focused and firm action by their boards – the whole NHS is under considerable pressure and it is clearly not appropriate for a few organisations to receive disproportionate financial support from the rest of the NHS.”

NHS Improvement’s ‘best’ performers

best

NHS Improvement’s ‘worst’ performers

worst

Explaining the drivers of the financial deterioration, NHSI said: “Key contributing factors cited by providers include difficulties in achieving planned efficiency savings, operational cost pressures relating to temporary staffing and substantive workforce pressures including the extent to which the Agenda for Change pay awards are fully funded, contracting difficulties, quality investment and unplanned emergency activity displacing elective income.”

The trust sector has repeatedly missed its financial plan in recent years, amid a sustained squeeze on NHS funding and a rise in costs and demand. The government has pledged £20.5bn of real terms revenue growth by 2023-24, with significant chunks of this funding set to help acute hospitals where most of the deficit is concentrated.

The technical accounting adjustment involves “donated asset income” relating to the PFI hospitals in Liverpool (£107m) and Birmingham (£149m) that were brought onto the government’s books following the collapse of Carillion.

The report said: “The adjustment for donated asset income is consistent with previous years and the accounting treatment has been agreed with the Department of Health and Social Care.”

HSJ understands the benefit arises because the value of the completed construction work in Liverpool and Birmingham exceeded the initial capital contribution from the public sector. The trusts will effectively consume economic benefit from an asset that exceeds the value paid for it, and this is accounted for as donated asset income.

Miriam Deakin, director of performance and strategy at NHS Providers, said: “This is a creditable performance by trusts in the face of rapidly rising demand for care, severe staff and skills shortages and continuing financial pressures…

“The financial position is broadly similar to what we saw last year, though fewer trusts are in deficit. However they continue to operate in an extremely challenging environment, and despite trusts’ best efforts, we are not convinced the sector will meet the projected overspend forecast by NHS Improvement.”