Trusts set 'unlikely' savings targets for 2011-12

Figures collected from 131 of England’s 144 acute, non-specialist trusts show CIPs have increased by an average of 30 per cent from 2010-11 to 2011-12, with 31 trusts increasing their target by 50 per cent or more.

The analysis suggests the savings equate to at least £2.4bn.

The difference means at least £800m more will be saved this year than if trusts stuck to the 2011-12 operating framework’s efficiency target of 4 per cent, aimed at helping the NHS achieve up to £20bn of savings by 2014-15. HSJ’s analysis is based on last year’s turnover, which is likely to increase slightly for some trusts this year.

All but 15 acute trusts plan to exceed the operating framework’s 4 per cent target, with a national average of 6 per cent.

30%:

Average increase of CIP plan from 2010-11 to 2011-12

Last week NHS chief executive Sir David Nicholson wrote to trusts warning of “unrealistic” CIP targets for the year.

The letter said: “I am expecting chief executives and boards to pay particular attention to the deliverability of their planning assumptions. It is not credible to close gaps with unrealistic balancing figures for cost improvement programmes.”

Seven trusts have a savings plan of 10 per cent or more for this financial year.

Trusts are setting the targets following tough negotiating rounds over contracts with commissioners.

118:

Number of trusts with CIP plans for 2011-12 higher than the 4 per cent in the Nicholson challenge

NHS Confederation acting chief executive Nigel Edwards said the speed of decommissioning by primary care trusts might explain the high savings targets. Rapid disinvestment means that trusts can struggle to achieve anything more than relatively small savings in the areas affected.

He said: “There is a risk that this [level of saving] will knock over some providers. For people looking at 8, 9, 10 per cent, unless they’ve got estate or fixed costs they can take out it’s unlikely [to happen]. It’s not going to come from better procurement or workforce activity.

“If you aim for that level of cost improvement all you need is one key person to leave or the weather to go against you. The NHS has the extraordinary ability to do the impossible but even by their standards this is stretching it.”

Foundation Trust Network director Sue Slipman said: “The figures from HSJ, which tally with the network’s own research, show an average CIP requirement over 5 per cent,  a level which Monitor considers to be extremely challenging for foundation trusts to achieve. 

“Some organisations are facing an even more severe cost improvement challenge of up to 15 per cent of income,” she said.

19:

Number of trusts with savings targets of 8 per cent or more

“We will be seeking transparency from the Department of Health on where the additional money in the system for 2011-12 has gone; on limiting the impact of the non-payment for readmissions policy so that providers are not penalised for readmissions that are outside their control; and for the DH to ensure that efficiency savings are not allowed to extend beyond the stated level of 4 per cent in the operating framework.”

Audit Commission managing director for health Andy McKeon said: “Five per cent would be manageable in a single year but probably not year after year after year.

“CIP percentages will be harder in 2011-12 than they were because extra income will be harder to come by.”

The biggest single savings plan is Epsom and St Helier University Hospitals Trust in Surrey, with 12.7 per cent of £313m expenditure planned in 2011-12.

19:

Number of trusts reducing their CIPs from 2010-11 to 2011-12

A spokesman for the organisation, which is looking to merge another to become a foundation trust, said: “We recognise that we face an extremely challenging financial position, but we are committed to balancing our books whilst continuing to provide our patients with the best possible care.

“It is important to note that the £39.9 million figure is a worst case scenario and will be reduced by the following actions.

“First, we are working closely with our commissioners to finalise our service level agreements for the year, which could have a positive impact on our income.

“Second, we are focussing our energies on building on the efficiencies we have made in recent years.  These include reducing the amount of time patients spend unnecessarily in our hospitals, maximising the productivity of our operating theatres and reducing our reliance on bank and agency staff.

“Finally, our Medical Director, with support from staff from across our hospitals, is leading a major review of the way we work to ensure our workforce is as efficient as it can be.  The outcome of this project is due to be published imminently.”

Princess Alexandra Hospital Trust in Essex is expecting to make the biggest increase in savings, moving from a 2010-11 target of 2.8 per cent  to 10 per cent.

A finance director at a small acute foundation trust said: “It’s excruciatingly hard. The big tension we face is between choice and cost, providing services where patients want them and doing everything as cost effectively as possible.

“We will start folding back our asset base to the main campus to get maximum value.”

He shared the concern of other hospital trust finance directors over the effect of the CIP combined with the reduced tariff for readmissions within 30 days.

One said: “There is no way this is a front-loading of CIPs, it would be difficult to take the staff with you on that. Finance directors are hoping just to get through the year and then maybe get bailed out with some of that non-recurrent two per cent that’s due out of the commissioners.”

Ten trusts approached by HSJ had not set their CIP plans for 2011-12.

They include South London Healthcare Trust – which has a turnover of £460m and told the Department of Health it had already saved £43m in 2010-11 and planned “estate rationalisation” in 2011-12 – and Milton Keynes Hospital Foundation Trust which had a 7.7 per cent target for last year.