Despite the forecast of a £620m deficit, the NHS chief executive claims the service is driving improvement and efficiency. And bailing out trusts in financial difficulty? The answer's still no

Published: 08/12/2005 Volume 115 No. 5985 Page 20 21

It is a short walk from Portcullis House in Westminster to the Department of Health's headquarters in Whitehall. Last Thursday lunchtime, NHS chief executive Sir Nigel Crisp emerged from his first brush with the new health select committee, having being forced to confirm that the NHS was currently forecasting a£620m deficit. Outside his Richmond House base he will have passed a one-man protest against NHS cuts.

And all on the day that he really wanted to talk about the annual half-year report on NHS activity, published yesterday, that as he puts it 'shows all the numbers going in the right direction'.

The report predicts that by the end of this month the NHS will hit its target to reduce inpatient waits to a maximum of six months and outpatient waits to a maximum of 13 weeks, as well as hitting the end-offinancial-year target of a two-month end-to-end waiting time for cancer.

Visits to walk-in centres have increased 40 per cent to more than 2.4 million.

Meanwhile, accident and emergency attendances are forecast to increase by 8.8 per cent, A&E admissions by 4.9 per cent, elective admissions by 1.6 per cent and outpatient procedures by about 2 per cent. Average length of stay has fallen from 7.4 to 7.1 days Death rates from cancer have fallen by 14 per cent, putting the service ahead of its trajectory for its 2010 target. However, the number of procedures in primary care and number of households receiving intensive homecare have shown increases at or below 5 per cent year on year.

It is ironic that this time last year, Sir Nigel framed his half-year report with two warnings to trusts: remember what 'binds' you together, and be mindful about how you spend the 'extra money' (news, page 5, 9 December 2004). He must be disappointed with the result.

On one hand, managers at all levels worry that policy lacks coherence about how different organisations should relate to each other.

And on the other, as Sir Nigel concedes, 'collectively we did not pay as much attention to finance as to the other requirements'. The target for this year has been revised to a deficit of£200m as a result - accompanied by a pointed statement from health secretary Patricia Hewitt about unacceptable 'inefficiency and poor financial management'.

Sir Nigel denies there has been any unravelling of the managerial mind.

'The direction of travel has in fact been very robust. It has been partly disrupted in the last six months by organisational change, and that has been unsettling. We said we expected primary care trusts to shed their provider services and Patricia and I have said that was too prescriptive and we would leave it to PCTs to make sure they can deliver commissioning responsibility and manage provision as appropriate.

'That has been disruptive and that has been difficult. I am not surprised that in some parts of the NHS there has been some real unhappiness and I am sorry about that. But I do not think that makes it any less clear that we want to move, in Patricia's phrase, from a politician-led NHS to a patientled NHS and we need to make the right incentives to achieve that.' One 'sharp incentive' on better finance management would be a tightening of the criteria used by the Healthcare Commission. Currently trusts are allowed, in effect, a 'margin of error' before being penalised.

Discussions between the DoH and the commission are ongoing.

Of course, this would mainly affect those trusts on the margins of financial imbalance rather than the hardcore debtors. Twenty four per cent of trusts have some kind of deficit (down from 27 per cent at the end of 2004-05). However, 37 trusts account for two-thirds of the gross deficit of£948m - down from 48 trusts accounting for two-thirds of the 2004-05 gross deficit of£719m.

Those trusts 'with really profound problems' will find the centre 'getting alongside them'.

'Which we have been doing to some extent but we will do that in a more rigorous and systematic way to get them into turnaround.' He is keen to stress that the£620m net deficit figure is 'almost exactly the same as this time last year and with almost exactly the same propositions'. In fact, the DoH never revealed the figure for this time last year although HSJ identified a widely accepted figure of£500m (news, page 5, 6 January).

The revised target to have a deficit of£200m at year end means 'in a small number of areas - five, I think - we have agreed a controlled deficit. That is not a bail out. The deficits will show as deficits, but we will cover it by underspends in other departmental budgets.'

Although he stresses 'they will have to pay it back', this must sound depressingly familiar to those who have heard the just-this-once-butnever-again mantra before. Some well-placed observers believe a oneoff clearing of accumulated debts is inevitable if the NHS is to achieve Sir Nigel's stated aim of every trust breaking even next year. He disagrees - with vigour.

Sir Nigel is adamant that 'shortterm solutions are no longer available' and must be replaced with sustainable ones, even if those plans span more than one financial year. 'This is part of the reason why we decided on a£200m deficit rather than zero.' He is unimpressed with the argument that some trusts are hobbled by incurable historical debts.

'Some people's jobs are harder than others, but there are plenty of examples of people who have dug themselves out of financial problems.

'It would be easy to get into a culture where deficits are accepted and that is why we are being so tough. This has got to be changed and why we want people to move towards what Monitor wants, which is recording surpluses.' He says this means the end of the 'short-term agonising about zero'.

A big theme for next year in Sir Nigel's activity report is productivity. Or as he puts it, 'I have a new joined-up word - quality-andvalue-for-money'. It may not roll off the tongue and is mildly alarming when Sir Nigel pronounces it at speed, but it does sum up a focus on measuring and improving efficiency.

Health and social care has collectively already accounted for savings of£1.7bn this year,£200m ahead of its Gershon public sector efficiency target. The proportion of management costs in the NHS have fallen from 5 to 4 per cent. 'There is a strong message that people are in fact controlling their management costs, reducing overheads and benchmarking clinical services against the best.' He highlights the work of the fledgling NHS Institute for Innovation and Improvement in pushing consistency of best practice.

'If we are going to carry on being successful in the way we have been over the past years it will depend on innovation in services.

The DoH has annoyed many foundation trusts by disallowing joint ventures with the private sector. But it is not averse itself and Sir Nigel is enthusiastic about the deal with services company Xansa to provide shared back-office support.

It currently has more than 60 client trusts and will pass 100 this financial year. Sir Nigel says he would like to see if 'they can expand the range of things they do'.

While not mandatory, contracting out back-office processes will be increasingly encouraged. And although the detail is yet to be decided, he says 'we want to see - and will see - people going a lot further and moving a lot of the back-office processes of commissioning to being shared, either at regional level or some other form'.

The creation of standard contracts still depends on feasibility studies.

Beyond that is the actual administration of commissioning: Sir Nigel is concerned that trusts will mistake being knee-deep in the process with effective management.

'At the moment we have people in PCTs and trusts spending a lot of time just monitoring the information and challenging each other and not doing what they should be doing, which is actually managing what is going on.' He says the aim - and a decision is imminent - is to replicate the benefits of the prescribing analysis and cost (PACT) reports used by GPs to manage prescribing. 'It shows spend and reveals trends.

What is important is that PCTs will be able to look not just at their own use of a particular hospital, but across all PCTs.' As he says when talking about the importance of managers getting close to the patient experience, 'no-one joins the NHS to be a commissioner'.

Which sounds like it might rather be part of the problem. .