Updated: Provider deficits swell to £930m in three months

Performance in the first quarter of the year was £163m worse than planned, and suggests the sector is heading for a year-end shortfall worse than the £2.1bn originally forecast.

The figures were published this morning by Monitor and the NHS Trust Development Authority, following a delay of several weeks.

The regulators said spending on agency staff was a key factor in the overspend, which was a response to rising demand from patients and a “heightened focus on service quality”.

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Trusts have also seen a reduction in their income compared with last year, they said.

Foundation trusts ended the quarter with a deficit of £445m, which was £90m worse than planned. Non-FTs were £485m in the red, which was £73m behind plan.

Monitor said its latest forecast suggests FTs will end the year with a deficit of about £1bn, which is broadly in line with original plans.

However, the TDA has not published a forecast for non-FTs year-end position, saying the quarter one figures pre-date several cost savings measures announced in August, which required trusts to revisit their financial projections.

But HSJ’s analysis of trusts’ latest financial reports and revised plans suggests the acute and specialist hospital sector remains on course for a deficit of about £2bn. The quarter one figures give no indication that other provider sectors are in line for a surplus that would significantly offset acute deficits.

Last year, the combined surpluses reported by clinical commissioning groups’, of £731m, largely compensated for the £822bn deficit in the provider sector. However, the Department of Health only avoided breaching its overall revenue budget after securing a £250m bailout from the Treasury, as well as the transfer of £640m from capital budgets.

Last month, HSJ revealed that CCGs have forecast a combined surplus of just £358m for 2015-16, highlighting the severe risk that the DH will breach its revenue budget this year.

Health secretary Jeremy Hunt told the Commons health committee last month that he was “confident” the department would balance its books this year, and the DH this morning said this remains the case.

NHS Providers chief executive Chris Hopson said: “These results are not a surprise – providers have been flagging their rapidly deteriorating financial position for more than two years now.

“NHS trusts and foundation trusts are doing everything they possibly can to avoid financial deficits, but they are experiencing a triple whammy: rapidly rising patient demand; an extra £2bn unfunded staff cost they have been required to add; and the deepest and longest funding squeeze in NHS history, despite the NHS ring fence.

“The fact that more than 80 per cent of all hospitals are now in deficit and more than 50 per cent of all types of trust are projecting a year end deficit, shows that this is a system level problem, not one of poor trust performance….

“We recognise that this size of deficit will give the DH a significant problem in making its overall 2015-16 budget balance.

“The only significant extra new opportunity on the horizon is the introduction of an agency staff spending cap, but this will now come very late in the year and just at the point when demand for agency staff is likely to be at its greatest as extra winter capacity comes on stream.

“Everyone will keep doing all they can, but we need to be realistic about what can be achieved at this point.”

Paul Briddock, director of policy at the Healthcare Financial Management Association, said: “It has now been 182 days since the government vowed to inject £8bn of much needed extra funding into the NHS and we still await confirmation as to where and when this investment will be made.

“They now need to keep their promise and make their pledged investment a priority.”

Monitor chief executive David Bennett said: “Monitor has already taken action to help the sector improve operationally and financially and continue to offer our support and guidance. But the FT sector must realise that a radical and lasting change is required.”

A spokesman for the TDA said another factor in the deterioration was “continued pressure for hospital based care, demonstrated by the level of demand for urgent and emergency services and continuing difficulties with the discharge of medically fit patients to more appropriate care settings”.

A spokesman for the DH said it is investing the funds needed to meet the “NHS’s own plan for the future”. He added: “The NHS must play its part in delivering efficiencies – so we’re taking action to help hospitals clamp down on rip-off staffing agencies and cut spending on management consultants. We expect the impact of these measures to be reflected in figures released later in the year.”