HSJ’s expert briefing on NHS finances, savings and efforts to get the health service back in the black.

Cut and paste

“The provider sector is experiencing one of the toughest winters on record. A&E departments have seen exceptionally high numbers of attendances on a daily basis throughout the winter period.”

This was what NHS Improvement said in February last year, explaining why trusts’ financial forecasts for 2016-17 had deteriorated by £300m in quarter three.

It will be a straightforward cut and paste job for the author of this year’s assessment.

The latest episode of “NHS winter crisis” – including the postponement of thousands more elective operations in the second half of January – will quickly eat into the extra revenue that arrived in the Budget (most of which is going straight to the bottom line).

Overall, we can expect the sector’s combined deficit to be broadly like last year’s £790m –with little prospect of returning to financial balance without a step change in funding.

Damage limitation

This leaves the NHS in limbo. Jim Mackey’s “impossible” targets in the 2016 “reset” have been missed, and the Five Year Forward View is significantly “off plan” and in need of revision.

But with the government preoccupied, there appears to be little short term prospect of new plans emerging.

Talk of a royal commission on NHS funding will be forgotten in a few weeks and one could take years to report in any case.

Limbo means damage limitation for NHSI, which cannot realistically plan to get the trust sector back in the black.

Ian Dalton, the regulator’s new chief executive, will be all too aware of the past reliance on non-recurrent savings, inflationary pressures and the ominous cash position. He will have to pull out all the stops just to hold the deficit at the current level.

For now, it looks like it can be covered off at the national level by the commissioning “risk reserve”. This will be tolerated by a government that has little appetite or capacity for big questions about the NHS.

Doing what you say you’re going to do

It will be interesting to see whether NHSI’s approach to financial governance changes under Mr Dalton.

Since the reset, the importance of setting and meeting a financial plan appears to have been of secondary importance to gaining access to sustainability and transformation funding.

Multiple trusts have been rewarded for agreeing to unrealistic targets with relatively little risk if that target isn’t met.

Many of the finance directors I speak to would like to see greater emphasis on “doing what you say you’re going to do” from the regulator. This would mean more control totals being rejected but also greater ownership of the subsequent plans and perhaps a similar combined outturn position anyway.

Mergers in vogue

Long term financial planning could also be given greater attention with the most unsustainable organisations having to provide more detail on how they are going to recover their position over multiyear periods.

Due to a lack of other options, many of these plans are likely to involve mergers, which seem to be back in fashion.