We knew it was bad, but as Monitor has effectively declared, the NHS is now officially living the “downside”.
That was the nub of the regulator’s update to its financial assumptions circulated to the NHS last week.
For 2012-13, Monitor is now advising acute hospitals they will need to find, on average, annual efficiency savings of 6.5 per cent as a financial base case – or, as the regulator puts it, as the “central estimate of the expected pressures and risks to income and costs”.
That number – equivalent to almost £20m at a trust with a £300m turnover – is even worse than the regulator’s “downside” case published last year. That warned that if things went badly, acute trusts might need to find savings of 6 per cent this financial year. Under the latest assumptions, the downside for 2012-13 is 7.5 per cent.
The main contribution to the worsening outlook is Monitor’s revised assessment of the impact the combined tariff levers as set out in the operating framework will have on providers.
Last year, the regulator reckoned readmission penalties would add another 0.4 per cent to efficiencies; local variations from tariff would be negligible and the so-called “marginal tariff” – which sees hospitals paid just 30 per cent of the tariff price for elective patient volumes over the 2008-09 level – would add 0.3 per cent.
Monitor now thinks those three measures together will lever out an average 2 per cent of income from hospital trusts this year.
Where has the change of heart come from?
For some hospitals, substantial pain is already being dealt by the “marginal tariff” as elective patient numbers have continued to grow at a rate of around 2.8 per cent a year. That implies an extra £180m worth of unfunded patient activity has been added each year since the policy begun in 2010-11, which should equate to a painful £500m or so this year – over 1.2 per cent of acute income. However, the implementation of that policy so far has been bitty, with a number of hospitals being spared the full pain as commissioners acknowledge their own culpability for failing to turn the tide on rising admissions.
That may be about to change this year as the Department of Health becomes more militant in its enforcement of the policy, and, for one year at least, has the central command and control to see that through.
Sally Gainsbury is a news reporter for the Financial Times.