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

Capping expenditure

It was only a matter of time before national regulators introduced new measures to try to improve the finances of local NHS organisations in 2017-18.

And NHS England and NHS Improvement have made their move early this time, setting out a “capped expenditure process” for those health economies which have been living furthest above their means.

This process set out a combined spending limit for the area, and says commissioners and providers must consider “how the resulting envelope for each area of spend will be broken down across the individual organisations”.

Which all sounds very similar to the “flexible system control total”, which was a concept introduced within the shared planning guidance published last September.

Yet the flexible control totals were intended to be something offered only to the star pupils – ie the Sustainability and Transformation Plans which had the most mature governance arrangements and processes in place – whereas the capped expenditure process is very much aimed at the naughty list pupils.

This just shows how quickly things move in the NHS, but also how the finances are not really getting any better.

Scaling back

While many NHS trusts will report dramatic improvements to their bottom line in 2016-17, much of this will be down to additional income from commissioners.

This means a system approach has become even more urgent – and why something that was seen as desirable back in September is now seen as essential.

However, it is hard to see how the capped expenditure process will make any great difference, compared to what has already been tried before.

The key question will be the extent to which the process will help local and national leaders develop an appetite to start “scaling back” their unaffordable services, as NHS England’s Next Steps document envisaged.

Earlier this year, Following the Money warned that although the vast majority of 2017-18 contracts had been signed between commissioners and providers, this was only achieved due to many organisations setting huge efficiency targets.

So not only has the capped expenditure process been targeted at health systems whose plans do not meet their net spending limits, it has also been mandated for areas where the plans do fit within the limits, but are “highly unlikely to be deliverable”.

One-off transactions

HSJ is currently in the process of collecting NHS providers’ reported financial performance figures for 2016-17, and has come across a number of large one-off transactions which have helped trusts get over the line, in terms of meeting their year-end control total.

The biggest recovery is likely to be the Royal Free London Foundation Trust, which has met its surplus target after selling one of its hospital sites to its charity arm for £50m.

The deal has certainly raised a few eyebrows – especially as it enables the trust to receive extra incentive funding – but has apparently been cleared by NHS Improvement and the Charity Commission, and appears to fit in with the charity’s strategy to provide key worker housing.

Without the deal, the trust was heading for a deficit in excess of £40m, so it will now have to focus on delivering real operational efficiencies to get back into balance. 

Naylor’s hidden gold

Sir Robert Naylor has revealed that five land redevelopments on NHS property in London are worth more than £1bn each (and HSJ’s Ben Clover has had a good stab at identifying where they are). 

If the recommendation in his review of NHS estates – that the proceeds of land sales should be retained by the relevant organisations in order to incentivise the transactions – is adopted then this could be quite a windfall for the London health economy.