NHS finances tapped out in Morse code

NHS finances in Morse codeThe National Audit Office issued a report this week that came as close as the government’s financial watchdog can come to shouting: “Doomed, doomed, we’re all doomed, I tell you.”

Rather few papers spotted this. Which may have been because the report was titled ‘The financial sustainability of NHS bodies’; and because even when the NAO is channelling Sergeant Frazer it says things like: “Financial risk in NHS trusts and foundation trusts is increasing” and: “Current trends are not sustainable.”

Still, the data is inescapable. The report found that as of June, NHS trusts were predicting a net deficit for the current financial year of £404m and that NHS foundation trusts were expecting a net financial deficit of £108m.

Or, to put it another way, the organisations that run NHS hospitals were expecting to end up half a billion pounds in the red, before they properly started to think about winter.

More worryingly, the report shows that this is not just a blip, that finances have been deteriorating for some time, and that all the trends are going in the wrong direction.

So, the NHS as a whole finished in surplus last year (because NHS England, the body that runs it, under-spent, and so did the clinical commissioning groups, that are in charge of local planning).

However, it was a smaller surplus than the year before. And a chunk of it had to go on bailing out trusts and financial trusts in such “severe financial difficulty” that they wouldn’t otherwise have had “the cash… to pay wages and creditors.”

This year, the NHS may end up with a deficit of around £45m overall. And next year, trusts and foundation trusts are budgeting to be paid far more for treating people than their commissioners are planning to pay them.

So unless more money is put into or squeezed out of the system, things will go on getting worse. Or, as Amyas Morse, head of the NAO put it in a press release: “The growth trend for numbers of NHS trusts and foundation trusts in deficit is not sustainable.”

Something needs to give

As explained in blog posts below, the NHS has been keeping up with the ‘Nicholson Challenge’ to bridge the gap between flat funding and growing demand by freezing the prices it pays to hospitals for treating people (the ‘tariff’), and squeezing wages.

What it hasn’t done is to get into the more fundamental kinds of reform that Sir David Nicholson, the former chief executive of the NHS, and various think-tanks have been calling for.

The new chief executive of NHS England, Simon Stevens, effectively urged the health service to get on with these changes in the ‘Five Year Forward View’ that is discussed in the blog post below.

He also urged politicians and the public to back these efforts, by coming up with some money for investment, and laying off campaigns to ‘save” every expensive (and sometimes unsafe) A&E, maternity, and hospital service in the country.

The NAO’s report effectively shows the consequences of trying to deliver Nicholson’s quality, innovation, productivity and prevention agenda by only doing the ‘productivity’ bit. But it also shows that some of the attempts that have been made to kick-start ‘innovation’ have not worked out very well.

For example, it notes that trusts are only being paid a third of the money that they should be being paid for emergency admissions, once they go over the number of emergency admissions that they made in 2008-9.

The idea was to discourage hospitals from sucking in patients who could be treated elsewhere, and to encourage commissioners, GPs and councils to come up with more effective services for the large numbers of near-death, elderly, and badly managed people who are blue-lighted into A&E every time they deteriorate.

However, since this policy was introduced, admissions have soared 62%; so it’s only effect has been to force hospitals to treat elderly, complex patients at a loss.

The government has moved to try and give the policy more bite by introducing a Better Care Fund, which strips money out of the acute sector, and gives it to community services and councils, to encourage them to sort out their act.

However, the NAO’s report says the experience with the 30% emergency admissions tariff means there is “considerable uncertainty about [its] impact”; which sounds like accountant code for ‘you must be joking if you think that’s going to work.’

Certainly, hospitals don’t expect it to work. The NAO says that’s why they are expecting to spend so much more than their commissioners are hoping to pay them next year.

Close(r) to the edge

Stevens’ has generated a huge amount of optimism and good will around his 5YFV plan. However, the NAO’s report demonstrates that the NHS will not be starting from a strong financial position, as and when it gets to try to implement it, which won’t be before the next general election.

Indeed, the audit office has joined the King’s Fund and Nuffield Trust in warning that a financial crisis in the NHS is now more or less inevitable, and the only question is whether it will arise before or after 7 May.

Political common sense says it will be after – and there are rumours the Treasury is trying to find £1 billion of ‘winter pressures’ money to make sure that is the case. After the election, though, we’ll find out whether the NHS is doomed or, to use Frazer’s catch-phrase when all turned out well, that Simon Stevens “is a fine man, a very fine man.”

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