So, it’s official. As audit bodies and think-tanks have been predicting for months, hospitals in England have run up a £2.45 billion deficit; the biggest overspend in their history.
And that’s after they sucked up an additional £1 billion of money meant for capital spending, and resorted to what the IPPR think-tank described as “crisis driven” “accounting tricks” to stop the figure going any higher.
It remains to be confirmed whether the Department of Health bust its budget as a whole last year. A recent House of Commons health committee hearing was told that it might have done; but there’s a chance it has managed to squeeze enough money out of central and commissioning bodies to get in under the wire.
In a way, it doesn’t matter. The acute sector has gone over a cliff, with horrible implications for the NHS’ big plans to sort out its finances by doing things in new ways.
Ever more heroic plans
As set out in several blog posts below, these plans were set out in the ‘Five Year Forward View’ in October 2014.
This called for investment in public health (to try and reduce demand), an efficiency drive, and new ways of working (to make the NHS more efficient at dealing with the demand coming towards it, as the result of an ageing population, more chronic disease, and new treatments).
Together, these were supposed to generate £22 billion of savings; with the government chipping in £8 billion to close a funding gap that might otherwise reach £30 billion by 2020-21.
A briefing for the health committee hearing added some useful detail to these headline figures. It said the Treasury spending review settlement assumed that £7 billion of the £22 billion will be “delivered nationally”; presumably by cutting the budget for the DH and organisations such as NHS England.
That leaves £15 billion to be “delivered locally”, of which £9 billion is supposed to come from “conventional provider productivity”; or from hospitals becoming more ‘efficient’ by squeezing wages, maintenance and supplies and generally “doing more with less.”
To reach this figure, hospitals would have to become 2% more efficient every year. The health committee’s note says the NHS regulator, Monitor [now NHS Improvement] believes this is “stretching but achievable.”
However, as also noted below, most watchdogs and think-tanks believe it is “heroic” at best and la-la land at worst; if only because hospitals have been trying to make these kinds of savings since 2008, when the former chief executive of the NHS, Sir David Nicholson, first sounded the finance alarm.
The fact that hospitals overspent by £2.45 billion in the 12 months running up to the first year of the Forward View suggests that the latter view may be more realistic.
Perils of the pioneers
Meanwhile, after a lot of semi-public haggling with NHS chief executive Simon Stevens, the Treasury agreed to front-load a chunk of its £8 billion to create a ‘Transformation Fund’ to pump-prime the bigger reform ideas.
One of the consequences of the hospital overspend is that almost all of the money in the fund for this year will now go on bailing out the acute sector. Another think-tank, the Nuffield Trust, has estimated that all but £339 million of a £1.8 billion pot will vanish this way.
So there isn’t going to be much cash about to try out all the new ideas that the plethora of ‘vanguards’ and ‘test beds’ are supposed to be setting up. This would be worrying if they were guaranteed to work. But they’re not.
As newspapers and broadcasters focused on the hospital deficit figures, they largely ignored a report that slipped out from the London School of Tropical Medicine’s policy innovation research unit on the ‘integrated care and support pioneers programme.’
The integrated care pioneers were set up by the Lib Dem social care minister, Norman Lamb, in the last Parliament, to test out one of the big ideas in the Forward View.
Specifically, they are testing out the idea that creating health and social care organisations that actually talk to each other and try to provide more ‘seamless’ care for patients will save a lot of money; not least by keeping them out of expensive hospitals by treating them at home or even keeping them well.
Some 14 pioneers were announced in November 2013 and another 11 in January 2015; and the PIU asked them how they were getting along in spring 2014 and summer 2015. Not all that well, was the short answer.
The researchers found their staff really wanted to bring about change, but that they were battling to overcome organisational intertia, IT problems, and the bigger financial situation, which gives hospitals an incentive to suck in patients, because they get paid for treating them.
Indeed, it found a lot of pioneers had already scaled back their ambitions, and were focusing on a much more limited agenda of ‘risk managing’ populations (to try and find the elderly, chronically sick patients who are constantly admitted to A&E because other services are so chaotic) and to ‘case manage’ them (to try and make services a bit more coherent, by putting one person in charge of co-ordinating them).
In a bind, with no easy way out
Taken together, these threads suggest the NHS is in a bind. The acute deficit figures suggest it is just not making the kind of “conventional provider productivity” savings it needs to stay in budget, never mind generate efficiencies of 2% a year.
And the integrated care pioneer report suggests that it’s not managing to change the way it does things in order to make more fundamental savings; even when it’s trying pretty hard to do that (although Norman Lamb thinks the pioneers have been left to wither since the Lib Dems left the coalition).
So where next? The response of most commentators is to say the NHS just needs more money. The amount being spent on the service, as a proportion of GDP, is falling; and it needs to rise again.
Faced with similar deficits, in tattier hospitals, ground down by years of cash releasing efficiency savings, governments have cracked and found more money in the past. So the acute sector may tacitly be assuming that this will happen again.
But with a Conservative government in power that appears to have public support for its austerity agenda, it doesn’t feel wise to bet on it. The Treasury and the DH are certainly sticking to the line that the government has agreed to fund “the NHS’ own plan” and that’s that.
A less common response is to say that the NHS’ traditional attempt to first stabilise the acute sector and then get into the reform agenda is wrong.
Things are so bad that the NHS just needs to get on with the kind of shifts that other service sectors have made (introducing IT to streamline operations, finding cheaper ways to deliver activity, and passing work off to new providers or to users where possible) and to pay for this from real – if very painful – personnel and cash shifts.
The experience of the pioneers is not promising; but it’s possible to argue that if they weren’t separately funded they wouldn’t be able to segue into another form of activity, as the rest of the system desperately tries to prop itself up around them.
All eyes will be on the vanguards, to see if they can manage to pull of this kind of trick. Because the third response put forward by commentators is to give up/introduce insurance/privatise it; and we don’t want to get there.