News / Balanced STP plans essential, says Baumann

Speaking to the HFMA annual commissioning conference on 23 June, Mr Baumann said it was important that organisations in STP footprints took the time to create a strategy that can stand up to external scrutiny. They should detail how the area would return to balance by 2020/21 and be based on a credible starting point.

But he recognised different areas were starting from different places in terms of existing relationships. ‘The question is not whether health economy spending can be made to balance within the resources but how,’ he said.

‘We need not to waste each other’s time submitting plans that either don’t balance or assume someone else will come to our rescue locally or nationally with additional resource. It is more of an egg and spoon race than a hundred metres sprint. I would rather have a fully developed and perfectly balanced golden egg in September than a sticky mess on the grass at the end of June.’

Mr Baumann told the conference that the reinvention of strategic planning was one of a number of key priorities facing the service. It also needed to ensure the ‘urgent’ restoration of financial discipline, deliver the efficiency challenge and target growth on areas that would deliver best value.

He said that providers and commissioners needed to work together to address the significant provider deficit of £2.45bn in 2015/16. He said this was not driven by ‘rampant activity’ but by costs growing at twice the rate of income and activity. A big overspend on agency and contract staff was a major contributor to the deficit, although there were some early signs that measures to tackle these costs were starting to be successful.

‘The key to cracking [this issue] is a combination of improving workforce planning ability, action on bottlenecks and a more disciplined approach to achieving safety and efficiency in staffing levels,’ he said.

He thanked commissioners for their performance in 2015/16, which had contributed to a an overall commissioning underspend of £599m. But he pointed out that non-recurrent and one-off factors – such as delayed spending on legacy continuing healthcare cases – made up the majority of this underspend.

And he said that commissioner plans for 2016/17 were ‘undoubtedly the most risky I have seen in my 10 years in the NHS’. He added that the common financial platform across CCGs had contributed to increasing the ‘financial grip’ on commissioner finances, but that the sector needed to improve its intelligence and early warning systems and clear the ‘commissioner-provider fog’. In particular it needed to: develop a consistent approach to the ‘tracking of financial risks and related mitigations’; achieve better integration of finance, activity and performance; and ‘align management information across the provider and commissioner sectors’ locally and nationally.

On efficiency he said the service needed to ‘demythologise’ the required £22bn savings – which, in any case, to a large extent meant more effective use of resources rather than cost reductions. The spending review assumes £7bn of these ‘savings’ will be delivered nationally through wage restraint and other mechanisms. The 2% annual efficiency requirement on providers would account for £9bn, with much of this achieved through delivery of the Carter report savings. This left £6bn for commissioning, which would be delivered by a combination of local action and national initiatives.

Mr Baumann broke the £6bn down further, with an estimated £4.3bn being delivered through activity-related savings. The RightCare programme is expected to support some £1.7bn of this, with new models of care and urgent and emergency care reform each contributing a further £0.9bn. ‘We need every health economy to grasp each efficiency programme and embed it into their plans for the future through the STP process,’ he said.