News / Baumann: commissioner focus on financial balance

No stone is being left unturned in the effort to ensure commissioners deliver a balanced budget this year, NHS England chief financial officer Paul Baumann (right) has said.

Mr Baumann told NHS England’s September board meeting that risks to the final position for CCGs and direct commissioners was £444m at month five. This was mostly due to the challenge of delivering efficiency plans, managing activity risks and absorbing the cost of an increase in funded nursing care fees. This could be offset by underspends in central costs (£71m), giving an overall risk position of £373m.

NHS England managers were undertaking a ‘deep dive’ into commissioners’ financial position. The outcome of the review will be included in the month six report to the board.

In his month five report, Mr Baumann said the deep dives would test the robustness of the overall balanced forecast position, to understand the interventions already under way to manage a higher level of risk than seen previously. They would also seek ‘to agree any further actions to sustain our 100% track record, so far at least, of living within our means’.

‘The report highlights why this is more difficult this year. We have had to increase the level of commissioner efficiencies by nearly 50% overall, and more than that in the CCG sector, to create the headroom for the 1% investment and risk reserve we are holding this year,’ he said.

‘Work to date indicates that, while recovery actions already under way will ensure not all of the £444m commissioning risk will crystallise, a substantial proportion of it probably will. As well as trying to steer that number down to the lowest possible level by supporting CCGs to take the required action to correct that position, we are redoubling our efforts to find additional mitigations among our central budgets.’

NHS England remained committed to delivering a balanced budget in the commissioning sector. ‘There is no stone being left unturned in the pursuit of that goal,’ he said.

Chief executive Simon Stevens said it was important to set the right starting point for the two-year operational plans. ‘The financial exit position for CCGs and trusts is obviously a risk – we’ve got to get it right,’ he said. ‘If we don’t deliver the end-year financial position in CCGs and trusts, 2017/18 will be very difficult.’

The £800m risk reserve has added to commissioners’ financial pressure and it was beginning to be seen in deteriorating forecast year-end positions. The funds are currently uncommitted, but will be released to spend on local priorities if they are not required to offset deficits elsewhere in the NHS.

It is understood NHS England is speaking to the Treasury about when this can be released – if this does not happen soon, CCGs could find it difficult to spend the money cost-effectively in the remaining months of the financial year.

As at month three, 39 CCGs were planning for a cumulative deficit at the end of 2016/17 and 29 expect to report an in-year deficit. While the numbers are similar to 2015/16, the overspends are on average 33% lower. At month five, headline expenditure was £95m above plan, with a CCG aggregate overspend of £159m (0.5%). The year-end forecast was an overall commissioning overspend of just under £24m.

The forecast also reflects greater pressure than expected from the impact of the technical and ring-fenced adjustments relating to provision movements and depreciation.

In the year-to-date, 77 CCGs reported an overspend position, of which 40 are greater than 1% of allocation. Most assume they will be able to recover the position by year-end. But 24 forecast a position worse than their annual plan, including four predicting an unplanned deficit.

Mr Baumann said: ‘A year that was always going to be exceptionally challenging is living up to our expectations. Across the commissioning sector we can draw on the financial management approach we have evolved over the first three years of operation, but there’s still a lot to do.

‘And that has to be done in combination with the work on STPs and on gearing up for the operating plan process.’