Comment / Collaboration key in ‘greatest challenge’

FT finance directors gathering for their annual conference know their organisations may face reducing income. Now is the time to seize opportunities for improvement

It is still early days for the new coalition government, although things are happening very fast. The Queen’s Speech has been followed by an emergency Budget and, for the NHS, a revised operating framework. We know the health bill will establish an independent NHS board to allocate resources, provide commissioning guidance and allow GPs to commission on behalf of patients.

The bill will also set out proposals to cut the cost of NHS administration by a third. And it will improve efficiency and outcomes by strengthening the Care Quality Commission role and developing Monitor into an economic regulator that will oversee aspects of access, competition and price setting.

It is perhaps difficult to see how plans to cut administration costs will apply directly to foundation trusts. But clearly, taken together, the proposals amount to uncertainty for FTs– at least in the short term. No change there then, I hear you cry.

FTs are part of a system designed as a marketplace with legally binding contracts.  The system has never quite established a failure regime. Coupled with this, strategic health authorities and primary care trusts, as commissioners, still attempt to plan strategically to  ensure they can  live within a cash-limited system. And this has had a profound influence on their interactions with FTs.

From announcements to date, the government seems intent on stopping such centralised planning, instead giving more power to GPs to influence events locally. The move to develop Monitor into an economic regulator appears to reinforce the role of FTs, but there is still no sign of a failure regime. 

The scale of change many organisations will face may be such that individual institutions, even well run FTs, will not be able to solve the efficiency requirements alone.  Mergers and acquisitions are therefore likely.

We hope ministers and regulators are already thinking about what changes may be necessary in the upcoming bill to facilitate this.

Most finance directors are focused on improving financial performance to meet challenging targets. With 28 years’ NHS experience, and 10 years as finance director of Guy’s and & St Thomas’, I can say the financial challenges, despite the coalition  government’s commitment to real-terms NHS growth, are the greatest we have faced. 

Tariff reductions, set to ensure the acute sector fulfils its share of the £15bn-£20bn savings forecast by NHS chief executive David Nicholson, are accompanied by PCT plans for decommissioning and to transfer services to the community. Only time will tell how real this threat to income is, but finance directors I know are taking it very seriously. They are having to gain commitment to change without full transparency about the  resources that will be available to commissioners, or their distribution.

There are many opportunities to collaborate to rationalise support services or to vertically integrate with community services to provide better care and value for money. We need to ensure our organisations have the capacity and capability to respond.

We also know we will be obliged to be even more publicly accountable and to demonstrate greater transparency, publishing online job titles and details for the most highly paid (as well as seeking Treasury approval for any salary above the prime minister’s). 

It is up to FTs’ finance directors to ensure their organisations seize the opportunities. Having clinicians integrally involved in managing our organisations and leading initiatives that improve efficiency will be key to achieving financial targets.