News / Deficit driven by system-wide problems

In a report, the foundation said providers were fighting a losing battle to balance their books this year, let alone deliver the £22bn of efficiencies expected over the next five years.

A perfect storm: an impossible climate for NHS providers’ finances? said a rising pay bill and nationally set prices were among the main factors influencing trusts’ deficits. Costs increased by 2.2% in 2014/15, but funding rose by 2%, the report said. While demand and costs were rising, productivity gains needed to plug the shortfall were not being delivered.

It added that poor quality care was associated with larger deficits – acute and specialist trusts rated inadequate by the Care Quality Commission were more likely to be in deficit than their peers. Though it did not establish a link between the two, it said deteriorating finances could b a warning sign that patient services could also decline.

Private finance initiative payments did not appear to be an issue for the NHS as a whole and were not found to be significantly linked to deficits.

Health Foundation research and economics director Anita Charlesworth (above) said: ‘NHS providers’ finances are in a shocking state with an unprecedented number of hospitals reporting deficits. The situation is particularly bad for acute hospitals, with 95% in the red.’

Many of the factors linked to the deficit result from system-wide problems, she added. 'The financial challenges facing our hospitals are not the result of weaknesses in the management of individual organisations. They stem from poor workforce planning and fundamentally an unrealistic expectation of efficiency improvement in the NHS.’