News / Monitor calls for firm focus on service transformation

Ft regulator Monitor has stepped up calls for foundation trusts to plan for ‘fundamental changes to service delivery’ over the coming five years.

Speaking to the Foundation Trust Network conference at the end of October, Monitor chairman and interim chief executive David Bennett highlighted the need to strip 20% out of the sector’s cost base by 2014/15 – describing it as the largest saving the NHS has ever achieved. ‘We know that simple efficiencies – the so-called low hanging fruit – are increasingly exhausted,’ he said. ‘So we need to have a more fundamental redesign of services.’

Small and medium-sized providers would have the biggest challenges. But Dr Bennett reiterated his claim that ‘probably no provider is going to escape some form of restructuring’.

Innovation will be crucial, he added. ‘What we know for certain is that it is increasingly likely there will be a need to be more innovative in developing some fundamental changes to delivery models,’ he said.

‘Part of that is going to be doing a clean-sheet redesign – going back to first principles in determining the services a community needs and what is the ongoing basis for the delivery of those services in conjunction with other providers in the community.’

Monitor has previously emphasised the importance of staying on top of cost improvement programmes (CIPs). A shortfall in one year’s cost improvements simply adds to already challenging pressures in future years.

The regulator’s report on FTs’ performance in Q1 highlights concern about slippage in CIPs. By the end of Q1, FTs collectively had delivered £258m of CIPs – 2.8% of their operating expenditure, compared with a planned 3.4%. While this mirrors last year’s trend, the percentage shortfall is greater this year.

The underperformance on cost improvement may be contributing to the number of FTs in deficit at this point in the year – 25% or 36 of the current 144 FTs.

While FTs are allowed to run a short-term deficit, Monitor said it was concerned that the aggregate deficit of the 36 trusts – £62m, which is £10m more than the same period in 2011/12 – reflected poor financial planning by some trusts.

‘If trusts do not plan early enough, they run up an early deficit, only to clear it later in the year when savings plans begin to bite,’ it said. ‘Monitor is urging trust boards to take a closer look at the issue and make sure cost savings are delivered earlier in the year.’

Despite these concerns and the challenging background, Monitor said that overall the sector’s financial performance at Q1 continued to remain ‘fairly robust overall in the short term and slightly ahead of expectations’.

Earnings before interest, tax, depreciation and amortisation was £523m compared with a plan of £503m.

The Department of Health also painted a relatively rosy picture of the service’s finances ahead of the significant challenges that lie ahead. According to its own report, the NHS had made a good start to its overall planned savings

for 2012/13 during the first quarter of the year.

The £1.2bn of QIPP (quality, innovation, productivity and prevention) savings reported equate to nearly 25% of the £5.1bn savings forecast for the year, which themselves build on £5.8bn secured in 2011/12.

Primary care trusts and strategic health authorities were forecasting an aggregate surplus of £1.153bn this year. NHS trusts (excluding foundations) forecast an overall surplus of £71m. One PCT and five trusts forecast a gross deficit at Q1 (totalling £19m and £160m respectively).

Writing in The Quarter, NHS deputy chief executive David Flory suggested this provided a good foundation for the challenges ahead but was also keen to put the focus on the need for transformation.

‘This year’s savings, together with last year’s, represent a solid financial platform for 2013/14 and beyond, as the NHS moves the focus of the savings towards transformational service change,’ said Mr Flory.

However, he warned: ‘Delivering the quality improvements and efficiency savings required over the remainder of the QIPP period will require the NHS to focus on transformational service change through clinical service redesign.’

Just over half of the current year’s savings (£2.75bn) will be delivered in acute services with a further £405m in mental health.