News / News analysis: On the critical list?

Campaigning for the general election is now well under way. But, unlike 2010, when it was barely discussed, the NHS is set to be one of the major talking points.

The £2bn announced in the autumn statement for 2015/16 were the first shots in the election battle and all the major political parties have promised additional funding for healthcare. Labour outlined its 10-year plan for a more integrated health and care service, reiterating plans for an extra £2.5bn a year in funding. But while political parties focus on future years, many in the service will still be conscious of the service and financial problems they face today.

The latest figures show, as has been the case for many months, that the financial pinch is being felt most in acute providers. This must have been taken into account by ministers and officials as they seek to get the right balance between supporting current activity and developing new ways of working.

While chancellor George Osborne said the additional £2bn for 2015/16 was a
‘down-payment’ on the £8bn funding gap identified in the Five-year forward view, only a relatively small proportion of additional revenue (£200m) has been earmarked for piloting new models of care outlined in this document.
Most of the funding is likely to be allocated to increase hospital activity.

Health secretary Jeremy Hunt told the Commons: ‘£1.5bn of the extra £1.7bn revenue funding will go on additional frontline activity – but to access this funding we will be asking hospitals to provide assured plans showing how they will be more efficient and sustainable in the year ahead and deliver their commitment to a paperless NHS by 2018.’

Problems spreading

Providers, especially in the acute sector, are under the most financial and service pressure. In its latest quarterly monitoring report, released in January, the King’s Fund warned that problems in A&E were spreading into other areas of performance. The report, including a survey of NHS finance directors, said performance against a range of measures had worsened.

For example, the proportion of inpatients waiting longer than 18 weeks for treatment rose to 12.5% in November – the highest level since this target was introduced in 2008.

In November, the NHS breached, for the first time, the target that no more than 5% of patients should wait longer than 18 weeks for treatment. Only 83.5% of cancer patients received treatment within 62 days of urgent referral from their GP – the lowest proportion since the current target was introduced. And the number of delayed discharges from hospital increased sharply to more than 5,000 a day in November – an increase of almost 20% since January 2014.

The fund acknowledged that the increases in hospital waiting times could be partly explained by the government’s relaxation of the 18-week target – allowing a managed breach while the backlog of long waiters is cleared. But it argued that a range of other indicators showed the service was ‘creaking at the seams’.

Recent King’s Fund quarterly monitoring reports have painted an increasingly gloomy picture and the latest, which covers October to December 2014, is no exception.

Four in 10 of the 73 trust finance directors surveyed forecast their trust would end the year in deficit – the largest proportion since the survey began in 2011. Just over 35% said they would end the year in surplus.

The report added: ‘The parlous state of hospital finances is underlined by the finding that more than 60% of trusts are relying on financial support from the Department of Health or, in the case of some foundation trusts, planning to draw down their reserves. Despite this, over three-quarters reported that their organisation is planning to increase the number of permanent nursing staff it employs over the next six months, as hospitals continue to prioritise patient care above balancing the books.’

However, while not specifically covered by the King’s Fund, if agency and bank staff are currently filling establishment posts, then employing permanent staff could cost less and improve the continuity of care.

King’s Fund chief economist John Appleby said the report demonstrated the pressures faced by the NHS. ‘While recent attention has focused on the problems faced by A&E units, performance against waiting time targets and other indicators has continued to worsen,’ he said. ‘Taken together, the findings from this quarter’s report show services are stretched to the limit. With financial problems also endemic among hospitals and staff morale a significant cause for concern, the situation is now critical.’

At the recent HFMA chief executives’ forum, he added that as the economy grows, politicians will have more money to spend on public services. But he questioned whether the efficiency improvement outlined in the FYFV was achievable.  ‘I think it’s unrealistic to say that the NHS will generate another £22bn in productivity. Over a longer period – yes, over time, as more productive processes come on stream, but in the short term I don’t think so.’

The NHS Trust Development Authority (TDA) found a similar position in its financial monitoring. As at 30 November 2014, non-foundation trusts were forecasting a net deficit of £308m. This was made up of 30 trusts forecasting a combined deficit of £452m, offset in part by 69 trusts (70%) predicting break-even or surplus totalling £144m.

The TDA reported that the main generic pressures on trusts were:

• An unplanned growth in demand
• A significant increase in the use of contract and agency staff
• The failure to deliver planned cost improvement schemes.

Acute improvement

While around 30% of all trusts are forecasting year-end deficits, the figure increases to 45% of acute trusts. However, acute trusts show the greatest improvement in forecast year-end position against plan – an aggregate forecast deficit of £361m against a planned £471m.

Meanwhile, ambulance trusts said they were on course to meet their planned £7m surplus, while community and mental health trusts predict their net surpluses will be slightly less than planned.  The TDA said a cohort of NHS trusts were in receipt of non-recurrent deficit funding. These trusts exhibited exceptional financial challenges that affected their overall sustainability, such as a structural deficit, and must be able to use the funding to accelerate their recovery and return to financial balance.

As further evidence of the strain on providers, Monitor intervened or agreed action over financial issues at five foundation trusts in December and January.

A further trust, St George’s Healthcare NHS Trust, had its foundation trust application deferred for a short period. Monitor concluded the trust was well led and said the Care Quality Commission had rated the trust as ‘good’ in April 2014. However, the delay would give the trust time to complete new borrowing arrangements.

As with previous quarters, the King’s Fund said commissioners were more upbeat about their financial prospects, with more than 90% of clinical commissioning groups expecting to break even or finish the year in surplus.

This is in line with the month eight CCG financial position, as discussed at the NHS England January board meeting, which reported that 22 of the 211 CCGs forecast a year-end deficit.

CCGs are forecasting an aggregate year-end surplus of £6m once the benefit of £67m of quality premium is taken into account. Overall, the sector forecast a year-end overspend of £42m, reduced to £17m with mitigations identified. Further economies are being sought.

Next year’s additional funding will be welcomed throughout the NHS, but it is clear that providers in particular will feel the strain in the remainder of the current financial year and well into the new Parliament.