News / NHS England to develop financial resilience framework

He told delegates the health service could not afford the ‘small but significant number’ of major organisational failures of recent years. The indicators of problems were clear and in most cases corrective action could have been taken sooner.

‘We simply can’t afford to keep learning the same lessons time and time again and it’s not fair on the vast majority of organisations that take the necessary steps to manage within their resources,’ he said. ‘So we need more effective mechanisms to detect trouble earlier and take robust action to nip it in the bud. We have analysed last year’s casualties in some depth and are using the resulting insights to create a framework for financial resilience.’

Mr Baumann said the framework was likely to result in a ‘style change’, with greater scanning to identify risk earlier and a subsequent increase in the speed and intensity of interventions.

The approach would focus on four key areas – diagnostic-based prevention initially; trend analysis to support early detection; standard approaches to recovery; and a menu of practical support. The latter would include a ‘call off’ list of proven turnaround experts and interim finance directors ‘both of which are becoming rare breeds in ever-increasing demand’.

He said some of the extra funding given to NHS England in 2015/16 had been used to accelerate the pace of change on allocations to bring CCGs most under target closer to their fair share. This was a ‘pressing necessity’ as more than half of the deficits in 2014/15 in commissioners or providers were in the Midlands and the East – by far the region with the biggest gap between current allocations and targets.

‘We have every intention of continuing this process of rebalancing in the multi-year allocations planned for December, not least to deliver on the undertaking to the Public Accounts Committee to eradicate the most significant cases of underfunding.’

While work was at an early stage, Mr Baumann said it was his ‘absolute intention’ that an adjustment for rurality/sparsity will be incorporated into the allocation formula.

The commissioning finance community had ‘credit in the bank’ – literally and in terms of enhanced reputation. This was due to the small underspend in 2014/15 and the fact that many CCGs were able to respond positively to requests for additional surpluses at the end of the financial year to help offset the significant deterioration in the provider position.

While there were positives, he said the provider financial position in 2015/16 was precarious and the service should not repeat mistakes of the 2014/15 planning round, when activity growth was understated by 3%. This left providers unable to plan for capacity and workforce.

Most providers were now signed up to stable tariffs and commissioner plans demonstrated overall financial balance. To help deliver financial balance this year, there should be ‘honest and balanced’ conversations about the level of demand, funded activity and capacity. A lot of work in the commissioning planning round had gone into ensuring activity plans struck the right balance between ambition and realism, he said.

‘We clearly got that fundamentally wrong last year. We now need to make sure these are translated into meaningful contracts, put into action through effective capacity and workforce planning and reflected in realistic provider financial plans.’

Better planning alone would not close the provider financial gap, which was why the added financial controls on agency spending, consultancy contracts and senior management pay had been introduced, he added.