NHS Providers has today released an estimate that the year-end deficit for NHS trusts in 2016/17 will be between £700m and £750m, while the Health Service Journal has conducted its own analysis which estimates trusts will come in £770 million in the red. Official figures will be published by NHS Improvement after the general election. Here, Chris Hopson shares his reflections on the figures.
- The government made it clear that rapid reduction of the provider sector deficit was a key NHS strategic priority in 2016/17. These latest figures represent a significant improvement in trust financial performance at a time of unprecedented funding and operational challenge. We should welcome and celebrate this achievement.
- While a year end deficit of £700m to £750m exceeds the £580m target set by the national bodies at the start of the year, our midpoint estimate of £725m is 70% less than last year’s deficit of £2.45bn. Trusts have reversed the runaway deficits of the last three years and brought them much lower. Crucially, for 2016/17, the final figure will be below the £800m (1% non-recurrent) contingency retained by CCGs, allocated at the beginning of the year to cover the provider sector deficit.
- The improvement is also notable given NHS Improvement were forecasting a year end deficit of £886m at the Q3 point in February. This was fuelled by the pressures caused by record demand over winter which led to a deterioration of £238m in Q3. We estimate trusts have recovered more than two thirds of that deterioration in the last three months. That is an impressive achievement.
- Based on the third quarter trajectories, we estimate trusts will have made cost improvement gains of more than £3.3bn – more than 4% of turnover, and £200m (10%) more than 2015/16. So, despite seven years of having to realise significant productivity and efficiency gains and cost savings, trusts are still finding more cost improvements. That is also impressive. There are few, if any, other healthcare systems where providers are delivering this level of gain over such an extended period.
- Reducing spending on agency and temporary staff has been a big part of the improvement. Based on third quarter trajectories, we estimate that these costs alone will have been reduced by more than £770m (20%) this year. Again, this is due to some exceptionally good, hard, work at the trust frontline and a ruthless focus on this issue.
- The performance improvement also shows the benefit of trusts working to a clear system-level plan – NHS Improvement and other national bodies played a key role in supporting trusts and securing dedicated funding. When given the right national framework and the right support, NHS trusts can deliver a stretching target.
- Some of the media commentary seems unsure about whether this particular glass is half full or half empty. Some are arguing that this performance is just “standing still” given that trusts have benefitted from £1.8bn of sustainability and transformation fund money. The £1.8bn has been important in delivering this year’s result. But we wouldn’t be having this debate had that money been mainstreamed through the tariff. The reality is that the £1.8bn arrived too late to do anything other than use it as an allocated fund. But we shouldn't diminish the scale of achievement just because the £1.8bn has been put through a dedicated sustainability and transformation fund as opposed to the tariff.
- While this is a positive improvement we need to keep these figures in context. NHS England funding in 2016/17 rose by 3.6%, but this year that drops to +1.3%. This means that trusts will struggle to eliminate the deficit in 2017/18, as planned, given that we are starting the year further in deficit than originally planned. We await the result of discussions between NHS Improvement, NHS England and the Department of Health on what the actual provider sector financial target for 2017/18 will be.
- We know that a large amount of the 2016/17 gains are based on one-off, non-recurrent items: two thirds of trusts told us at Q3 that they were very or fairly reliant on these to meet their year-end figures. We estimated that this accounts for about £1bn of the predicted gain. We therefore endorse the National Audit Office’s clear judgement that the NHS does not have a credible, sustainable, plan to match what the NHS is being asked to deliver to the funding available.
- In our commentary on these figures, we hope trusts feel we have struck the right balance. On the one hand, we think it’s particularly important that this significant achievement is recognised. There is a perception in some quarters that the NHS is a bottomless pit and often fails to deliver. These results show the opposite. However, this great achievement doesn’t alter the underlying position of a clear gap between what’s being asked of the NHS and the funding available.