Financial recovery

01 March 2021 Steve Brown

Login to access this content

The NHS is focused on recovery. Cases of Covid-19 are declining, with the seven-day average more than halving during February. There are still a lot of patients with coronavirus in hospital, but this is also reducing, albeit slowly. So with direct Covid pressure decreasing, the service is increasingly focused on recovering normal levels of activity in non-Covid areas.Steve Brown

The NHS never stopped delivering urgent care, but capacity has been a real issue and some elective services were paused during each of the waves of the pandemic. There are more than 4.5 million people on the NHS waiting list, although there are concerns this could soar as pent-up demand is released into the system. And the numbers waiting over a year has risen to a staggering nearly 225,000.

Resuming normal levels of activity while addressing the backlog is a big priority, with full recovery likely to be measured in years.

Finance departments face their own recovery agenda. The past year has seen the sensible adoption of much simpler financial flows, with a commitment for the first six months to ensure all providers’ extra Covid costs were met, enabling them to break-even. Fixed system funding levels were introduced from October, with block contracting arrangements remaining in place.

These mechanisms have been extended for at least the first three months of 2021/22, with the contracting round very firmly on hold.

But a funding flow system with more downward pressure on costs will return, even if the service has seen the last of any tariff-based, payment by results contracts.

The direction of travel is clearly towards blended payment arrangements. While initially this might result in something that looks broadly similar to rolled-forward block contracts, the intent is for future contracts to be set at values informed by local costs.

Finance teams will have a major role in implementing these revised arrangements, which will also have to factor in the move to integrated care systems.

Lots of positives have come out of the simpler funding flows over the past year, including greater collaboration across organisations in systems. These good relationships need to be retained, but there will inevitably be tensions as financial envelopes tighten and expectations increase in terms of activity levels to be delivered.

Budgeting and budget management disciplines will also need to be reimposed. Clinical teams have rightly been focused on frontline delivery. But cost improvement requirements are a fact of life and finance teams will have to re-engage, or step up their engagement, with operational colleagues – building on the enhanced relationships that have developed – to look for ways to reduce waste and enhance service value.

Tone and language will be all important. Targets need to service-specific and achievable. The focus needs to be waste reduction and value improvement.

Big agendas must be addressed. Covid-19 has further underlined problems with inequality across the country – both in access and in outcomes. There is a big appetite to address this among clinicians, and finance professionals should be major players in this. They can help teams to see opportunities, identify the best places to start and quantify the benefits of redesigning pathways – benefits that must be looked at across whole systems.

Finance teams have a lot to focus on in the immediate future, with the year-end and plans to be drawn up for 2021/22. But beyond those pressures, there is a huge agenda.

Financial discipline hasn’t gone away over the past 12 months. There have been impressive governance and monitoring arrangements put in place often at very short notice. But many routine financial management processes will need to restart or increase in intensity alongside the recovery of NHS services. And the process of transformation – called for by the NHS long-term plan – will need to be kickstarted.