News / FTs ‘frayed at the edges’ as Monitor reveals CIP shortfall

By Seamus Ward

Foundation trusts are ‘looking a little frayed around the edges’ and are unlikely to achieve the planned level of cost improvements, Monitor has said.

In its round-up of foundation trusts’ performance during the first nine months of the current financial year, the regulator insisted that the sector was performing well in particularly challenging times.

However, while trusts continued to make an aggregate surplus, this was less than expected. And more foundations than planned had deficits.

The downbeat news on foundation trust financial performance was accompanied in February by a warning from the Commons health committee that the NHS was not meeting the £20bn Nicholson challenge.

The committee’s annual report on public expenditure on health and social care said the NHS had made savings of £5.8bn and £5bn in the first two years of the QIPP quality and efficiency initiative. In the current year – the third of the initial four-year period – it is expected to deliver £4bn in savings, about £200m less than planned.

Monitor’s report showed that clinical services were performing well. It said that foundations were coping with winter pressures, with fewer missing the four-hour A&E waiting time target than at the same period last year (28 compared with 32 in 2013).

While they hit elective waiting times targets, more were in breach than in the last quarter and compared with the same time last year. There was also an increase in the number of trusts breaching the target for cancer patients to start treatment within 62 days of GP referral.

Overall, foundations continued to make a surplus – £135m by the end of the third quarter, but this was £38m less than planned. And 39 were in deficit – more than the 24 expected to have a deficit at this point and almost double the number at the same point last year (21 trusts).

Monitor said that, at £180m, the deficit trusts’ combined shortfall was £12m higher than expected, but 60% of the deficit was due to five organisations, which were already subject to regulatory action. Some trusts were receiving additional financial support from commissioners.

Looking at cost improvement programmes (CIPs), Monitor said controllable operating costs had reduced by £867m (2.9%) in the first three quarters of the year, compared with £894m (3.2%) at month nine in 2012/13. The current year’s figure is £185m or 18% behind plan.

The report went on to say: ‘Whilst historical delivery of cost savings has always been weighted to the latter half of the year, under-delivery in the year to date leaves £640m of savings still to be achieved. This is unlikely to be recovered by year end.’

Pay costs contributed significantly to the under-delivery of CIPs. There is a shortfall of £135m in the year to date. The regulator surveyed 27 trusts about

their under-delivery of CIPs and 36% said unplanned activity and A&E pressures were the key causes.

Monitor added that the failure to deliver CIPs was compounded by the fact that 18% of savings were reported as non-recurrent, increasing cost pressures on trusts in future years.

Jason Dorsett, the regulator’s financial reporting director, said: ‘All trusts need to up their game in delivering efficiency savings this year in order to maintain and improve the quality of care for patients, and ensure the sustainability of services.

‘The FT sector is doing remarkably well in tough circumstances but is looking a little frayed at the edges.’

Responding to the health committee report, Chris Hopson, chief executive of the Foundation Trust Network, said: ‘The health select committee has recognised the depth and complexity of the challenge to reform services at pace and scale. NHS providers are under increasing financial strain, and at the same time recognise the urgent need for transformative change.

‘This is a circle that needs to be squared to ensure sustainable models of care are designed around patient needs.’