Reality check

by Paul Briddock

01 December 2016

The latest NHS financial position and outlook - as revealed by the December 2016 NHS financial temperature check briefing, published today – makes for sobering reading.  Our briefing draws on over 200 responses to our survey of finance directors and chief financial officers (CFOs) of trusts and clinical commissioning groups across the NHS in England.

Their views offer some grounds for optimism.  Current year deficits, if still worryingly high, are no worse than in 2015/16 after taking into account monies from the sustainability and transformation fund.  This is an achievement in challenging circumstances.  Many say that relationships between local providers and commissioners have improved.  There is broad support for strategic planning on the basis of sustainability and transformation plan (STP) footprints. 

But there are also real concerns.  These concerns centre on what’s seen as a lack of financial realism, especially surrounding savings expectations.  Commissioners and providers alike are proving unable to achieve nationally set efficiency targets, and are resorting to non-recurrent expedients in an attempt to balance the books.  This is not new, but only stores up problems for the future.  And there are more concerns about ambiguity within the STP governance regime, contrasted with directors’ own very clear accountability for their own organisations.  

Finance directors warn that the risk associated with STPs may not be fully appreciated, while risk management is in its early days.

NHS finance directors and their staff, are under tremendous pressure to deliver major change. Their recent performance is to be praised, and we do well to take heed of their mature professional view.  The autumn statement’s silence on NHS funding makes it clear that, in the short term at least, there will be no extra money for the NHS or social care in England. To live within its means, the NHS needs a considered evaluation of what is affordable, and the STP process offers this opportunity.

The briefing published today is the sixth HFMA NHS financial temperature check briefing, a series setting out finance directors’ views on the financial issues facing the NHS in England.  It is consistent with - and forms a valuable adjunct to - official performance reports issued by NHS England and NHS Improvement.

The financial position of trusts in particular continues to cause concern.  This is disappointing, as restoring the provider sector to financial balance is a stated priority for 2016/17.  After the national deficits reported in 2015/16, 52% of trusts and 21% of CCGs forecast deficits in 2016/17.  Moreover, 85% of finance directors do not believe the 2016/17 financial “reset” will restore financial balance in the short term.

Finance directors are broadly positive about the sustainability and transformation planning process, seeing STPs as an appropriate vehicle for strategic discussions.  However, they warn of over-ambitious savings expectations and the scale of financial risk involved. 

They are also concerned about unclear governance and accountability.  Many say they will prioritise their own organisation’s needs above rather those of the STP.  This may not be surprising, but it calls into question the realism of the more ambitious STP ambitions.  Finance directors also warn that while relations between providers and commissioners may have improved, in many cases they are still not strong enough to deliver real cross-organisational change.  This is why resolving governance and accountability issues remains a matter of urgency.

Finance is inseparable from care quality, and nearly half of the trust finance directors who responded to our survey, and around one-third of CCG CFOs, believe care quality will worsen in 2017/18.  Access to care, waiting times and range of services are those aspects of care thought to be most vulnerable.  It is reassuring that nearly all finance directors expect clinical outcomes and patient safety to remain sound, but nevertheless a context of declining care quality will not make major changes easy to deliver at local level.