Moving targets

NHS Improvement’s performance report for quarter 3 makes for difficult reading. I don’t mean difficult in terms of a service continuing to face a tough financial position – although that is certainly true – but in the sense of trying to understand exactly how the provider sector’s performance relative to plan is changing as the year goes on.

The latest report shows that at Q3 providers were forecasting to overspend their planned position by £267m. This compares with year-end forecasts at Q2 that the plan would be overspent by £119m. On the face of it, there is no news here. A worsening of the financial position between Q2 and Q3 is not a major shock, especially given it includes the first period of winter.

However, it only tells part of the story as NHS Improvement has also changed the planned position. So providers’ performance against plan is this year being judged against a moving target.

In fact, the planned financial position has changed twice during the year. NHS Improvement made it clear from the outset that the original plan for a combined £519m deficit was unaffordable – and that further work was needed to ‘close the residual local planning gap’.

An initial reset brought the ‘planned’ deficit down to £439m at Q2 – with provider sustainability fund bonus payments offered to providers willing and able to commit to an improved financial position. This plan revision continued into Q3 with a new plan set at £394m.

But changing the planned position seems odd for two reasons. First, it is not usual practice. The plan is the plan. Any changes or savings generated during the year to improve performance against that plan are exactly that – in-year changes. Those revised plans were not in place at the beginning of the year.

You might argue that major unforeseen changes might justify a change to the plan – for example, if the chancellor, without notice, changed the VAT rate mid-year, increasing costs for trusts unable to reclaim all their VAT on goods and services. You might argue that rather than show trusts as overspending against a plan that predated the announcement, it was more meaningful to reflect these unavoidable higher costs in the plan and then judge trusts’ performance against this revised position.

However, it is difficult to imagine such a scenario – and such circumstances do not exist in this case.

Second, the reduction in the planned position flies in the face of the actual increase in the forecast deficit. Providers’ forecast deficit of £661m (£267m above the revised plan) is in fact £142m higher than the original planned deficit of £519m. And the £661m is after an exceptional technical adjustment relating to the accounting treatment of private finance initiative hospitals being brought onto providers’ books after the collapse of Carillion.

Without this, the forecast deficit would be £917m, £523m above the new plan and (closer to but still) £398m above the original.

Perhaps none of this really matters. They are only numbers, albeit very big numbers. But retrospectively changing the planned position seems an odd take on transparent financial management, especially when you are only taking account of negotiated changes that move the planned deficit down, while actual forecasts are moving in the opposite direction.