News / FDs more pessimistic, as finances tighten

By Seamus Ward

The King’s Fund has warned that NHS organisations’ confidence in their finances is waning and a financial crisis is looming in 2015/16.

One in eight trusts and clinical commissioning groups will overspend their budgets in 2013/14, according to the fund’s latest quarterly monitoring report, which surveys NHS finance directors.

Although this was an improvement on the previous quarter, the fund said this reinforced concerns that NHS providers as a whole would end the 2013/14 financial year in deficit – for the first time since 2006/07.

When asked about the future, finance directors were more pessimistic.

Just 40% of finance directors in providers believed their organisations would achieve financial balance in 2014/15. This dropped to 16% for 2015/16.

Clinical commissioning group chief finance officers were more optimistic, although only a third were confident of balancing the books in 2015/16.

The fund said this reflected concern about the implementation of the better care fund, which will see an extra £1.9bn transferred from the NHS to support joint working between health and social care from April 2015.

The fund added that to compensate for this transfer, NHS England has estimated that hospitals will need to reduce emergency admissions by 15%.

However, nearly 70% of hospital finance directors said that this was very unlikely.

King’s Fund policy director Richard Murray said the NHS has continued to cope despite the growing financial pressure. Over the quarter, 95% of patients waited no longer than four hours in A&E, for example, though 60% of hospitals with major A&E units missed the target.

He added that pressure on hospital waiting lists was rising, with a further 360,000 people waiting in January compared with 12 months earlier.

'The NHS has coped well during the winter and avoided the A&E crisis that was so widely predicted,’ he said.

‘However, as the implications for hospitals of implementing the better care fund sink in, there is a growing recognition that the NHS will face a financial crisis in 2015/16, if not before.

‘It is now certain that the next government will need to find more funding for the NHS or accept significant cuts to services.’

Costing needs further support in NHS

Auditors are calling on NHS bodies to provide more support to costing in their organisations.

Fifty trusts faced costing audits as part of the 2013/14 payment by results data assurance framework. In general, auditors found that trusts struggled to derive accurate costs across all service areas, with high levels of materially incorrect reference cost submissions.

While more than half the trusts audited were selected because they appeared at risk of poor costing, auditors believe the findings demonstrate the challenges in using this information at national and local levels.

‘The problem is not costing accountants making mistakes, but a lack of organisational support,’ said Howard Davis, associate director of CHKS, part of the Capita Group, which runs the framework on behalf of the Department of Health. ‘This includes inaccurate activity data, not supporting accountants in checking data, issues with IT systems and poor clinical engagement in costing methodologies.’

He said that organisations were in general not making good enough use of cost data. ‘We need to raise the profile of costing,’ said Mr Davis. ‘We need visible leadership and costing data needs to be used in anger – that is the only way we’ll improve its accuracy.’

He added that improvements in costing were achievable if organisations bought into the process. ‘It needs to be embedded in the organisation,’ he said. ‘It can’t be treated separately from performance reporting or budget monitoring. It can’t be a paper exercise, but has to be part of how an organisation is managed.’

CHKS will share its findings with the HFMA costing conference at the beginning of May, ahead of publication of a full report later in the month.