News / HFMA FT conference: Bennett outlines productivity challenge

The NHS could save £25.5bn by 2021/22 according to work to assess improvement opportunities undertaken for sector regulator Monitor. However this would still leave the NHS with a £2.5bn funding gap, assuming NHS funding grows in line with GDP.

Monitor chief executive David Bennett briefed the HFMA conference on the work, the headlines of which were first published in Monitor’s recent 2014/15 national tariff consultation document. Savings range from  £15.4bn to a best case of £25.5bn, equating to savings of between 17% and 28% over 11 years, compared with the 2010/11 spend of £91bn.

This compares with an assessed funding gap of £28bn, which assumed growth in line with GDP would start from 2015/16, or £44bn on the basis of a real terms spending freeze.

Dr Bennett provided a breakdown with best case savings of: £12.1bn from improving current services; £4bn from ‘right care, right setting’; £1.9bn from innovative new services; and £7.5bn from one-off capital receipts. Compared with the £28bn funding gap, this would leave a balancing amount of £2.5bn needed from further productivity improvements.

The national tariff paper makes it clear that there are other potential efficiencies, although these have not been quantified. The £28bn and £44bn funding gaps fall to £17bn and £33bn, when the £11bn QIPP savings already achieved are factored in. However Dr Bennett warned that some of the £11bn had been achieved as a result of the wage freeze, which has now ended. ‘It may be difficult to hang on to some of this,’ he warned.

‘Doing all this doesn’t quite close the gap,’ he said. ‘It shows how much change is needed.’

Dr Bennett said the foundation trust sector was continuing to perform strongly in financial terms. An overall EBITDA margin of 6%, while slightly down on the previous year, was ‘considered acceptable’. However cost improvements at 3.4% masked a near 15% underachievement compared to plan and he underlined concerns about capital expenditure. While actual expenditure rose, there was an increase in the shortfall compared to planned capex.

He said that he would expect to see transformation plans being signalled through capital expenditure programmes.

The 16 FTs in deficit at the end of 2012/13 were within the levels that the regulator would expect to see, but he said there were increasing concerns about the numbers of organisations close to breakeven. ‘The average [surplus/deficit as a percentage of turnover] is 1.36%,’ he said. ‘So it wouldn’t take a lot for the number in deficit to increase.’ Viewing this alongside a ‘negative mood’ among chief executives and chairmen, Dr Bennett said Monitor would be paying ‘more attention to plans this year’ to understand the risk of a shift into deficit.