Short-term focus hampering transformation, says NAO

30 January 2018 Seamus Ward

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In its sixth report on NHS sustainability, the NAO said it seemed additional funding was spent on helping the NHS cope with current pressures rather than investing in the transformation needed to put the service on a sustainable footing.

The report, Sustainability and transformation in the NHS, said the overall financial position improved in 2016/17 – a £1.8bn deficit in 2015/16 became a £111m surplus in 2016/17. But it was hard to measure the underlying position, and two figures indicate finances were not improving.

First, there was a sharp increase in the cash support given to providers. This money was not part of contracts for services, suggesting providers were struggling to deliver patient care under their contracts with commissioners, the auditors said.Amyas Morse

In 2016/17, national bodies gave trusts £4.1bn in financial support not linked to commissioner contracts. NHS Improvement had hoped the £1.8bn sustainability and transformation fund (STF) would reduce the need for such cash support – £1bn of STF was given as cash in year.

But on top of this, cash support increased from £2.4bn in 2015/16 to £3.1bn in 2016/17. Most of this (£2.7bn) was revenue support, paid directly to trusts to maintain services.

Second, providers and clinical commissioning groups became increasingly reliant on non-recurrent savings to achieve efficiency targets. The bodies increased their savings overall – between 2014/15 and 2016/17, CCG savings rose from £1.4bn to £2bn, and for trusts from £2.8bn to £3.1bn. But over the same period, the proportion due to one-off savings rose from 14% to 17% for commissioners and 14% to 22% for trusts. This increasing reliance on non-recurrent savings posed a risk to financial sustainability, the NAO said.

The report said the STF was set up to return trusts to aggregate financial balance and give them the stability to transform services and improve performance. However, the financial reset in July 2016 moved the objective away from transformation to help trusts target a combined £580m deficit in 2016/17 (the final deficit was £791m).

Most of the STF (60% – just over £1bn) was used to reduce or eliminate in-year deficits, with the balance being used to create or increase surpluses. However, this money will not necessarily be available to spend in 2017/18 if trusts are again going to meet control totals.

The report made several recommendations: the NHS should move ‘further and faster’
to system-wide incentives and regulation; reassess how best to use the STF to support trusts beyond 2018/19; and calculate and publish the underlying financial position in the trust sector annually.

The NAO also called for a timetable for the availability of capital for transformation and backlog maintenance and said NHS Improvement and NHS England should provide financial support for local partnerships making the slowest progress.

‘The NHS has received extra funding, but this has mostly been used to cope with current pressures and has not provided the stable platform intended from which to transform services,’ said NAO head Amyas Morse (pictured).

‘Repeated short-term funding-boosts could turn into the new normal, when the public purse may be better served by a long-term funding settlement that provides a stable platform for sustained improvements,’ he added.

Nuffield Trust senior policy analyst Sally Gainsbury said trusts had been grappling with rising prices and significant cuts to their income per patient. ‘This has meant they are relying increasingly on one-off savings and bailouts to balance the books, leading to a significant underlying deficit,’ she said. ‘This has left hospital trusts with no choice but to spend the money earmarked for reforming services – the STF - on dealing with their yawning deficit.’

• CIPFA has warned that financial pressures are undermining sustainability and transformation partnerships (STPs). In a submission to the Commons Health Committee inquiry on STPs, CIPFA said the need to plug gaps in resources and capacity had taken the focus away from STPs, with little evidence of concrete changes or investment in measures that will make services sustainable in the long term.