​Financial performance improves but 2018/19 plan missed

12 June 2019 Seamus Ward

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The provider sector ended the financial year with a £571m deficit – it had planned for a deficit of £394m – around £90m better than the year-end position forecast at Q3. It was also an improvement on 2017/18 when the sector ended the year with a £966m deficit.Ian Dalton NHS Improvement said the provider sector’s performance contributed to an overall balanced financial position across the NHS. 

During 2018/19, the planned year-end deficit was reset – initially it was £519m, then £439m, before subsequently being set at £394m at month seven.

The final position includes £256m of exceptional technical adjustments due to the liquidation of Carillion and two private finance initiative assets being brought onto the books as part-donated assets.

However, the Q4 report said a small number of trusts ‘did not deliver acceptable financial performance’. These trusts accounted for most of the sector’s financial problems. Excluding the Provider Sustainability Fund (PSF), 29 providers (12.6%) reported a variance from plan of more than £10m. These providers accounted for £569m (120%) of the sector variance from plan – again, excluding PSF.

NHS Improvement said there were a number of reasons for trust variances, including: difficulties in achieving cost improvement programmes; staffing and Agenda for Change pressures; contracting issues; quality improvement investment; and unplanned emergency activity displacing elective income.

Regional teams will implement a range of interventions to improve financial controls in 2019/20.

The report added that the sector ended the year with an aggregate underlying deficit of £5bn, which falls to £2.55bn if the PSF is deployed. At the end of 2017/18, the comparable figure was £1.85bn.

Efficiency increased, with £3.2bn (3.6%) of CIPs delivered – however, this was less than planned and trusts are underdelivering against recurrent savings plans and over-delivering against non-recurrent plans. Productivity increased to 2.3%, largely driven by activity growth. Agency cost savings – a non-recurrent saving – fell from £2.4bn in 2017/18 to £2.2bn in 2018/19. This was a £201m overspend against target, driven by volume increases and not agency rates.

While there had been welcome capital funding for sustainability and transformation partnerships, the collapse of Carillion had put further pressure on capital budgets. The report warned that pressure on capital would remain in the short term and 2019/20 is looking to be a particularly challenging year.

The report said the new financial regime introduced on 1 April signalled a move away from blanket control totals. ‘Using performance against plan as a performance measure obscures the underperformance and overperformance of different providers when measured on an absolute deficit basis,’ it added.

The new financial regime will help reduce the proportion of trusts in deficit by more than 50% by the end of 2019/20 and return all organisations to financial balance by 2023/24. The report warned further work would be needed to achieve this, including addressing levels of Department of Health and Social Care debt held on provider balance sheets. This stood at £14bn at 31 March.

Providers must continue to achieve CIP savings, focusing on recurrent measures and ‘concerted efforts’ to reduce unwarranted variation.

'The NHS’ 1.1 million staff delivered care to more patients within national standards, improved quality, and stepped up efficiency to deliver one of the best financial performances in the last five years,’ said Ian Dalton (pictured), NHS Improvement’s chief executive.

'The NHS long-term plan will build on this achievement by giving staff the support they need to secure the future sustainability of the NHS by managing the needs of an ageing and frail population.'

However, King’s Fund chief analyst Siva Anandaciva said the figures showed the NHS ‘was running to stay still’ in 2018/19. ‘The NHS is treating more people than ever before and is in the grip of a workforce crisis. The new funding deal for the NHS will not wash these endemic pressures away. Unless the government delivers on its promises to address staffing shortages and provide investment and reform for social care and preventative services, it is hard to see how NHS providers can get back into the black and meet current waiting times standards.’