Understanding the NHS deficit and why it won’t go away

This briefing assesses the financial health of those providers by unpicking the headline figures presented in the official accounts to reveal the true underlying state of the NHS’s finances today, and to outline prospects for the next three to four years | Nuffield Trust

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Image source: Nuffield Trust

  • NHS trusts have begun the current financial year, 2017/18, on course for an underlying overspend or deficit of £5.9 billion. To meet their reported deficit target of £500 million, they will need to cut their operating costs by £3.6 billion and receive temporary extra funds of £1.8 billion.
  • This would require trusts to make savings in one year equivalent to 4.3 per cent of their operating costs – far in excess of any level achieved over recent years and likely to be almost impossible to deliver.
  • A more likely scenario is that they will make cost savings similar to the level made last year. That would collectively leave the trusts with an underlying deficit of around £3.5 billion.
  • The headline deficit for 2016/17 (which ended in March 2017) was £791 million. However, that figure was flattered by billions of pounds’ worth of one-off savings, temporary extra funding and accountancy changes that did nothing to improve the underlying state of provider finances. Once they are removed, the underlying deficit for 2016/17 is £3.7 billion.
  • This is compared to an underlying deficit the year before, 2015/16, of £4.3 billion. As trusts also had to soak up additional inflation costs in 2016/17, the reduction in the underlying deficit between 2015/16 and 2016/17 actually represents providers making £2.3 billion in permanent savings.
  • Projections of future years suggest that, even under optimistic assumptions for inflation and continued high levels of savings, NHS providers will continue to run a large collective underlying deficit until at least 2020/21.

Read the full briefing here

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NHS funding and privatisation: the facts

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A lecture and article by the scientist Professor Stephen Hawking outlining his views on the NHS have prompted a lively debate about a number of issues.

Here the Kings Fund looks at the facts about two of these: whether the NHS is being privatised and if it has been given the funding it needs:

Is the NHS being privatised?
The involvement of the private sector in the NHS is a hotly contested topic. Private companies have always played a role in the NHS, but critics claim that their increasing involvement is evidence of growing privatisation of care and is undermining the service’s core values.

Does the NHS need more money?
In recent years, spending on the NHS has been protected while other budgets, such as those for local government services and policing, have been subject to significant cuts. Despite this, health services are facing unprecedented financial and operational pressures, with many NHS organisations in deficit and key performance standards being missed.

Practical value in the NHS

The King’s Fund has previously highlighted the fact that addressing waste and variability in clinical work can create better value in the NHS. But what does value mean to people working in the NHS – and how it is being applied in practice? | The King’s Fund Blog

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‘Value’ sounds like a familiar concept but it can mean different things to different people. One definition of value in the health and care sector is ‘health outcomes per dollar spent’, so attempts to increase value can look at either improving quality or reducing cost.

In early July we held a roundtable discussion with health service providers to better understand their approach to value improvement – initial research for a new project intended to understand the practical barriers and challenges that frontline clinical, operational and managerial leaders have encountered in pursuing better value health care. Experts who attended – including a chairman, chief executive, chief nurse, deputy chief operating officer, change leader, and representatives of national bodies – agreed that the emphasis should be on patient care. Clinicians are more likely to engage in a programme that revolves around the quality of services, and better care is typically less wasteful, so as one participant put it, ‘if you focus on quality, money will fall out’ [spending will reduce]. Consultants will often drive through successful programmes with change management teams, but we also discussed the role of junior doctors, nurses and therapists, who frequently witness low-value care and understand how to fix it. We know that substantial changes in practice can be delivered as we have seen, for example, in generic prescribing, reduced length of stay and the move towards day case surgery.

Read the full blog post here

Financial challenges facing the NHS

The Healthcare Financial Management Association (HFMA) has published NHS financial temperature check: finance directors’ views on financial challenges facing the NHS in England. 

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This briefing draws on the responses of finance directors of trusts and foundation trusts and chief finance officers of CCGs.  It finds the financial performance of the NHS remains under significant financial pressure.

Trusts reported a combined deficit of £791m in 2016/17, after receiving additional funds of £1.8bn from the sustainability and transformation fund (STF).

The performance of CCGs, based on month 11 forecasts, looks better than that of trusts with a forecast in-year underspend of £250m, but this is after the release of the £800m risk reserve to CCGs’ bottom line.

Full document: NHS financial temperature check – briefing July 2017

Additional link: NHS Providers

The rising cost of clinical negligence: who pays?

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The Medical Protection Society estimates that clinical negligence costs in the NHS have increased by 72% over the last five years and that costs could reach £2.6bn a year by 2022.

It argues that there should be reasonable compensation for patients who suffer harm due to clinical negligence but that this must be balanced against society’s ability to pay. The report makes recommendations for legal reforms around clinical negligence compensation.

More detail: Clinical Negligence Costs: Striking a balance

 

 

The impact of NHS financial pressures – a mixed picture

Recent figures reveal a provider deficit of nearly £900 million for the first three quarters of 2016/17 – a clear sign that NHS organisations are struggling in the face of constrained budgets and growing demand | Lillie Wenzel – The King’s Fund Blog

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As NHS organisations seek to manage current pressures, the number of media stories suggesting that tight health budgets are having a negative impact on patient care is increasing. But is this the whole picture?

For the NHS, the relationship between financial performance and quality of care is complex. Indeed, a recent Public Accounts Committee report recommended that the Department of Health and NHS England undertake work to better understand the association between the two. We know that the actions NHS organisations take when they are under financial pressure can affect patient care in a number of ways. We also know that patient care is affected by many factors besides funding, and that both national data and public attention tend to focus on care delivered within hospitals.

Our research, set out in Understanding NHS financial pressures, aimed to get beneath the top-level data and explore in more detail how patients are being affected by the financial pressures facing the NHS. We looked at four different service areas – genito-urinary medicine (GUM), district nursing, elective hip replacement and neonatal – to try to understand the impact in different parts of the system.

Read the full blog post here

NHS efficiency map

The Healthcare Financial Management Association and NHS improvement have updated the NHS efficiency map.

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This map promotes best practice in identifying, delivering and monitoring cost improvement programmes in the NHS.

 

It contains links to a range of tools and guidance to help NHS organisations improve their efficiency and includes sections on enablers for efficiency, provider efficiency and system efficiency.