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The financial demand on healthcare services has never been so immense as organisations strive to continue offering high standards of healthcare against a backdrop of ambitious efficiency targets and quality initiatives. Pressure on the NHS is rising as cuts are biting into budgets and the scale of the challenge is further exacerbated by recent revelations that NHS Trusts and Foundation Trusts have been told to rework their financial plans in a bid to reduce the forecast £2 billion Provider deficit for the year.
In the post-election period, much had been made of the £8bn cash injection promised to the health service over the next five years to help it plug its £30bn funding gap. Yet how can the health service – a dominant issue during the election campaigns – achieve the unprecedented £22bn in efficiency savings that it has promised to make through substantial productivity gains between now and 2020? How far can these funds really take health and care in the UK?
Saving the NHS
In more than 100 days since the new government has formed we have heard a number of suggested initiatives to save the NHS – with plans for seven day services, a more integrated health and social care and devolution mooted as potential rescue bids. Lord Carter claimed the NHS could save £5bn a year by cutting down on staffing inefficiencies and a better approach to spending, while Jeremy Hunt announced plans to clampdown on ‘expensive’ agency staff spending in a bid to ease the financial woes of the struggling health service. But before we can look for answers we have to analyse the financial position our health organisations are currently facing.
It’s evidently a turbulent time in the sector and NHS financial performance across the board continues to nose-dive at an alarming rate, which was evident in our latest findings from 196 NHS finance directors across England. The ‘Temperature Check’ report into the financial challenges facing the NHS was the first research of its kind since the new government took office and found that more than three quarters (78 per cent) of provider trust finance directors expect to be in a worse financial position at the end of 2015/16 than they were in 2014/15. Added to this, almost two thirds (63 per cent) are also forecasting a deficit for the end of this financial year, up by a third compared to the 47 per cent that finished 2014/15 in deficit.
With expected deficits set to rise, the news agenda is awash with speculation regarding the future of the NHS.
The vast majority of finance directors (92 per cent in England) don’t feel that health organisations will have sufficient financial resources available to implement the Five Year Forward View, or other long-term financial plans, without further cash injections – something the government has made clear is not going to happen beyond the £8bn promised. We can therefore see that we have a questionable outlook. To help with financial planning, we urgently need details on how and when the £8bn will be deployed. This is a very welcome financial boost, but when will the sector see it and across which areas?
In order to achieve current 2015/16 plans there are several risks associated and finance directors themselves are telling us that these are currently high, such as a slippage in outlined cost savings, increased demand, fluctuating emergency activity and spending on agency staff.
Finance directors have ambitious plans to save through improving efficiency, from procurement streamlining to supporting staff to work in different ways. While this will help protect and maintain services, we can’t rely on these measures alone to plug the remaining £22bn gap in NHS finances. Increasing demand for services and an ageing population mean transformation of service provision is the key to a sustainable, fit-for-the-future NHS. This will require short term investment before long term benefits are realised.
When asked about the risk associated with achieving plans set out for the current year, most finance directors assessed this as either high or medium, with only 16 per cent of clinical commissioning groups (CCGs) and 10 per cent of provider finance directors rating risk as low. We examined what the biggest of these risks were and savings was highlighted again, with 74 per cent of respondents citing slippage in cost savings as a top risk factor; followed by increased demand (64 per cent), emergency activity (55 per cent) and spending on agency staff (50 per cent).
In contrast to the foreboding picture presented by trust respondents, on the surface at least, things look more positive for their CCG equivalents. Some 83 per cent expect a surplus at the end of this financial year and half predict they will be in a similar or better position than they were at the end of 2014/15 by April 2016.
Our CCG members also told us they are responding to the current financial challenges in quite different ways to their trust counterparts, with CCGs concentrating on integration, redesigning pathways and investment in community services, while trusts prioritise reducing agency costs, procurement cost savings and reducing clinical variation.
Budgeting for the budget
There is no single right answer to how to balance the pressure to deliver an every-higher quality service with this further squeeze on finances. But one thing everyone working in finance in the health service can pledge to do is give more thought to how the NHS measures and understands the results achieved from the money spent on and by it.
A lot of emphasis is placed on how much things cost and the budgets we have – we know the cost of everything that takes place in a hospital and we know what is spent. What’s more difficult to get to grips with is the return on investment of this spend because often the impact on clinical outcomes isn’t being consistently measured and evaluated. Better measurement is going to be a key factor in making these promised efficiency savings a reality. As a result, driving improvements in the quality of cost and business information used within the NHS to better inform decision-making must be a key focus.
Costing has historically been given a back seat in relation to the overall aims and challenges of an NHS organisation. However, this has changed dramatically over the past five years, particularly with the introduction of patient-level information and costing systems (PLICs), which help organisations to better understand variations and their causes within the services they offer as well as helping to ensure that we make the best use of available resources.
Putting quality at the forefront
The NHS is now at a point where it is recognising the importance of good costing, the need for highly trained finance staff and the possibilities of costing for value. To support organisations in achieving greater value for money, the Healthcare Financial Management Association (HFMA) has recently set up the Healthcare Costing for Value Institute, specifically targeted towards healthcare professionals including finance directors, clinicians and operational managers keen to learn how to drive improvements in the quality of costing.
What is clear is that the unprecedented financial challenge facing healthcare organisations means that quality should be at the forefront of every financial plan in order to make the most effective use of budgets. But health communities also need to work together to develop sustainable solutions for the long term. Now more than ever requires a united effort for the NHS to be a sustainable service going forward and to evolve and transform services for a sustainable future.
The recent summer budget saw the government make good on the £8 billion of funding promised but what we desperately need now is clear detail on how and when this funding will be deployed. The HFMA is calling for the funding to be front-loaded to enable the service to make the investments needed to start realising those savings. The longer we go without clarity and the funding kicking in, the longer it will take for efficiencies to be achieved in a health service already facing huge financial challenges.
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