Providers can’t keep making unrealistic recurrent savings

CREDIT: This story was first seen in OnMedica

We shouldn’t pretend that providers can keep on realising levels of recurrent savings that no other Western health economy has ever consistently realised, NHS Providers have warned.

OnMedica reports that they said a commitment to future Sustainability and Transformation Funding (STF) is crucial to protecting progress on clearing provider sector debts.

In Recovering provider deficits: has it worked and at what cost?, which draws on survey responses from 109 trust chief executives and finance directors (47% of the sector), NHS trust leaders reported that STF has played a key role in helping the provider sector stabilise its financial position, reducing the sector deficit from £2.45bn in 2015/16 to £791m in 2016/17. But its authors argued that the STF and control total regime has not addressed the financial unsustainability of the sector; has masked the underlying financial problems providers now face; and that the £1.8bn STF has become a key part of provider sector finances.

They warned that progress made by the provider sector to reduce financial deficits will be put at risk if the current £1.8bn of STF allocated to providers is not protected beyond 2018/19, when current commitments on the use of the fund run out. And they called on the government to confirm that the £1.8bn STF will continue to be directly allocated to providers beyond 2018/19.

The report found that just over half of survey respondents agreed that the introduction of control totals had improved financial management within the provider sector: 52% said it had improved their focus on driving savings; 31% said it had improved their accuracy of financial forecasting; and 38% said it improved their focus on achieving mandated performance targets.

But the trusts had several concerns about the STF and control total regime in its current form:

  • The level of savings required of trusts that sign up to control totals is unsustainable, forcing them to rely on non-recurrent measures, such as land sales and balance sheet and accounting adjustments to meet their savings target.
  • Control totals risk eroding provider autonomy – 36% said central imposition of individual trust control totals had diminished their sense of ownership of their own financial plans;
  • Requirements to meet control totals in order to secure STF support could discourage full frankness in reporting underlying financial challenges, they argued;
  • The regime, including the allocation of bonus and incentive payments at year end, risks polarising the sector, widening the financial gap between trusts, and exacerbating the financial problems of challenged trusts.
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Chief executive of NHS Providers, Chris Hopson, warned: “The STF £1.8bn is now an integral part of provider funding. If the STF is taken away from trusts in 2019/20 when current commitments on the use of the fund end, the provider deficit will simply balloon again.

“The STF and control totals are also hiding the underlying financial problems the sector faces … the real underlying provider sector deficit is closer to £3.7bn. We shouldn’t pretend that providers can keep on realising levels of recurrent savings that no other Western health economy has ever consistently realised. We can’t keep on raiding the capital budget and selling the family silver to make the annual budget add up … the NHS at a local level remains under considerable financial pressure and the NHS still has a long way to go before we can regard it as being on a sustainable footing again.”

Tim Connolly, policy adviser on finances at NHS Providers commented that the report “shows that untangling the thorny knot of trust finances has no straightforward solution, and that there is uncertainty among trusts about what a future mechanism should look like given that sustainability funding is due to run out at the end of 2018/19”.

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