Feeling the NHS funding crunch

Posted on September 18, 2014 · Posted in AB Public

The financial squeeze on the NHS has become unbearable and the solution has to be selective charging for health services, or else higher rates of tax, according to a group of NHS leaders in a letter to The Times.  The signatories – who include two non-executive directors of NHS England, leaders of four royal colleges and the chief executives of the Foundation Trust Network – argue that without radical action, the NHS is heading for a £30bn shortfall in England by the end of the decade.

 

This financial over-stretch will get worse as the demographic change in the population continues. The NHS leaders warn that two and a half times as many patients will suffer multiple health problems over the next 50 years.  The signatories call for a “national conversation” on how to address this developing crisis.

 

FCCAs and ACCAs working in the NHS confirm that financial difficulties are being felt within the service, in some cases as severe pressures on existing services. In other instances the pressures are felt more in the planning of future years’ provision.

 

Kellie Atkins ACCA is interim finance manager for severe and complex non-psychotic and estates service lines at the Barnet, Enfield and Haringey Mental Health NHS Trust. “The financial challenge in the NHS is being felt tangibly across the whole health system,” she says.

 

“NHS Trusts and commissioners need to exhibit ever tighter controls and greater accountability against a backdrop of challenging efficiency targets.  I see this most in the growing interest for detailed financial support from all clinical departments who are looking to understand their services in greater depth.

 

“Every part of the health economy is looking at new and inventive ways to work more efficiently and to deliver improved models of care. However, this is proving increasingly difficult with the reality of an aging population, increasing acuity of patients and delivery of savings year-on-year, whilst not impacting on clinical quality and safety.”

 

Some finance managers believe that while the NHS was initially spared the full impact of the austerity budgets imposed after the financial crisis, the pain is now being felt. Tim Goodson FCCA, chief officer at the NHS Dorset Clinical Commissioning Group, explains: “The NHS has had a softer landing in term of financial settlement over the recent years of austerity than other areas of the public sector.

 

“However, this needs to be balanced against the ever increasing demand being placed on the NHS by an increasingly elderly population with multiple health conditions and an ever increasing development of new drugs and treatment options.”

 

While demands for efficiency improvements in the NHS are not new, they have previously been balanced by new money for providers via tariff increases and for extra or new activity. “Overall this balance of cost improvements and extra income allowed the NHS and most organisations to broadly balance the books, even if there were hot spots of financial difficulties up and down the country,” says Goodson.

 

“The balance of cost improvements and extra income has now definitely changed, with the income side all but gone when you compare with pay and cost inflation affecting the NHS.”

 

What is more, adds Goodson, the crisis at the Mid Staffordshire NHS Trust and the strongly critical report by Robert Francis QC has led to inescapable pressures to improve service quality and avoid making savings by cutting back on staff.

 

There had been expectations, says Goodson, that the real pain in the NHS would be felt in 2015/16, but the crunch has moved closer. Instead, many NHS bodies are heading for the “cliff edge” in 2014/15, with higher than expected staff costs this financial year as a result of the greater focus on ward staffing levels.

 

“The term ‘planned deficit’ has entered the vocabulary of many more providers in 2014/15 than was ever envisaged a few planning rounds back,” explains Goodson. “Organisations that were previously financially very sound have slipped into a ‘planned deficit’ position for 2014/15.  The knock-on effect of the tightening of the finances is already playing out in the commissioner and provider relationships, with tensions rising on all sides and demands for ‘extra funding’ being met with replies of ‘there is no extra funding – this is it’.”

 

With the obvious and simpler responses now adopted, the NHS must look to “radical and transformation solutions” says Goodson. “Some might say this is a good thing and long overdue, but this type of change takes time to deliver, and in the short term at least this will put the NHS finances very much back in the spot light as organisation struggle to keep the books balanced.”

 

But Michael Schofield MSc, FCCA, chief financial officer of the Brighton and Hove CCG and the High Weald Lewes Havens CCG, says the financial pressures in his area are being evidenced more through future planning than through pain on the ground at present.

 

He explains: “The funding pressures are being felt, but there are not enormous funding issues at the moment. We are very aware of the pressures, especially as most organisations have been producing five year plans, which brings home the point that we have five years of managing increasing demands on the service, while producing efficiencies.  So from a commissioning point of view, it seems endless.

 

“It feels very pressured if you look two years ahead. In the past, 4% efficiencies were achieved by putting more patients through the system.  But now the efficiencies have to be cash releasing.

 

“We are getting to the point where we are not financing the NHS sufficiently, so that means more tax. To release cash through efficiencies you are talking about moving services around, creating centres of excellence, so people will have to travel a good bit further.  But even with Mid Staffordshire there were demonstrations with people on the streets that wanted it kept open.  If people still want services at the end of their street, something has to give.”