How is the NHS performing?
- Our latest survey of finance directors shows a deepening pessimism about the current financial state of health organisations and worries about the coming financial year. Slightly more than 4 out of 10 trust finance directors forecast an overspend by the end of this year – the highest proportion since our survey began in March 2011 – and just over three-quarters say they are fairly or very concerned about staying within budget by the end of the next financial year.
Balancing the books this year: an increasingly difficult task?
As we reported in our previous quarterly report, the planned increase in overall funding for the English NHS this year amounted to a real rise of just 0.8 per cent. While additional money has been channelled to the front line within the year, this has mainly come from within existing NHS budgets at national level. Overall, funding remains extremely tight.
Forty-two per cent of trusts forecast a deficit by the end of this financial year. This is despite additional spending of nearly £1 billion directed at reducing waiting times and alleviating winter pressures and with 60 per cent of trusts in our survey drawing on their reserves and/or taking up loans or additional funding of one sort or another from the Department of Health to support their financial position this year. As Figure 1 shows, this represents a deterioration in trusts’ finances over the year since our survey in March last year and is evidence of a wider systemic financial problem.
QMR 1-4 based on a panel of 50 trust finance directors
This proportion is similar to the financial position of trusts and foundation trusts reported half-way through the year by the NHS Trust Development Authority (TDA) and by Monitor last autumn. Then, the NHS TDA reported that around 27 per cent of trusts forecast a deficit this year while Monitor’s six-month report showed that 55 per cent of foundation trusts were overspent (Monitor 2014; NHS Trust Development Authority 2014).
Difficulties in balancing the books this year are reflected in finance directors’ views about their organisations’ cost improvement programmes (CIPs). On average trusts are planning CIPs of around 5 per cent of turnover (a cumulative total over the past four years of around 20 per cent). However, the trend over the past two years in the proportion of finance directors who say they are fairly or very concerned about achieving their CIP plans has increased; the latest survey shows that more than half are fairly or very concerned.
Increasing workloads: pressure on spending and longer waiting times?
- The reason for increasing pressures on trusts’ spending is evident from trends in hospitals’ workloads. As Figure 2 shows, some quarterly seasonal trends aside, trends in referrals have been increasing over the past six years (at around 3.2 per cent per year), as are attendances at outpatients (3.2 per cent), accident and emergency (A&E) departments (1.8 per cent), and elective (2.8 per cent) and emergency admissions (1.8 per cent).
Data source: NHS England, Monthly hospital activity data (commissioner based time series) www.england.nhs.uk
While increasing demand – largely a reflection of increases in the population and its demographic structure – has an impact on spending, evidence of the general pressure on the secondary care system as a whole is also evident from trends in waiting times – in particular waiting times in A&E departments (which remain a top concern for finance directors).
As Figure 3 shows, the proportion of patients waiting more than 4 hours from arrival to discharge, admission or transfer in all A&E departments in the quarter from October to December last year was 7.4 per cent (ie, 414,000 patients) – a 47 per cent increase on the previous quarter and the poorest performance since quarter 3 in 2003/4. For major A&E departments, more than 14 per cent waited for more than 4 hours. Overall, for all types of A&E units, nearly 50 per cent of all hospitals missed the 4-hour target in the third quarter of 2014/15.
Data source: Weekly A&E SitReps 2014–15 www.england.nhs.uk.
While attendances at A&E departments have been higher in the third quarter of 2014/15 than in the third quarters of the previous two years, the much higher number of patients waiting to be admitted to a hospital bed from A&E (‘trolley waits’) than in previous years point to pressure on beds in other parts of hospitals, leading to disruption in the flow of patients though A&E.
Part of the pressure on beds in other parts of hospitals is due to problems with discharging patients – another top concern for finance directors, and reflecting the fact that since last summer there has been an acceleration in the number of delayed transfers. Numbers now stand at more than 5,000 patients per day. Two-thirds of all delays are related to NHS care and a third are related to social care. However, in terms of the reasons for delays, during the past year there has been a 50 per cent increase in waits for care packages, a 42 per cent increase attributable to waits for nursing home places and a 22 per cent increase in waits for assessments.
This suggests that capacity and workforce issues – particularly in nursing home and non-acute services – are becoming more important than social care funding issues per se. The overall pattern is not as straightforward as the ‘social care cuts = more delayed transfers’ narrative would suggest. With nearly a fifth of delays due to waits for non-acute NHS care, the need for better co-ordination between different parts of the NHS is just as significant as the hospital/social care interface.
Another indicator of pressure on beds is the number of cancelled operations as a proportion of elective admissions. Although (seasonal fluctuations aside) this has remained steady at between 0.8 per cent and 1.1 per cent for each quarter for the past decade and was 0.8 per cent for quarter 2 of 2014/15, year-on-year comparisons for the three-month period from November to January 2014/15 show an increase of around a third in the number of cancelled operations. Whether this will translate into a higher cancellation rate for the full 2014/15 quarter 3 compared to the equivalent quarter in 2013/14 depends on final admission and cancellation figures that will be published in February.
The combination of increasing elective referrals, pressure on beds, problems discharging patients and increasing emergency admissions into hospitals from A&E has also put increasing pressure on elective waiting times. As we have previously reported, since December 2012, there have been upward trends in all three stages of the 18-week referral-to-treatment path – for patients admitted to a bed in hospital, for those seen in outpatients and for those yet to be seen as either outpatients or inpatients. The latest figures (for November 2014), show that the proportion still waiting has stabilised at around 1 per cent within target. However, the outpatient target was breached (5.4 per cent versus a target maximum of 5 per cent) for the first time since the summer of 2008. The inpatient target was also missed (12.5 per cent versus a target maximum of 10 per cent) and is the highest proportion since this particular target was introduced in June 2010.
Breaches in the inpatient and outpatient stages of the 18-week referral-to-treatment target are to be expected given the ‘managed breach’ policy designed to reduce the growth in long waits for patients yet to be seen in outpatients or admitted as inpatients. However, while the number of patients still waiting more than 16 weeks has reduced by around 9,000 since last June, it seems unlikely that the government’s target reduction of 115,000 will have been met by December 2014. Whether the managed 18-week breaches for outpatients and inpatients return to target by December remains highly unlikely.
Seasonal fluctuations aside, given continued financial and demand pressures on hospitals, it is hard to see much improvement in overall elective waiting times over the next few months.
The outlook for next year: critical?
If this year looks gloomy, finance directors are even more pessimistic about next year. Aside from various promises from the three major political parties on NHS spending next year and beyond, current plans amount to a real increase of just 0.2 per cent over this year’s planned spending – equivalent to around £250 million. It is perhaps not surprising therefore that nearly 8 out of 10 trust finance directors are very or fairly concerned about their organisations’ ability to achieve financial balance by the end of 2015/16. A similar proportion are very or fairly pessimistic about the general state of their local health economy’s financial state next year too. However, CCG finance leads remain, by comparison, somewhat more confident about their financial position next year (31 per cent are fairly or very concerned) and slightly more than 7 out of 10 say they are pessimistic about the financial state of their local health economy next year.
Over and above the planned very small rise in overall funding, an important part of the financial context next year is the implementation of the Better Care Fund which will involve significant transfers of money from next year’s NHS budget to fund new services and initiatives in partnership with local authorities. So far, plans indicate possible commitments to the Better Care Fund of more than £5 billion.
Part of the planned benefit of the anticipated initiatives the Better Care Fund will facilitate is a reduction in emergency admissions. On average, trusts in our survey are planning a reduction in emergency admissions of 3.4 per cent next year (against a background of annual average increases of nearly 2 per cent per year over the past six years). However, neither trust nor CCG finance directors appear particularly confident of achieving these plans: 83 per cent of trust finance directors and 63 per cent of CCG finance leads are fairly or very concerned about the ability of trusts to achieve their planned emergency admissions reductions. This is in line with NHS England’s planning guidance for next year which has asked for revised plans and noted that ‘plans must be credible'. It is likely, in light of the rise in emergency admissions we have seen in recent months, that many of these ambitions will need to be revised downward.’ (NHS England 2015c)
Given the results from our latest survey of finance directors, the current overall financial position of the NHS and the outlook for next year, it is hard to escape the conclusion that the situation looks critical for NHS finances and services. While it is true that the majority of people using the NHS will continue to receive timely and high-quality care, increasing numbers of patients are having to wait longer and NHS organisations will find it harder to balance growing demands within budget.
Monitor (2014). Quarterly report on the performance of the NHS foundation trust sector: 6 months ended 30 September 2014. London: Monitor. Available at: www.gov.uk (accessed on 12 January 2015).
NHS England (2015a). Monthly hospital activity data 2014/15. London: NHS England. Available at: www.england.nhs.uk (accessed on 12 January 2015).
NHS England (2015b). Weekly A&E SitReps 2014–15. London: NHS England. Available at: www.england.nhs.uk (accessed on 12 January 2015).
NHS England (2015c). Information for commissioner planning, 2015/16. London: NHS England. Available at: www.england.nhs.uk (accessed on 12 January 2015).
NHS Trust Development Authority (2014). NHS trust service and financial performance report for the six month period ending 30 September 2014. Paper D for Board meeting 20 November 2014. Available at: www.ntda.nhs.uk (accessed on 12 January 2015).