Headlines

How is the NHS performing?

  • As the NHS begins a new financial year and we move from one parliament to another, it is clear from the performance on key headline targets and standards and from our latest survey of finance directors that the NHS will face huge challenges this year – very possibly the most difficult for many years.

  • Our latest survey of finance directors carried out at the end of February and the beginning of March is the last for the financial year 2014/15 and confirms much of the pessimism evident in our December 2014 survey about the current financial state of health organisations and deep worries about the coming financial year.

  • Nearly 70 per cent of providers and 40 per cent of commissioners are concerned about staying within budget in 2015/16, and more than 90 per cent of providers and 85 per cent of commissioners are concerned about the overall financial state of their local health economies.

Looking back at 2014/15

  • There’s no doubt that 2014/15 has been the toughest year of this parliament for the NHS in England. Despite overall NHS funding exceeding the 2010 Spending Review plans – due in the main to lower than forecast inflation – at an average of around a 0.8 per cent real-terms increase per year, money has been extremely tight.

  • With an estimated need for increased funding of 4 to 5 per cent each year from 2011/12 to 2014/15 to meet growing demands, the NHS – but particularly providers – has been under constant pressure to close the funding gap with increases in productivity. Our finance directors’ surveys back to 2011 show that trusts have on average set themselves cost improvement programme (CIP) targets of around 5 per cent each year. But the cumulative difficulty in achieving this has become increasingly evident. Our latest survey suggests that only 45 per cent of trusts are confident of achieving their cost improvement targets for 2014/15 – a decline in confidence compared to previous years.

NHS Trusts
How confident are you of achieving your cost improvement programme (CIP) target?

Respondent comments

  • “'The pressures over winter have prevented a number of initiatives from commencing in the last quarter, resulting in a significant shortfall.'”

    Acute and community foundation trust
  • “'There are few low-hanging fruit therefore cost change will only come with changes to the operating model, which take time and collaboration to effect. Also every national missive focuses on investment in additional staff be that for numbers on wards or seven-day working. There is a mismatch in timing of resource out and the current clamour for staff investment.'”

    Acute trust
  • “'This is the last year in which I expect to have this level of confidence. From 2015/16 the ability to generate savings has materially diminished because of compounding effect of activity increases (which are unaffordable to commissioners) and combined pressures from the health systems we operate in.'”

    Ambulance trust
  • “'The system is "playing with the statistics" as we all know. A cost improvement programme (CIP) target beyond 2 per cent is not achievable and the system finds a way to inject income into the system non-recurrently, which is storing up a problem for the future. '”

    Acute specialist NHS foundation trust

QMR1-4 based on a panel of 50 finance directors. QMR1 and QMR5 excluded as wording of responses not compatible with other quarters' data.

  • These findings reflect the fact that, overall, it is now certain that in aggregate the provider side of the NHS economy will have overspent for 2014/15 – increasing the 2013/14 deficit of just over £100 million to nearly £800 million (Appleby et al 2015). This overspend is despite the fact that around 6 out of 10 finance directors in our survey reported that their financial position relied on additional financial support of one form or another. At national level this has included £640 million taken out of capital spending and switched into revenue and a further £250 million provided by the Treasury. Whether the health budget overall will overspend depends on any further increases in clinical commissioning group (CCG) underspends (currently forecast to be around £135 million (NHS England 2015c) and performance against the other health budgets managed by the Department of Health and other national bodies. As the Chief Financial Officer, Paul Baumann, put it in his March financial report to the NHS England board, ‘In view of the challenging overall financial position in the health sector, all opportunities to contain expenditure further are being scrutinised with a view to improving bottom line delivery, and to help manage the overall DH revenue position [our emphasis]’ (NHS England 2015c).

  • Increasing difficulty in realising savings and more cost-effective ways of providing services (in the short term at least) have been compounded by a relentless increase in demand, rising staffing costs in the wake of reports on the quality of care from Sir Robert Francis (Francis R 2013) and Sir Bruce Keogh (Keogh B 2013) and, possibly, more generally, local level decisions to prioritise quality over cost containment.

  • While the NHS has responded to increasing demand with increased activity and, for example, increasing nurse and consultant staffing, and maintaining health care-acquired infections such as C difficile at historically low levels, 2014/15 has also seen widespread breaches of key waiting times standards such as the four-hour target for A&E – the top concern for commissioner finance leads.

Quarterly referral and admission trends: English NHS 2008/09 quarter 1 – 2014/15 quarter 3

Data source: NHS England, Monthly hospital activity data (commissioner based time series) www.england.nhs.uk

Percentage waiting more than four hours in A&E from arrival to admission, transfer or discharge

Data source: Weekly A&E SitReps 2014–15 www.england.nhs.uk

  • Another major concern throughout 2014/15 for trust finance directors has been problems in discharging or transferring patients. This has placed pressure on beds, which leads to problems with emergency admissions from A&E – exacerbating waits in emergency departments. After remaining flat for a number of years, the number of delayed transfers of care started to rise at the beginning of last year and now stands at its highest level since 2008.
NHS Trusts
Which aspects of your organisation's performance are giving you most cause for concern at the moment?

Respondent comments

  • “'Local authority funding cuts impact on community nursing, social care access and support, delayed transfers of care (DTOCs), and de-stabilise the system. The problems in our patch due to local authority cuts are as big as the NHS overall provider pressures from cost improvement programmes and demand.'”

    Community and mental health trust
  • “'As a mental health trust, predominantly on block contracts, the areas of performance concerns are: a) management increasing demand and acuity of patients within fixed resources, b) recruitment and retention of clinical staff, leading to high uses of agency workers.'”

    Mental health trust
  • “'Relative high usage/reliance on agency staff.'”

    Acute and community provider
  • “'Referral-to-treatment (RTT) is ok now but is a tsunami that will hit us in three months. Staff goodwill is on a knife-edge.'”

    District general hospital
  • “'Our patient care quality depends on staff morale. Staff morale is taking a knock given the extra hours staff are putting in to meeting standards and growing fears that the "next lot in Downing Street", irrespective of promises, start re-organising the deck chairs again.'”

    Specialist trust

Respondents asked to choose their top three concerns. Figures expressed as a percentage of the total number of concerns in each survey.

  • In the face of increasing elective referrals, delays to discharges add to pressures, with a deterioration in elective waiting times. Despite additional funding and twice suspending the penalties for breaching the target for waiting times to try and deal with rising numbers of patients still waiting for admission, 2014/15 has been the worst year this parliament for breaches of the 18-week referral-to-treatment targets as well as diagnostic tests and the 62-day cancer standard.
Percentage still waiting/having waited more than 18 weeks (more than six weeks for diagnostics)

Data source: Referral-to-treatment waiting times statistics www.england.nhs.uk

Diagnostic waiting times statistics www.england.nhs.uk

  • More generally, when asked about the state of patient care in their local area over the past year, 45 per cent of commissioners and of trust finance directors thought that on balance it had got worse. Worries about the quality of care are also reflected indirectly by trust finance directors’ top concern – staff morale – which has now topped the list for three consecutive quarters. As we have noted before, the morale of staff directly affects the quality of care patients experience; the NHS planning framework for 2014/15 to 2018/19 notes, for example, that ‘...happy, well-motivated staff deliver better care and… their patients have better outcomes’ (NHS England 2013). And as The Point of Care Foundation also notes, there is evidence to link staff satisfaction and morale not only with patient experience but also with clinical quality and productivity (The Point of Care Foundation 2014).

Looking forward to 2015/16?

  • Given the evident pressures on finances and performance in 2014/15, what are the prospects for 2015/16? The government’s spending plans suggest a cash increase in NHS funding in 2015/16 of about £3 billion – a real increase of around 1.3 per cent. However, this is more than wiped out this year as at least £3.46 billion from the total NHS budget has been earmarked for the Better Care Fund (NHS England 2015b). While it is envisaged that this money (plus additional sums pledged locally from the NHS and local authorities) will have positive benefits for patients, nonetheless, there will be an opportunity cost to the NHS in terms of funds available for its routine work.

  • It is perhaps not surprising therefore that just 2 per cent of trust finance directors and only 8 per cent of commissioner finance leads are optimistic about the financial state of their local health economies in 2015/16 – with the remainder either mostly pessimistic or uncertain. At an organisational level, two-thirds of trust finance directors and 40 per cent of commissioner finance leads say they are concerned about staying in budget this year.

  • Pessimism about finances is also evident in views about future productivity gains. 2014/15 was the last year of the so-called Nicholson Challenge to generate productivity gains of £20 billion. The extent to which this was achieved is uncertain (Appleby et al 2015) but from our previous surveys finance directors have been consistently doubtful about its chances of success. Now, however, the NHS five year forward view (Forward View) has proposed an extension to the need to generate further productivity gains – the Stevens Challenge? – on the basis that funding up to 2020/21 is also likely to be almost as constrained as funding over the past five years (NHS England et al 2014). However, 75 per cent of trust finance directors and over two-thirds of commissioner finance leads thought there was a high or very high risk of not achieving the Forward View’s efficiency targets of 2 to 3 per cent.

  • This pessimism is partly fuelled by the fact that most trust finance directors believe that demand will continue to rise in 2015/16. Two-thirds have plans for, or expect, an increase in elective admissions and nearly 80 per cent expect emergency admissions to rise. However, this contrasts sharply with the views of commissioners: more than half expect little or no change in elective admissions and nearly 60 per cent a reduction in emergency activity. Who proves to be correct remains to be seen, but the weight of recent historical trends is on the side of the providers, which would create pressure for the funding of additional secondary care activity.

  • Pressure on providers is also likely through continuing cuts to the Payment by Results tariff in 2015/16. Following objections to the proposed tariff arrangements by providers a new proposal devised by Monitor and NHS England has been broadly accepted. In our survey around 80 per cent of finance directors said their organisation had opted for the enhanced tariff option (ETO) – in essence comprising a slightly smaller efficiency price cut (3.5 per cent instead of 3.8 per cent), and less severe marginal cost reimbursements – rather than continuing with the 2014/15 tariff arrangements.

  • It would be an understatement to say that these compromises have not been greeted with much enthusiasm by finance directors. Comments from our survey reveal not only anger with the way the tariff-setting process was conducted – many questioning its legality – but also arguments that the tactic of cutting prices first and asking efficiency questions later has been counterproductive, leading not to more efficient services but to increasing deterioration in trust finances.

  • There is no doubt that the NHS has begun 2015/16 facing a bigger financial challenge than over the past few years. As we noted last year in a review of NHS productivity (Appleby et al 2014), while there is scope for more cost-effective use of the NHS budget, unlocking greater productivity takes time, upfront transformational funding and measures to support change and value for money.

References

  • Appleby J, Galea A, Murray R (2014). The NHS productivity challenge: experience from the front line. London: The King’s Fund. Available at: www.kingsfund.org.uk (accessed on 15 April 2015).

  • Appleby J, Baird B, Thompson J, Jabbal J (2015). The NHS under the coalition government. Part two: NHS performance. London: The King’s Fund. Available at: www.kingsfund.org.uk (accessed on 15 April 2015).

  • Francis R (2013). Report of the Mid Staffordshire NHS Foundation Trust Public Inquiry. HC 898-I. London: The Stationery Office. Available at: www.midstaffspublicinquiry.com (accessed on 6 November 2014).

  • Keogh B (2013). Review into the quality of care and treatment provided by 14 hospital trusts in England: overview report. London: NHS England. Available at: www.nhs.uk (accessed on 12 January 2015).

  • NHS England (2015a). A&E attendances and emergency admissions 2014-15. London: NHS England. Available at: www.england.nhs.uk (accessed on 15 April 2015).

  • NHS England (2015b). Better Care Fund: guidance for the operationalisation of the BCF in 2015-16. London: NHS England. Available at: www.england.nhs.uk (accessed on 15 April 2015).

  • NHS England (2015c). Consolidated 2014/15 financial report (month 10). Paper PB.150326/13A for Board meeting, 26 March 2015. Available at: www.england.nhs.uk (accessed on 30 March 2015).

  • NHS England (2015d). Consultant-led referral to treatment waiting times. London: NHS England. Available at: www.england.nhs.uk (accessed on 15 April 2015).

  • NHS England (2015e). Diagnostic waiting times and activity. London: NHS England. Available at: www.england.nhs.uk (accessed on 15 April 2015).

  • NHS England (2013). Everyone counts: planning for patients 2014/15-2018/19. London: NHS England. Available at: www.england.nhs.uk (accessed on 13 January 2015).

  • NHS England, Care Quality Commission, Health Education England, Monitor, NHS Trust Development Authority, Public Health England (2014). NHS Five Year Forward View. London: NHS England. Available at: www.england.nhs.uk (accessed on 15 April 2015).

  • The Point of Care Foundation (2014). Staff care: how to engage staff in the NHS and why it matters. London: The Point of Care Foundation. Available at: www.pointofcarefoundation.org.uk (accessed on 21 October 2014).