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The King’s Fund published its first quarterly monitoring report in April 2011 as part of our work to track, analyse and comment on the changes and challenges the health and care system is facing. This is the 24th report and aims to take stock of what has happened over the past quarter.

This report details the results of an online survey of NHS trust finance directors carried out between 14 September and 5 October 2017. We contacted 233 NHS trust finance directors to take part, and 85 responded (36 per cent response rate). The sample included 36 acute trusts; 36 community and mental health trusts; 2 specialist trusts; 1 ambulance trust and 10 trusts that were not categorised. In addition, we contacted 151 clinical commissioning group (CCG) finance leads, and 27 responded. Between them these finance leads covered 32 CCGs (15 per cent of all 207 CCGs). This is a lower number of responding CCGs than in previous surveys.

How is the NHS performing?

Winter is approaching, and with it comes a familiar sense of deepening seasonal gloom about NHS finances and performance. The aspirations for the NHS set out in the September 2016 planning guidance were comprehensive and ambitious: both the commissioner and provider sectors were expected to be in financial balance at a national level and delivering national waiting time standards in 2017/18. It is now halfway through the year and these ambitions have been tempered.

With the 18-week standard for planned treatment in hospitals given lower priority in Next steps on the NHS five year forward view (March 2017), limiting financial deficits to £500 million and improving waiting times in accident and emergency (A&E) departments would be considerable achievements for the provider sector. The latest survey of trust financial directors and clinical commissioning group (CCG) finance leads shows increasing concern over whether local CCGs can deliver their financial targets in 2017/18. This, in turn, increases the focus on NHS England’s central budget, which will have to bear more of the financial burden than planned if the NHS is to achieve financial balance and the Department of Health is to avoid overspending the budget it was allocated by parliament.

Over the past few months, a series of national policy announcements has highlighted the NHS’s focus on recovering A&E performance and reducing financial deficits. Next steps on the NHS five year forward view set an ambition that the proportion of patients seen within four hours in A&E should reach 90 per cent by September 2017, with the majority of trusts meeting the 95 per cent standard in March 2018, and the NHS overall performing at 95 per cent within the course of 2018. To help achieve this, the Spring Budget 2017 provided £100 million extra funding for GP triage projects in A&E and £1 billion for the social care system to help reduce delayed transfers of care from hospital. The national NHS bodies have also put considerable emphasis on preparing for winter, with winter planning guidance issued in July and funding made available to offer flu jabs for care home staff. It was hoped that these actions, combined with giving lower priority to the 18-week standard for accessing planned care, would free up hospital bed capacity, improve A&E waiting times and relieve some of the financial pressures on commissioners.

Our most recent quarterly monitoring report brings together publicly available data on NHS performance measures and views from NHS trust finance directors and CCG finance leads to explore just how well the NHS is performing against the set of ambitions it has been given.

Performance on NHS waiting time standards

The NHS missed its first performance milestone – of seeing 90 per cent of A&E patients within four hours in September 2017 – by a hair’s breadth: 89.7 per cent of patients were seen within four hours. If just 6,400 more of the 1.9 million patients attending A&E in September had been seen within four hours the milestone would have been achieved. This performance needs to be seen within the context of rising demand for services, with a 3.4 per cent increase in all emergency admissions compared to September 2016 (when 90.6 per cent of patients were seen within four hours in A&E). With rising demand continuing to run well ahead of increases in funding, the surprise is not that the milestone was missed but that it was missed so narrowly.

Current A&E waiting times do not bode well for the next performance milestone in March 2018, or the winter period in between. The A&E waiting time standard applies to all types of A&E – including minor injury units and walk-in centres – but most attendances (and long waits) occur in major or type 1 A&E departments attached to hospitals. In September 2017, only 11 of the 137 trusts with a type 1 A&E unit achieved the standard (Figure 1), with some demonstrating considerably lower standards.

Figure 1: Percentage of patients seen within four hours at major (type 1) A&E departments, September 2017

Departments are ranked in order of performance, with those meeting the standard highlighted in green.

97.84% 94.87% 92.06% 90.71% 89.65% 88.18% 85.82% 84.45% 82.19% 79.81% 72.45% 67.52%
97.73% 94.63% 91.88% 90.67% 89.60% 87.94% 85.82% 83.83% 81.79% 79.74% 72.33% 65.82%
97.18% 94.62% 91.77% 90.56% 89.57% 87.70% 85.75% 83.78% 81.66% 79.39% 71.90% 62.50%
96.79% 94.06% 91.48% 90.43% 89.44% 87.54% 85.57% 83.49% 81.48% 78.46% 71.42% 62.28%
96.59% 93.53% 91.33% 90.32% 89.42% 87.50% 85.55% 83.19% 81.38% 78.35% 70.94% 57.00%
95.67% 93.38% 91.17% 90.30% 89.22% 87.41% 85.45% 83.13% 81.29% 78.29% 70.79%
95.58% 93.36% 91.13% 90.29% 89.06% 86.82% 84.96% 82.92% 80.95% 78.18% 70.42%
95.56% 93.16% 91.12% 90.25% 89.02% 86.71% 84.92% 82.87% 80.77% 77.65% 70.32%
95.33% 93.01% 91.12% 90.17% 88.94% 86.44% 84.92% 82.86% 80.33% 77.34% 69.98%
95.07% 92.66% 91.11% 90.08% 88.82% 86.10% 84.87% 82.64% 80.25% 76.68% 69.70%
95.02% 92.60% 91.08% 89.94% 88.35% 86.03% 84.56% 82.64% 80.17% 76.41% 68.98%
94.98% 92.40% 90.81% 89.93% 88.30% 85.87% 84.53% 82.56% 79.98% 75.49% 68.26%

Source: A&E Attendances and Emergency Admissions 2017-18.

Each cell represents one of the 137 providers of major (type 1) A&E departments submitting data within the month. The performance standard is for at least 95 per cent of patients to be seen within four hours of arrival at A&E.



Our latest survey results reflect this challenging situation. Only 28 per cent of trust finance directors in our survey were very or fairly confident about meeting the commitment to return A&E performance to the 95 per cent standard by March 2018. This concern was mirrored on the commissioner side, with only 4 per cent of CCGs very or fairly confident that their local trusts would achieve the required standard. Some trusts noted they would pull out all the stops to improve performance: ‘If the finances have already gone south, then we will probably spend everything we can to hit 95 per cent,’ while others were less sanguine about their prospects of achieving the standard by March 2018: ‘We have a snowball’s chance in hell.’

The relaxation of the 18-week referral-to-treatment standard in Next steps on the NHS five year forward view was, in part, intended to focus attention and resources on A&E performance, but it also helps to reduce the pressures on CCG budgets, which may have been a strong motivating force in some parts of the country. Both national performance indicators and our survey suggest performance against the 18-week standard may indeed be slipping further down the list of priorities. At the end of August 2017, only 89.4 per cent of patients waiting to start treatment were waiting up to 18 weeks, below the 92 per cent national standard. The waiting list for elective treatment reached 4.1 million patients, the highest level since August 2007 (this includes an estimate of waiting time data for trusts that did not submit data to the national data collection). Despite this decline in performance, there was a sharp drop in the level of concern from trust finance directors on meeting the 18-week referral-to-treatment standard, perhaps reflecting its lower priority (Figure 2).

Figure 2: Areas of performance that give NHS provider finance directors most cause for concern

Respondents were allowed to select top three causes for concern from a list of options.

There is, of course, a potential sting in the tail for NHS trust finances as profitable elective work is replaced by unprofitable emergency work. This reduction in income is material enough on its own, but it could also have a serious knock-on effect for trusts that miss their financial targets and lose access to portions of the £1.8 billion sustainability and transformation funding as a result.

There was one further area of national action that was intended to give A&E departments a clearer run at achieving their performance standards: reducing delayed transfers of care from hospital. The 2017/18 Mandate from the Department of Health to NHS England set an ambition that delayed transfers of care (attributable to both social care and the NHS) should be reduced to 3.5 per cent of occupied bed days by the end of September 2017. Additional funding in the Spring Budget was intended to support this, with the hope that councils could fund more care packages and support social care providers to reduce pressures on NHS beds.

This extra funding was welcomed, though councils were quick to point out that directors of social care have many other calls on their budgets in 2017/18, including increasing costs from the National Living Wage and stabilising the home care market. Official data on September 2017 delayed transfers of care performance will be available in early November. In recent months the rocketing growth in delayed transfers has been halted (and slightly reduced) – suggesting the NHS and care system are delivering a return for the extra investment. However, just 13 per cent of trust finance directors and 15 per cent of CCG finance leads were very or fairly confident that the September target performance of 3.5 per cent could be achieved. Progress in reducing delayed transfers has also come at some cost to relationships between councils and the NHS in parts of the country, as local systems are put under increasing pressure to deliver these ambitious national targets.

NHS financial performance

The NHS planning guidance for 2016/17 stated that ‘during 2016/17 the NHS trust and foundation trust sector will, in aggregate, be required to return to financial balance’. The fact that the provider sector fell £791 million short of this aspiration in 2016/17 did not dissuade NHS England and NHS Improvement from repeating this goal for CCGs and trusts in both 2017/18 and 2018/19. To support the delivery of financial balance this year, national NHS bodies added a capped expenditure process to the litany of regulatory controls to exert greater financial control in areas at risk of overspending their budget.

But our survey suggests just how far off these financial targets trusts are. 43 per cent of NHS trust finance directors were forecasting their trust will end the year in financial deficit and 16 per cent of CCGs were expecting to overspend their budgets in 2017/18. Just 45 per cent of all trusts, falling to 21 per cent for acute trusts specifically, were fairly or very confident of achieving their financial control total for this year. National data for the first three months of this year also indicates the provider sector is on course for an aggregate net deficit of £523 million in 2017/18.

NHS providers are planning to make £3.7 billion of efficiency savings in 2017/18, with just 8.3 per cent of these savings expected to be achieved through non-recurrent means. However, only 28 per cent of trust finance directors were fairly or very confident of achieving this year’s savings plan. And if a word cloud was built from comments in this part of our survey ‘non-recurrent’ would surely take centre stage, as trust finance directors spoke of their reliance on one-off measures such as land sales, recruitment freezes and cancelling planned capital investment. In some cases, trusts’ 2017/18 savings plans were still being developed six months into the year: ‘20 per cent of the total savings are not yet fully identified,’ according to one NHS trust finance director.

The financial pressures in 2017/18 have also led to increasing unpredictability in NHS finances, and several trust finance directors voiced concern over their cash position. To manage this uncertainty, NHS trusts are resorting to a range of actions to maintain an appropriate cash balance, including delaying payments to suppliers and taking out loans from the Department of Health for interim financial support. Other analysis has highlighted just how significant and widespread this financial support is within the NHS.

For the first time, our survey suggested just how unlikely it is that these loans will ever be paid back in full. 52 per cent of trust respondents receiving interim financial support were very concerned about being able to pay back the loan, and only 19 per cent were fairly or very confident of their ability to repay. One finance director noted their trust had been reliant on a ‘Department of Health cash drip feed for years’ and another was emphatic in their view on repayment: ‘Loans will never be repaid – it’s impossible.’ In a sufficiently funded health system, interim financial support and loans might still be needed to smooth over short-term cashflow issues, but we are a long way from that system, with loans increasingly needed to pay the bills and staff salaries. Trusts are expected to repay the interest and principal on these loans through the normal course of business. However, many trusts take on loans in the knowledge this will never happen and that they will stay on a permanent financial merry-go-round despite their best efforts.

If there is a familiar gloom to the NHS provider financial position, the pressures on CCG finances are leading to some stark decisions to avoid overspending this year. Several CCGs noted their end-of-year financial position would rely on access to the 0.5 per cent of their funding that is currently – in line with national guidance – held back in reserve. 53 per cent of the 27 CCG finance leads in our survey were also expecting to delay or cancel spending plans to support their financial position in 2017/18.

The list of unpalatable options considered by CCGs includes extending waiting lists or reducing activity for certain elective specialties; increasing the number of low-value treatments and prescriptions that will not be funded; increasing use of patient characteristics and eligibility criteria – such as smoking status or body mass index as criteria for accessing care; and placing more limits on access to services such as IVF (Figure 3). Only three of the 27 CCG finance leads were considering none of these options, with more than two-thirds of CCGs considering extending waiting lists for planned elective care.

CCG Leads
Figure 3: Options CCGs are considering to help them remain within their 2017/18 budget

Respondents were allowed to select more than one option. Data refers to the proportion of CCG finance leads selecting each option.

None of these options would be considered lightly, and CCGs also noted these actions would be unlikely to accrue any financial benefits until 2018/19. And as one finance director noted, the impact of funding constraints in the wider health and care system may be even more dramatic than those facing NHS commissioners: ‘Social care cuts are frightening, and councils face nightmarish decisions. Health visiting and school nursing as we know it will no longer exist.’

A wider ‘systems not institutions’ approach to managing finances was also referred to in comments from commissioners and providers in our survey. There was some positivity that ‘systems’ working was beginning, not least because – as one finance director put it – ‘for the first time both providers and commissioners are in financial difficulty’ and need to work together to resolve financial pressures. However, other responses noted that the split between purchasers and providers of care was still very much in force, as providers try to maximise their income and CCGs try to limit their spending. Providers in our survey expressed particular concern that they would not receive their full CQUIN funding this year from commissioners, which would impact on their ability to hit their own financial control totals. (Commissioning for Quality and Innovation (CQUIN) funding makes a proportion of NHS providers’ income conditional on demonstrating improvements in quality and innovation in specified areas of patient care.) As one trust finance director noted: ‘The level of effective collaboration is decreasing due to application of pressures on individual organisational results.’

With providers and CCGs broadly on track for a similar level of financial performance in 2017/18 as last year, the focus for finding savings will increasingly shift to NHS England and the Department of Health. If providers and CCGs fail to hit their financial targets, which appears increasingly likely, these national bodies will need to deliver the underspends necessary to achieve financial balance. When asked about their financial prospects for 2017/18 one trust finance director observed ‘Our margin for error is being eroded year by year.’ While financial deficits remain stubbornly in place across the provider and CCG sectors, the eroding margin for error must be of increasing concern at all levels of the NHS.

Workforce

One further high-profile (and high-risk) choice for containing spending, and remaining within this year’s budget, is to reduce the NHS staff pay bill.

As our previous analysis has shown, the number of nurses and health visitors employed in the NHS is falling for the first time in more than three years. However, the enthusiasm for recruiting nurses remains undimmed among trust finance directors, with 65 per cent planning to increase the number of permanent nursing staff in the next six months. In many cases this was to fill existing vacancies (with two trusts commenting they currently had a nurse vacancy rate of 15 per cent or more), rather than recruiting to new posts to keep pace with rising demand and population growth.

Trusts were realistic about the prospects of filling nurse vacancies. The impact of the EU referendum and changes to language-testing requirements on nursing recruitment and retention have rightly been highlighted. However, deeper widespread issues – such as morale, pay restraint and shortages in qualified nursing staff – came out even more strongly in responses from trust finance directors (Figure 4).

Difficulties in recruiting nursing staff will not improve the NHS financial situation, as trusts will have to employ more costly agency nursing staff as the demand for care starts to increase over winter. Trust finance directors also echoed warnings from national leaders that the mooted lifting of pay caps for NHS staff would require additional funding, as there is little room to manoeuvre within the existing NHS funding settlement.

NHS Trusts
Figure 4: If you are experiencing difficulties in recruiting and/or retaining sufficient nursing staff to fill available posts, which factors have had the most significant impact?

Respondent comments

  • “Other trusts are paying golden handshakes to attract nursing which is increasing the supply issue.”

    Small acute trust
  • “The delay in obtaining visas has also been a real problem for us. Many candidates have gone elsewhere in the interim.”

    Acute
  • “We were assigned far fewer visas than we requested and told we can only apply for more when we have a small number of visas left, the time lag will significantly impact our international recruitment programme.”

    Acute teaching provider
  • “Skills shortage, levels of pay and benefits, the changing nature and intensity of the work and the agency alternative (higher pay, greater flexibility and less responsibility).”

    Mental health and community

Note: Of the 82 respondents for whom the question was applicable, one respondent selected 'no difficulties in recruiting or retaining nursing staff'. Respondents allowed to select more than one option. Figures expressed as a percentage of the total number of mentions for all options.

Conclusion

The ambitions for the NHS this year were focused on improving financial performance, reducing waiting times in A&E and preparing for winter. Significant efforts have been made both nationally and locally to support this. But despite the hard work of staff in the health and care system, both our survey and national performance data suggest the NHS is to miss targets for reducing delayed transfers of care, the next performance milestone for improving A&E performance, and financial targets for reducing deficits in the provider sector. As a result, patients are waiting longer for both routine and urgent treatment, and CCGs are facing troubling decisions on restricting access to some services. And all this comes just as the NHS is about to enter winter, with high levels of bed occupancy and hopes that the high levels of flu in the southern hemisphere do not travel north.

We have not arrived at this situation because of a lack of effort or because of poor management within individual NHS organisations. The health and care system is now so over-stretched that even when effort and resources are focused on a smaller set of priorities the required performance levels remain elusive. What concerned the trust finance directors in our survey even more than A&E performance? The morale of their staff. As frontline staff try their best to improve quality of care and access for patients, it is increasing apparent that we are setting them an unachievable task.

There has been an almost Sisyphean aspect to the management of NHS finances and performance since the onset of austerity in 2010, with a familiar rhythm emerging for each year. Now, once again, we wait to see if winter sends provider income and performance plans off track, and we start the long run-in to March wondering if CCGs can land their savings plans or if NHS England can find a large enough underspend to cover any remaining deficits. ‘Sustainability’ and ‘transformation’ have been the two watchwords for the NHS in recent years, but as financial, operational and workforce pressures increase, it seems that we are at increasing risk of achieving neither.

See the box below for further details of recent measures that have been put in place to manage NHS finances and performance.

Managing NHS finances in 2017/18

In 2016/17 NHS Improvement and NHS England introduced a new approach to NHS finances, designed to reduce the significant deficits that had grown over previous years. NHS planning guidance made clear that many features of this new approach would be retained in 2017/18 and 2018/19 along with a small number of changes. The key elements of this approach are set out below.

The Sustainability and Transformation Fund

In 2017/18 and in 2018/19 the NHS will again place £1.8 billion into the Sustainability and Transformation Fund. This will be paid out to mainly acute trusts providing emergency care as long as they meet targets on finance and A&E. Payments from this Fund reduce an organisation’s reported deficit.

Control totals

Control totals are the financial targets for each organisation – they set the maximum deficit (or minimum surplus) an organisation is allowed to run. Each organisation has its own control total, which is agreed with NHS Improvement depending on its financial strength. The financial position reported by individual NHS trusts includes any Sustainability and Transformation Fund money they have received.

Meeting finance and performance targets

If providers fail to meet the finance and performance requirements that underpin their control totals, access to all or some of their planned payments from the Sustainability and Transformation Fund can be withheld. While withholding funding will increase deficits reported by individual providers, it will not alter the position across the provider sector as a whole as the Sustainability and Transformation Fund will be underspent by the equivalent amount and NHS Improvement counts this underspend against the overall position. If a provider cannot pay its bills – such as salaries for its staff – without Sustainability and Transformation Fund support, it may need to turn instead to the Department of Health for additional cash support, usually provided as a loan.

Commissioners

CCGs also have financial targets. In 2017/18, 1 per cent of the total commissioning budget (worth around £830 million) has been set aside to offset risks to overall financial balance in the NHS. Unlike in 2016/17, when CCGs were required to set aside the full 1 per cent from their budgets, this year CCGs have been asked to hold only half of their share (£360 million) uncommitted at the start of the year to which NHS England has added £200 million from its own resources. The remaining £270 million will come from Commissioning for Quality and Innovation (CQUIN), which makes a proportion of NHS providers’ income conditional on demonstrating improvements in quality and innovation in specified areas of patient care.

Sustainability and transformation partnerships (STPs)

In 2016, the NHS developed new sustainability and transformation plans covering the years to 2020. To do this, England was divided into 44 geographical areas – the 'footprints' for the STPs. The detailed operational plans for each organisation in 2017/18 and 2018/19 are intended to be consistent with these more strategic STPs. In addition, NHS Improvement and NHS England have introduced system control totals: for each STP area, these represent the sum of control totals of the organisations contained within the STP’s geography. STPs can apply to NHS Improvement and NHS England to alter organisations’ control totals, as long as they do not alter the system control total and are consistent with net financial balance in both providers and commissioners.

Additional financial controls

In 2017/18 NHS Improvement and NHS England introduced the capped expenditure process (CEP) – an intensive process to contain expenditure in areas of the country with high financial risk and/or historical overspending of their share of funding. The CEP is the latest addition to a wide range of actions to address financial challenges in the NHS. These further actions include the introduction of financial special measures regimes – an intensive process to develop financial recovery plans for challenged organisations – for trusts and commissioners in July 2016.