10 reflections on...

Q2 performance data for 2017/18

Tim Connolly profile picture

21 November 2017

Tim Connolly
Policy Advisor - Finances


As we head into winter, the latest quarterly financial and performance figures for the provider sector from NHS Improvement highlight the sustained challenges trusts are grappling with. There is cause for optimism, however, with trusts once again making impressive efforts to overcome the obstacles they face. What does the report tell us about the financial picture for trusts?

1.  The forecast end-of-year deficit for the provider sector has unfortunately increased from £523m at quarter one to £623m at the end of quarter two. And as the report points out, this forecast is itself dependent on assumptions about activity levels, winter performance, and bed availability, which may or may not be borne out. NHS trusts are telling us that they continue to be committed to making every effort to meet their end of year plans, but are now deeply concerned about the impact a range of system wide risks could have on an already extremely difficult delivery task.

 

2.  The number of providers reporting an adverse year-to-date variance has increased from 67 at quarter one to 87 at quarter two. In total, 152 providers are reporting a year-to-date deficit after the first six months of the year. If we follow the patterns of last year this is worrying given the significant deterioration in provider finances that occurred in quarter three of the 2016/17 financial year.

 

3.  There are 26 providers who are currently reporting deficits of over £5m against their quarter two year-to-date plans, 13 providers who are reporting deficits of over £10m against plan, and three who are reporting deficits of over £20m against plan. Five trusts alone contributed to over £120m of the overall adverse financial variance against plan in the first six months of the year, suggesting that while the overall deficit position is challenging, the picture has been markedly affected by a handful of trusts dealing with especially difficult circumstances.


4.  On the positive side of the ledger, trusts have again delivered above planned performance on agency spend, beating the agency ceiling at year-to-date at month six by 6.1%, and on track to be 10 % ahead by the end of the year. Spending on bank staff has increased significantly, but this is unsurprising, however, given ongoing workforce challenges and shortages faced across the country. Employing bank staff is almost always going to represent better value for both patients and providers than agency staff because of the continuity they provide.

Trusts have again delivered above planned performance on agency spend, beating the agency ceiling at year-to-date at month six by 6.1%, and on track to be 10 % ahead by the end of the year.

Tim Connolly    policy advisor finances

5.  For better or worse, the Sustainability and Transformation Fund (STF) is now a vital element of trust income. Out of 206 trusts that signed up to control totals more than one in ten have been unable to access any STF funding – probably because they were unable to meet required performance levels. They will undoubtedly have made every possible effort to meet the necessary targets. The fact that they were unable to do so gives the lie to the idea that trusts are in need of greater incentives to deliver improvements. After all, as the Health Foundation has made clear, the NHS is improving its productivity at a greater rate than the wider economy.


6.  Turning to those trusts who did receive STF funding, providers collected between just 13% and 35% of planned STF. Again, the range is probably the result of some trusts not being able to meet the financial and operational performance trajectories they had been set despite making every effort to do so. Predictably, those trusts at the bottom of the range are showing the greatest variance against their year to date plans.

 

7.  At this point in the year, there is now £132m more unallocated STF funding than originally planned. The unallocated part of the fund – in total £292m at month six - represents the money that trusts were unable to access as a result of not being able to meet the required financial and operational performance trajectories. Trusts will be keen to understand how, and when, this portion of the STF will make its way to the provider sector. While last year’s bonus and incentive scheme for trusts rewarded those able to deliver beyond their agreed control totals, we still don’t have a sustainable solution for the trusts who need the most support.

 

8.  The provider sector aggregate financial position at quarter two remains fundamentally reliant on non-recurrent, unsustainable deferrals of spending on key areas including estates. Trusts have responded fully to the necessary task of reducing the deficit, but these impressive efforts must not obscure the underlying sustainability gap facing the provider sector.

Trusts have responded fully to the necessary task of reducing the deficit, but these impressive efforts must not obscure the underlying sustainability gap facing the provider sector.

Tim Connolly    Policy advisor finances

9.  There has been considerable focus over the last twelve months on increasing the availability of primary and out of hospital care, and yet demand on emergency and accident departments increased by 3.4% compared to quarter two last year. Trusts are straining every sinew to improve performance against the four hour accident and emergency target, but reaching the constitutional standard of 95% by the end of the financial year seems extremely challenging in the current environment.

 

10. Despite the investment of £1bn extra funding for social care in 2017, the cost pressure affecting the provider sector resulting from delayed transfers of care (DTOCs) remains stubbornly high. These costs for providers are not expected to fall this financial year. If left unresolved, these cost pressures will make it even harder for trusts to deliver their forecast end of year positions.

 

This article was first published in the HSJ on 21 November 2017

Read our Q2 performance data briefing

 

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Tim Connolly profile picture

Tim Connolly
Policy Advisor - Finances

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