...quarter 2 finances and performance

Chris Hopson

1. Providers are making good progress against the key priority of eliminating the provider sector deficit. The last four years’ Q2 figures show: 2012/13 +£60 million; 2013/14 -£105 million; 2014/15 -£630 million; 2015/16 -£1,616 million. If this trend had continued, we could have expected a provider deficit of nearly -£2.4 billion at this point. So it’s impressive that providers, supported by £900 million of sustainability funding, delivered a 2016/17 Q2 outturn of -£648 million: £968 million better than last year. The sector has stopped the runaway deficit train and is heading back towards financial balance. This shows that NHS providers can deliver when they are given a reasonable task and are properly supported.
   
   
2. One piece of clear evidence that providers are raising their game to tackle the provider deficit is that forecast year-end cost improvement delivery is £3.2 billion, an impressive £346 million (12%) higher than last year.
   
   
3. Another piece of evidence showing providers raising their game is the control of agency staffing costs. Almost three quarters (71%) of providers have reduced their agency spend since this was made a priority in November 2015. Providers are currently forecasting a £900 million full year reduction in agency costs, eliminating a quarter of the total agency spend in a single year.
   
   
4. Many providers tell us that they are concerned about the sustainability of the current approach to reducing the provider deficit. Many are using non recurrent savings to hit their control totals often ‘tipping the dwindling strength of balance sheets into the P&L’ through one off items like land sales. This is reflected in the fact that only 75% of Cost Improvement Plan savings were recurrent, as opposed to the planned 91%.
   
   
5. Providers will have to increase their rate of savings to hit the target year end deficit of £-580 million and there is significant risk to manage in the second half of the year. Providers recorded a first half year deficit of -£648 million. To hit -£580 million year end, providers will need to deliver a second half surplus of £68 million, a £716 million swing. That is very stretching.
   
   
6. A&E attendances are up 5.5% and emergency admissions are up 4.1% year on year – these are a long way beyond provider plans and NHS Five year forward view (5YFV) assumptions. Delayed transfers of care were up 35% year on year. It’s therefore not entirely surprising that overall A&E performance against the four hour target was at 89.7%, well below the 95% target and last year’s 93.6%. This clearly shows that the four hour wait target is as much a measure of whole system performance as individual A&E department/hospital performance. It’s also worth noting that ambulance services are under similar pressure with red 1 calls up 10% and red 2 calls up 14% year on year.
   
   
7. We need to be careful about how we tell the story on increasing A&E demand. Providers saw 2.2% more patients within the four hour wait target than last year. This suggests that if demand had only increased by the 2% many providers had planned for, as opposed to the 5.5% increase in attendances and 4.1% in admissions that have occurred, the sector would be much closer to hitting the 95% target. It’s also worth remembering that, by international standards, patients continue to get speedy access to hospital emergency care.
   
   
8. The elective waiting list remains under huge pressure – high demand, having to use elective beds to cope with higher than planned emergency admissions levels, and the junior doctors’ strike means many providers are struggling to meet their planned activity levels. This means more patients are having to wait longer than 18 weeks for treatment than in recent years. Q2 performance was 90.3% versus the target of 92%. But it makes the financial performance even more creditable, given how much elective income providers will have lost.
   
   
9. The plan of a sensible tariff and £1.8 billion of sustainability funding is working. But it’s taking a huge amount of leadership capacity and frontline effort to deliver and is it sustainable given the lower NHS funding increases over the next two years? Whilst there is recognition that control totals may be a Treasury quid pro quo for the extra £1.8 billion investment, concerns remain around the erosion in freedom for provider boards; the leadership time taken to agree, manage and report the totals; and the potential blurring of lines of accountability.
   
   
10. The short-term plan to reduce the provider deficit is being delivered. The 5YFV sets out a good vision for longer-term transformation - a local system focus, the move to new care models and a prevention revolution. The obvious, glaring, gap is the credible, realistic, mid-term plan for the rest of the parliament which matches what is expected of the NHS to the sharply lower funding increases of the next two years and a plan that also addresses the problems of social care.