In the first quarter of financial year 2016–17, the number of UK National Health Service (NHS) providers reporting a financial deficit fell by 20% year on year (y/y).
Implications | According to a report by NHS Improvement, which oversees UK NHS providers, the number of NHS trusts reporting a deficit in the first quarter of 2016–17 fell from 190 to 153 year on year, an improvement of 20%, and 185 providers met their quarterly control targets in full in the first quarter of 2016–17, partly driven by savings on agency staff. The overall deficit for the provider sector was GBP461 million (USD609 million), GBP5 million ahead of plan, and a marked improvement on last year’s first-quarter deficit of GBP930 million. |
Outlook | The report shows the positive effect of tight financial controls maintained by providers during the quarter, despite an unprecedented patient demand for accident and emergency (A&E) services. This is the first time in over three years that NHS providers have been ahead of the financial plan. Although financial pressure on the NHS continues, these figures give some grounds for a more optimistic outlook than previous years. |
In a quarterly report by NHS Improvement on financial performance reported by 156 NHS foundation trusts and 82 NHS trusts for the three months ending 30 June 2016, the NHS provider sector showed a year-to-date deficit of GBP461 million (USD609 million), GBP5 million ahead of plan, and a dramatic improvement year on year (y/y) over the GBP930-million deficit for the first quarter of 2015–16. The number of NHS trusts showing deficits fell from 190 to 153, an improvement of 20%. Of 214 trusts accepting their control totals, 185 met their first-quarter funding targets, enabling them to access a total of GBP450 million of payments from the GBP1.8-billion Sustainability and Transformation Fund (STF).
NHS Improvement also reported the following findings for the quarter:
• The NHS provider pay bill, including agency costs, was GBP9.8 million better than planned. Agency spending caps, instituted in October 2015, have saved around GBP500 million compared to predicted spending in this period. The agency staff budget for the full 2016–17 year is GBP2.5 billion.
• These controls were exercised in a quarter where there was a dramatic increase in demand for services. Over the quarter, there were 5.34 million attendances at A&E departments in England, a rise of over 300,000 (6.3%) y/y, and the number of patients requiring admission to hospital in major A&E departments rose by 6.4% y/y.
• However, despite the increased patient numbers, A&E departments treated almost 73,000 more patients within the four-hour national target time.
• Bed constraints resulted in 112,117 patients waiting over four hours on a trolley for a bed, an increase of 60.7% y/y.
• Ambulance services missed all key response time targets, with numbers of time-critical and life-threatening calls rising by 5.9% and 15.5% y/y.
• For elective care, the waiting list reached the highest recorded level of 3.45 million, resulting in a referral-to-treatment performance of 91.27%, missing the 92% target.
• The number of patients waiting over six weeks for a diagnostic test fell from 1.88% to 1.50% y/y, particularly resulting from a programme to reduce waiting times for endoscopy procedures.
• Regarding cancer treatment, 82.34% of patients with urgent GP referrals for suspected cancer were treated within 62 days, missing the target of over 85%. The NHS is working with the National Cancer Taskforce to improve performance in this area.
As part of the government’s strategy to address the financial challenges faced by the NHS, the one-off GBP1.8-billion STF was introduced for 2016–17, with trusts becoming eligible once they can meet a “financial control total” and agreed plan regarding waiting time standards. By early July 2016, 214 of 238 trusts had accepted their control totals and plans, and the control target was achieved by 185 providers.
According to the report, trusts are currently on course to reduce their combined annual agency staff costs by GBP1 billion by the end of the year. Measures to reduce agency staff costs have included approved procurement frameworks, and caps on numbers of agency nurses (see United Kingdom: 5 January 2016: UK's NHS hospitals reduce expenditure on agency staff).
The report highlights that non-pay spending was the largest overspend area, with drugs and clinical supplies being overspent against budget in the first quarter by GBP44 million (60% of the total non-pay overspend). This was driven by a combination of cost and volume factors. NHS Improvement plans to implement a Purchasing Price Index Benchmarking Tool in the near future to enable providers to share information, benchmark prices transparently, and facilitate NHS negotiations on pricing or switching of suppliers. Providers have shared purchasing information on expenditure of GBP6.5 billion, and NHS Improvement expects the new tool to generate non-pay savings in the second half of the year.
The full NHS Improvement report may be accessed here.
Outlook and implications
In the conclusion to its report, NHS Improvement acknowledges that NHS provider plans for the remainder of the year have a “challenging trajectory”, but recognises the substantial financial progress made by the majority of trusts over the past year (see United Kingdom: 24 November 2015: NHS providers' deficit reaches USD2.4 bil.). It also highlights that the achievement of meeting (and exceeding) the financial plan for the quarter “bucks the trend” of being off-plan in the first-quarter period of recent years. According to Jim Mackey, NHS Improvement’s Chief Executive, “providers are meeting some of the ambitious plans that trusts' boards have signed up to, and this is a promising start to the year."
However, NHS Improvement has also recognised that the unprecedented rise in demand for A&E services has made it much more difficult to meet waiting time targets while still delivering a high-quality service. According to Paul Briddock, policy director at non-profit organisation the Healthcare Financial Management Association (HFMA), quoted in Pharma Times, “The demands on the NHS are extremely high, with waiting times struggling to hit targets and patient numbers set to increase during the winter months. We must therefore move forward with caution, but it is clear that finance directors are tackling the challenge head on and setting good foundations for the coming year.”