HFMA Financial Temperature Check Finance directors’ views on financial challenges facing the English NHS November 2015

Introduction These slides summarise responses to HFMA’s fourth NHS financial temperature check survey of finance directors working in the English NHS Results were collected during October 2015 from finance directors working in clinical commissioning groups (CCGs) and provider trusts HFMA’s first financial temperature check briefing was published in June 2014 Full briefings and infographics are available at:

The response rate was high, covering over half of trusts and two fifths of CCGs The responses split by sector for the English provider trusts: Organisation typeTotal number of organisations Number of responses Proportion of responses CCG % Trust % Type of trustProportion of respondents Acute25% Acute and specialist17% Acute and community15% Mental health15% Community and mental health11% Specialist8% Ambulance4% Community3% Integrated1% Specialist, acute and community1%

Financial Performance

The size of the NHS deficit is unprecedented, according to the latest figures There is a combined net deficit of £930m in the provider sector at the end of the first three months of 2015/16. This is greater than the net deficit reported for the whole of 2014/15 financial year NHS foundation trusts (FTs) reported a £445m deficit for the first three months of the 2015/16 financial year, compared with a planned net deficit of £354m. 118 of the 151 (78%) FTs reported a year-to-date deficit The NHS trust sector reported an aggregate net deficit of £485m, compared with a planned net deficit of £412m. 72 of the 90 (80%) NHS trusts reported a deficit CCGs reported a combined overspend against their plans of £5m (less than 0.1% of allocation) for the first four months of the 2015/16 financial year.

The majority of trusts are forecasting a year-end deficit for 2015/16

Acute trusts are finding it most difficult to balance their books SectorDeficitBreak-evenSurplus Acute100%0% Acute and community75%0%25% Acute and specialist85%10%5% Ambulance20%60%20% Community0% 100% Community and mental health43%7%50% Mental health39%6%56% Specialist50%30%20%

The majority of CCGs are forecasting a year-end surplus for 2015/16*. However, nearly half of CCG CFOs said their 2015/16 plan reduces their brought forward surplus *CCGs work under a different financial regime to NHS trusts and their financial performance is not comparable. CCGs are required to make a minimum surplus of either 1% of allocation or the 2014/15 surplus, less any agreed drawdown.

The majority of finance directors are forecasting a year-end position for 2015/16 that is worse than their 2014/15 outturn

In trusts the main drivers of the difference between plan and outturn are an under- achievement of savings plans and an increase in agency costs

In CCGs the main drivers of the difference between plan and outturn are an increase in acute programme costs, prescribing costs and an under-achievement of savings plans

Finance directors think their organisation’s 2015/16 financial plans are medium to high risk and the proportion increases for 2016/17

Quality

The majority of finance directors expect quality to be maintained during 2015/16 - they are less confident about 2016/17

The outlook

Finance directors think they probably have sufficient levers within their organisation to improve quality and financial performance. However, trust finance directors are much less confident about their ability to effect change in their local areas

Do organisations in your area have sufficient financial resources to implement the Five-year forward view without extra support?

How confident are you that your organisation can deliver productivity gains of 2% to 3% a year between now and 2020 to help close the expected £22bn funding gap?

The majority of finance directors are calling for the £8bn additional funding promised by the government by 2016/17

Are you confident that improvements to provider productivity outlined in Lord Carter’s interim report can save the NHS up to £5bn?

Do you think the savings from the new care models will be able to deliver the financial benefits required to meet the estimated £17bn funding gap?

Can the NHS continue to deliver current levels of quality* within the promised levels of increased funding? *Quality is defined as services that are patient-centred, safe, effective, efficient, equitable and timely

Which actions should be used to reduce the deficit if the NHS cannot continue to deliver the current levels of quality within the promised levels of funding?

Are there aspects of current service provision where the NHS could withdraw services or change aspects that would ease financial pressures without damaging the principles of universal healthcare, free at the point of delivery?

Actions to help bring the NHS back into financial balance To ease financial pressures finance directors are calling for: An honest public debate about how the NHS funded and what services should be provided Certainty about the timing and whether there will be any conditions attached to the pledged £8bn government funding Realistic efficiency targets for providers and adequate funding for new demands and cost pressures to create headroom so that the focus is on new care models and improving efficiency, rather than short-term firefighting Strong system leadership to drive and support change across an area and consistency across the different regulatory regimes