The NHS must have what it needs right now but maintaining financial control through the challenge of COVID-19 also remains essential for our future public health service.
Supporting the NHS with whatever it needs in these unprecedented times is beyond question. Financial and operational planning for 2020/21, contracting processes and cost improvement programme (CIPs) delivery have been suspended temporarily so that the NHS and its staff can fight COVID-19 without worrying whether there are the resources or funding to do what is needed.
But maintaining financial control and ensuring that underlying financial issues aren't forgotten will be essential if the NHS is to avoid an almighty thump in the future when landing back on solid ground.
As a publicly funded service the NHS still has a primary responsibility to ensure the stewardship of funds and ensure it achieves value for money for every penny spent.Effectively it has an open cheque book from the government to spend what it needs to fight this thing. Guidance has been clear that the government will fund all COVID-19 expenditure and that the impact of this on our hospitals and the wider NHS will be neutral.
It will, however, only reimburse those costs that are clearly attributable to COVID-19 – and NHS England and Improvement (NHSE/I) will be collecting information to validate (and even possibly audit) this. Strong financial control and governance needs to remain in place so that the finances are managed alongside the huge operational and clinical effort being delivered.
It’s inevitable that some financial policies and governance processes will need to be flexed to be more agile and adapt to the nature of these circumstances. There will be changes in roles, responsibilities and even accountability, alongside fast-tracked processes. But underpinning controls and financial reporting will be key to ensuring that the NHS is in no worse position financially than at the reported position at month 11 before this all kicked off.
The fact that the NHS financial year end is on us has probably gone unnoticed as anxiety about where our NHS organisations and systems will finish the year financially has disappeared. Annual battle lines between commissioners and providers – or is it now systems and NHSE/I? – on planning for the new financial year have been paused; instead we have come together for a bigger, wider cause. The pause button may have been pressed but when play is pressed again there are lingering and emerging issues to sort. In the pre-COVID-19 period, financial performance issues and non-delivery of control totals were spreading across NHS nearly as fast as the coronavirus.
The causes of the deterioration in financial performance can of course vary depending on the organisation and area – there will always be some specific localised factors, and even structural and geographical issues. But increasingly we were seeing consistent issues indicating more widespread, systemic problems, which has led to a deterioration of NHS financial performance.Here are just five examples of ongoing issues:
1 Agreeing to unachievable control totals
For 2019/20, regulators asked –maybe asked is too polite – organisations and systems to agree control totals that many of the numbers, previous performance and trends suggested were unachievable. The current financial rewards through Provider Sustainability Fund (PSF) funding is based on the delivery of control totals meaning there was a strong financial incentive for local systems to agree to control totals and achieve additional funding even for part of the year. Rejecting a control total you don’t agree with meant potential lost funding for the local NHS system.
2 Setting undeliverable back-ended plans
Plans were set that were plausible at a high-level but ultimately undeliverable. Many organisations and systems had savings, CIP and QIPP (Quality Innovation Productivity and Prevention) plans that were not developed sufficiently, over-optimistic in terms of in-year financial asks or with unidentified gaps well into the first and even second quarters – gaps that were never recovered.
Unsurprisingly, given the current financial regime, the ask and challenge is always phased into the last six months of the year. Trusts were able to achieve PSF funding for Q1 and Q2 by delivering performance against modest phased plans. No surprise therefore that at month seven and eight suddenly forecast outturn projections move out and by the end of Q3 the scale of the perceived poor financial performance is unearthed.
3 Lack of an agreed understanding of activity and demand
Commissioners and providers agree plans as part of the planning process that don’t reflect the actual activity being delivered. They often assume:
unrealistic demand (in particular for emergency and non-elective activity)
heroic elective performance and trajectories (a double whammy if non-elective demand is not planned)
high level QIPP plans, which are not formed sufficiently or don't have buy in.
In addition,many trusts are not planning for any of the assumptions made. As a result, both sides have difficulty working to those plans, undermining financial delivery and creating risk. This creates unnecessary tensions in health systems and leads to no common understanding of what is being delivered and how to manage it.
4 System working in name only
Many systems worked together in delivering 2019/20 financial and operational plans. They outlined high-level strategies and even system-wide savings plans. They agreed new more collaborative contractual models and these shared risks across the system. And they collated numbers to provide system-level control totals.
All good signs. But in many cases these plans were built up from a series of organisational level plans and that meant that systems savings plans were not sufficiently formed, agreed or engaged with to deliver the transformational delivery and financial ask in one year.
5 Lack of maturity of longer-term, cost out and waste reduction CIPs
We are still seeing a lot of transactional, non-recurring and even income-driven cost improvement programmes. But, if we want to deliver financial sustainability, longer-term cost and waste reduction plans need to be developed.
Individual organisations and acute trusts in particular have already made progress. Of course, more could be done in managing service delivery and variation. But increasingly real cost and waste reduction can only be achieved by working as a system, mainly where services cross over with acute care in primary, community and social care. We are going to need investment, detailed planning and clinical engagement to deliver that kind of change.These are long-term change programmes and not quick fixes. Systems and more importantly regulators need to accept that addressing long-term financial sustainability can not be achieved in one year – well, actually, 10 months by the time delivery plans are in place.
We often see that the causes of financial underperformance can include a lack of awareness, understanding, engagement and buy-in from middle management, and from the operational and clinical shop floor. As the movement towards system control totals progresses, having an agreed understanding of activity and costs of delivery care is critical.While not always palatable, it provides an accurate baseline for real discussions on if, how and where that activity could and should be delivered in the future.
I’m sure we would all prefer to be grappling with these issues rather than facing what we are now. The impact of COVID-19 will undoubtedly change how we work and how the NHS operates moving forward. Let’s use this pre-COVID-19 learning when we get back to business as usual – hopefully in the not so distant future.