Sustainability and financial performance of acute hospital trusts

National Audit Office

16 December 2015

Full report: Sustainability and financial performance of acute hospital trusts

The financial performance of acute hospital trusts has significantly declined in the last year and their financial position looks set to worsen in 2015-16, according to the National Audit Office.

The deterioration in the financial position of NHS trusts and NHS foundation trusts has been severe and worse than expected, with their £843 million deficit in 2014-15 representing a sharp decline from the £91 million deficit reported in 2013-14.

Overall, the financial position of NHS bodies worsened in 2014-15, as NHS commissioners, NHS trusts and NHS foundation trusts together moved from a surplus of £722 million in 2013-14, to a deficit of £471 million.

In June 2015, the Department of Health announced limits on some elements of trust spending in response to the worsening financial position of NHS trusts and NHS foundation trusts. Today’s report warns, however, that the response by the Department, Monitor and the NHS Trust Development Authority might come too late to improve the 2015-16 financial position. The revisions and resubmissions of trusts’ 2015-16 financial plans have created an unsettled planning period, and might make it difficult for NHS trusts, NHS foundation trusts, the NHS TDA, and Monitor, to meet targets, measure progress and ultimately manage resources effectively.

The government has committed to giving the NHS £8.4 billion more in this Parliament. It is not yet clear that the Department, NHS England, Monitor and the NHS TDA have the coherent plan that is needed to get trusts’ finances back on track and to close their estimated £22 billion gap between resources and patients’ needs by 2020-21.

Despite recent efforts to work together, interventions from the Department and its arm’s-length bodies risk creating perceived or actual competing priorities for trusts. One area where advice to trusts could have created actual or perceived conflicts is on safe staffing. The Department’s interventions to reduce trusts’ spending on agency nursing staff, for example, came at a time when acute trusts needed to recruit more nurses to meet safe staffing guidelines, and when the vacancy rate for permanent nursing staff was high.

The NAO warns that effective oversight by the Department and its arm’s-length bodies will become harder if the number of trusts in financial distress rises further. While the Department and its arm’s-length bodies have taken steps to learn how trusts could reduce costs, the wider use of this learning and how it will improve trusts’ finances overall is not clear.
Today’s report also reported that making savings through the redesigned models of healthcare will be challenging. The NHS’ new models of care aim to integrate services around the needs of the patient, but are relatively new and untested.

“We said in November 2014 that the trend of NHS trusts’ and NHS foundation trusts’ declining financial performance was not sustainable. We repeat this view today. Running a deficit seems to be becoming normal practice for acute trusts. There is a risk that poor financial performance is seen as the least worst option compared with poor healthcare provision. The Department, NHS England, Monitor and the NHS TDA must take a rounded view of how to improve trusts’ finances. The government’s commitment to give the NHS more funding, with almost half of this coming upfront, could be a significant step towards financial sustainability, if this funding can be devoted to improving the financial position of trusts rather than dealing with new costs. Continued demand for healthcare services means that the pressure on acute trusts will not go away. Until there is a clear pathway for trusts to get back to financial stability, we cannot be confident that value for money will be achieved.”

Amyas Morse, head of the National Audit Office , 16 December 2015

Notes for Editors

-£471m
Net deficit of NHS bodies (NHS England, clinical commissioning groups, NHS trusts and NHS foundation trusts) overall in 2014-15

-£843m
Net deficit of NHS trusts and NHS foundation trusts in 2014-15

61%

Of acute trusts (94 out of 155) reported a deficit at the end of 2014-15

115 out of 240 (48%)
NHS trusts and NHS foundation trusts in deficit in 2014-15

-£958 million
Net deficit of acute trusts in 2014-15 (those NHS trusts and NHS foundation trusts that provide acute healthcare services)

26
Acute trusts in 2014-15 with deficits that made up more than 5% of their income

83%
Of planned efficiencies were achieved by acute trusts in 2014-15

£1.8 billion
Additional funding given to both NHS trusts and NHS foundation trusts in financial difficulty as a cash injection, loan or other financial support in 2014-15

181 out of 239 (76%)
NHS trusts and NHS foundation trusts reporting deficits in the first 6 months of 2015-16

  1. Press notices and reports are available from the date of publication on the NAO website. Hard copies can be obtained by using the relevant links on our website.
  2. The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO, which employs some 810 people. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund have used their resources efficiently, effectively, and with economy. Our studies evaluate the value for money of public spending, nationally and locally. Our recommendations and reports on good practice help government improve public services, and our work led to audited savings of £1.15 billion in 2014.

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