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NHS funding system ‘not fit for purpose’

MPs say trusts’ financial performance has deteriorated sharply and trend is unsustainable

Louise Prime

Tuesday, 15 March 2016

The Government’s warm words of support for the NHS cannot compensate for the financial crisis engulfing it as it tries to meet ever-rising patient demand with declining resources, doctors’ leaders warned this morning – as a committee of MPs revealed a sharp and unsustainable deterioration in NHS finances.

In the Public Accounts Committee’s latest report into the sustainability and financial performance of acute hospital trusts, it expressed “deep concerns” over the financial future of the NHS – concluding that the Government had “not acted quickly enough to keep acute hospital trusts in financial balance”. The MPs, representing all the main parties, found that “there is not yet a convincing plan in place for closing the £22bn efficiency gap and avoiding a ‘black hole’ in the NHS finances”.

They reported a significant worsening in the financial health of NHS trusts and NHS foundation trusts in the past three financial years: trusts had a net deficit of £843m in 2014-15, a severe decline from their £91m deficit in 2013-14 and £592m surplus in 2012–13. Furthermore, they said matters are expected to deteriorate even further – halfway through 2015-16, three-quarters of trusts already had a deficit, and their total overspend could rise to about £2.5bn.

The PAC said unrealistic efficiency targets have caused long-term damage to trusts’ finances, and reported serious flaws in the data used to estimate trusts’ potential savings.

It called on the Government to urgently address failings in the current system of paying providers, which it said fails to incentivise joined-up healthcare services and is “not fit for purpose”. It also warned that the NHS cannot solve the problem of its reliance on agency staff – spending on whom has contributed to trusts’ “financial distress” – until it solves wider workforce planning issues.

BMA council chair Dr Mark Porter responded: “There is a complete mismatch between the government’s promise of extra funding and the reality on the ground where many NHS trusts are struggling to deliver basic care to patients in a climate of rising patient demand and declining resources. The chaos in workforce planning is exacerbating these pressures, with staff shortages in many key specialties resulting in far too much being spent on temporary workers.

“We need the government to realise that warm words of support for the NHS are not going to halt a rapidly deteriorating situation.”

Committee chair Meg Hillier MP said: “Central government has done too little to support trusts facing financial problems with the result that overall deficits are growing at a truly alarming rate. Crude efficiency targets have made matters worse.

“Without urgent action to put struggling trusts on a firmer financial footing there is further serious risk to services and the public purse ...

“The government’s approach to planning is a serious and recurring concern for this Committee – one that we highlighted in our report last week on access to general practice, and in our hearing last month on managing NHS clinical numbers.”

The NHS Confederation, which represents five out of six NHS providers and commissioners, called for urgent reform of the financial system of reward and risk in the NHS, as well as for urgent action to stabilise acute services in the NHS. Its chief executive Rob Webster said: “Overall, we need closer engagement with the sector and a genuine understanding of the challenge NHS leaders are facing locally … coupled with support from politicians and regulators to change services, change finances, and change a culture looking at performance based on individual hospitals, into one that measures and supports the whole system.”

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