No quick fixes for financial failure in the NHS

With the NHS facing unprecedented financial pressures, a new report from The King’s Fund warns that there are no quick fixes for hospitals at risk of financial failure.

The increasing number of hospitals reporting deficits has put the spotlight on what happens when NHS providers are in financial difficulty. The report warns that the prolonged slowdown in funding means that the NHS is now facing a period when even the best managed organisations will struggle to avoid financial failure.

Against this background, the Health and Social Care Act built on existing arrangements for administrators to take over the management of failed organisations, with the intention of ending the practice of bailing out struggling trusts. This system has only been used twice and has already proved controversial. Meanwhile bail-outs for struggling trusts have become widespread.

Other, older approaches to managing financial failure such as replacing the management, mergers, or bringing in private companies through franchising arrangements have had limited success and were not designed to deal with the wave of financial distress currently spreading across the NHS.

The report calls for a more nuanced approach to financial failure based on:

  • distinguishing between providers struggling due to the exceptionally difficult financial environment and those with more fundamental problems
  • taking a more sophisticated approach to finance that distinguishes between emergency support and investment to enable transformation of services 
  • allowing a realistic timetable for the recovery 
  • understanding problems in the wider local health economy rather than just focusing on the individual organisation 
  • establishing strategic leadership to manage change across local health economies following the demise of strategic health authorities 
  • designing an approach that responds to legitimate public and political concern about difficult service changes. 

Richard Murray, Director of Policy at The King’s Fund said: ‘Providers are operating in an extremely difficult financial environment. Developing an approach to financial failure that responds to this environment is a significant challenge. A nuanced approach is required based on an understanding of the whole local health economy and balancing a range of other factors. None of this makes for a speedy or straightforward process but there are no quick fixes.’

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