What not to do to stay in budget

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Next week the NHS will learn what funding it will have for the next five years. Social care will also get a strong indication as central government funding of local authorities is also set out. The parlous state of NHS finances is evident from the rapid increase in deficits, with nearly 80 per cent of providers overspending by a total of £1.62 billion in the first half of this year.

Staying in budget isn’t hard. The problem is the consequences of doing so. The NHS has been here before of course.

My first job in the NHS in 1981 was in South Birmingham Health Authority. Recovering an overspend was less than sophisticated. My experience in a cold February as the allocated budget for our main hospital wouldn’t stretch to the end of March was to follow a porter round a couple of wards to check the doors were firmly chained shut. The waiting list would grow a bit, but we knew more money would arrive in April and the wards would be re-opened.

So, to stay in budget: just stop doing things; relatively easy in the 1980s, not so easy now of course.

Although headline waiting times performance has slipped over the past year or two, it remains relatively good compared to the longer historical record. However, employing more staff and other resources to do more work (in part to slow the growth in waiting times) has come at a price. Trusts overspent by £1.62 billion in the first quarter of this year – equivalent to around 4.5 per cent of their turnover.

Though understandable, overspending is not sustainable in the long run. So what could trusts have done to stay in budget? The 1980s option of temporarily closing a few wards would be difficult for a number of reasons. First, to save £1.62 billion would have meant closing not just ‘a few wards’ but all hospitals, community, mental health services and ambulance trusts for around eight days. And second, even this would have saved money only if providers also stopped paying for things – like drugs, electricity and staff.

Furthermore, if trusts stop treating patients – £1.62 billion can pay for 607,000 elective inpatients or 1.4 million emergency cases or 14.5 million outpatient attendances – they will then lose income. Less work by providers means less spending by commissioners of course. But providers are still out of pocket unless they cut costs to match their loss of income. Either way, while the benefit of not spending £1.62 billion means staying in budget, the opportunity cost of doing so would be felt by patients and NHS staff.

Alternatively, the NHS could have saved £1.62 billion by not paying NHS consultants for 5 months; or registrars for 10 months; or nurses for 2 months; or senior managers for 26 months…

Or the NHS could have just shut down all chemotherapy, critical care, diagnostic imaging, radiotherapy, renal dialysis and all ambulance services for nearly three months.

No, thought not.

The point about the overspend is that it bought real things – people, drugs, equipment – and had real effects – more work, better health, less pain, fewer deaths. HM Treasury may ask why the NHS couldn’t have produced these things without spending more than it had been given. The NHS can point out that despite an increase in real funding of around only 0.8 per cent per year from 2009 to 2014, the number of elective inpatients has increased by 3.1 per cent, outpatient attendances by 3.0 per cent, and A&E attendances and emergency cases by 1.7 and 1.9 per cent respectively.

And in the longer run too, new ways of delivering care and new technologies will enable the health and social care system to push the production possibility frontier – as it has done in the past – to produce more with less.

But time is pressing. With the vast majority of NHS organisations in deficit and little possibility of change in funding increases to 2020, it is hard to see alternatives to a more 1980s-style approach to managing the finances in the short run.


John Bolton

Comment date
23 November 2015
I like your pieces on the NHS John but isn't the big issue that there isn't quite the same culture and push for efficiency that has developed in social care? Even though I accept that council performance like tha t in the NHS is variable and patchy.

Mary Shek

Wellbeing Service Development Manager,
Portsmouth City Council
Comment date
23 November 2015
Thanks John for your thought on this. Doing things the old way is no longer an option. I have worked in the NHS acute care, Health authority, voluntary sector and now the local authority. We all face relentless pressure on budgets and it is urgent that we look at the whole systems and pull resources together. We need to think of long term sustainability and not short term fixes. Transaction changes do not work any longer. Real transformation is needed with appetite for risks and learning. We pay lip service to transformation, prevention of ill health, patient and community empowerment so far. It is time for real actions!

Douglas Newton

Retired Critical Care Doctor,
Now a UK patient
Comment date
23 November 2015
It is easy to compile a shroud list of things we could stop doing to save money. However, there remains a huge list of activities which are totally futile in the care of patients. Mortality remains at 100% so far, yet we spend huge amounts of money on trying to prolong life by a few days of high tech misery, normally without the informed consent of the patient.
Sadly managers grossly misused the Liverpool care pathway as a means of speeding patients healthy or sick on their way to valhalla, and brought any concept of managing terminal illness into disrepute.
In reality, by informing patients, relatives and doctors of the imminent fatal illness they can be helped to manage the situation in a completely different way. The hospice movement, should it receive a small amount of state money is capable of avoiding the waste of critical care services in the dying and turning a nightmare into a satisfactory end. It is also massively cheaper
Although most Critical Care Doctors can recognise a terminal patient from 1000 paces, this does not seem to be a transferable skill to the many surgeons, and acute physicians, who have been taught to soldier on well past the final battle, and request transfer to the ITU when the patient has no chance of survival. At this point, of course it is too late for the patient to be taken home and to die in dignity.
I have absolutely no problem with treating the treatable at all ages, but failure to recognise the limitations of medicine is a major contributor to the difficulties of funding the NHS, and failure to discuss it openly is a shared failing of both doctors and politicians.

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