How is the NHS performing? June 2018 quarterly monitoring report

Our most recent quarterly survey of NHS finance leads shows services remain under substantial pressure. There are 4.2 million patients waiting for consultant-led hospital care, and there is little optimism that the current A&E performance milestones set by the government can be achieved.

The national approach to managing the finances of NHS organisations is broken and must be reviewed. Some NHS organisations in financial difficulty are spiralling further into deficit, while other parts of the NHS see their surpluses bolstered by the release of centrally held funding.

There are some positive signs of increased joint working between local providers and commissioners of care. This is reflected in more aligned expectations for what will happen to demand for emergency and planned (elective) hospital services in 2018/19. However, it is still unclear whether these more aligned plans can be delivered over the rest of the year.

The recent announcement of a five-year funding offer for the NHS provides an opportunity to make good on previous attempts to develop out-of-hospital services, including social care. In our survey, finance directors from both providers and commissioners placed greater priority on the need to invest in these areas in the future than on further investment in hospital care.

A new funding offer for the NHS alone will not guarantee improvements in patient care. The forthcoming Green Paper on social care and the 10-year health and care workforce strategy will be equally important for determining the quality of care patients can expect in future.

Performance

National targets are increasingly out of reach

Although we have technically moved out of winter, the latest performance data paints a picture of continuing pressure on NHS staff and services. While A&E departments understandably received much of the focus over the winter months, a quieter decline continues in waiting times for planned (elective) care.

The NHS Constitution gives patients the right to start planned consultant-led treatment within a maximum of 18 weeks from referral (92 per cent of patients are expected to be seen within this time).

But the phrase '18 weeks' is noticeably absent from the 2018/19 NHS planning guidance, which instead instructs the NHS to keep waiting lists for planned care in March 2019 at the same level as those in March 2018, when 4.1 million people were waiting (Figure 1). It also instructs the service to halve the number of patients waiting more than one year for treatment. By March 2018, 2,755 people had been waiting more than a year for treatment – the highest number since 2012/13.

^{Source: NHS England 2018
Notes: Data includes estimates for missing data from trusts that did not report data}

In crude terms then, the NHS is now being asked to focus on the number of people waiting for planned hospital treatment rather than on how long patients wait (as long as it is less than a year). This could have serious implications for both hospitals and patients. The 92nd percentile (the time by which 92 per cent of patients are seen) has already crept up to 22 weeks by March 2018 – its highest level since March 2009 and far above the 18-week target. And others have noted that targeting the size of the waiting list could lead to perverse consequences between now and March 2019, such as patients with less complex conditions being prioritised for care.

But even the task of containing the size of the waiting list at its March 2018 level will prove challenging. Although GP referrals for hospital treatment (which add people on to the waiting list) are growing at a slower rate than before, they are still growing. Meanwhile the rate at which patients can be taken off the waiting list (by treating them in hospital) is stalling as constrained capacity in hospitals continues to take a toll. Hospital bed occupancy has reached its highest level in eight years, and emergency admissions to hospital in May 2018 were a staggering 5.6 per cent higher than in the year before. There is simply not enough capacity in hospitals to cope with rising demands for both emergency and planned care.

The potential net result of all this might be a waiting list in March 2019 that is not only larger than intended but is filled with patients who have been waiting longer than in the past with more complex (and more costly to treat) conditions. Particularly as 44 per cent of CCG finance leads are considering extending waiting lists or reducing activity for certain elective specialties in 2018/19. And in the interim, there will be a considerable human cost for patients who will have to wait longer, sometimes in pain, for the treatment they need. As one finance director said, the new guidance may ‘provide a lot more scope for increasing waiting times and deteriorating patient experience. The [trust’s] current position was achieved through massive commitment of staff and significant resource – this will all be lost within 12 months’.

What then of A&E? Well, if the NHS planning guidance has little to say about 18 weeks it has plenty to say about four-hour waiting time targets in A&E departments. First, there is an expectation that national performance will rise so that 90 per cent of patients are seen within four hours in A&E during September 2018 and beyond. Second, that by March 2019 the majority of providers will see 95 per cent of patients within four hours. Finally, the NHS overall returns to 95 per cent performance 'within the course of 2019'.

If this all sounds familiar, it is because these were originally the expectations for last year (2017/18). The NHS came commendably close to achieving some of these. In September 2017, 89.7 per cent of patients were seen within four hours, just shy of the 90 per cent target. But in March 2018, only 9 of 137 trusts with major consultant-led A&E departments met the 95 per cent standard in March 2018. And, of course, the overall 95 per cent standard has not been achieved since July 2015.

Our survey data suggests the A&E target will remain as out of reach in 2019 as it was in 2018. Only 23 per cent of trust finance directors were confident they would achieve 95 per cent performance by March 2019 – and this is bolstered by finance directors from community trusts that operate walk-in centres and minor-injury units, where achievement of the 95 per cent standard has largely been maintained. Of the 32 CCG finance leads we surveyed, only one was confident their local providers would achieve the standard. As one trust director succinctly put it, they have ‘no chance of achievement for type 1 (major A&E) units’.

But if there is a silver lining when it comes to NHS performance, it may come in the form of an increasingly aligned view of the world across providers and commissioners of care. When we last looked at this issue in April 2015, nearly 80 per cent of trust finance directors were expecting emergency activity to increase in 2015/16 compared to the previous year, but only 8 per cent of CCGs agreed with them. Even if trusts and CCGs are not exactly on the same page now, there are increasing indications they are at least reading the same book – with much greater alignment in their plans for both emergency and planned activity in 2018/19 (Figure 2). Whether these plans can be delivered is another question. NHS Improvement’s chief executive recently reminded the sector that ‘the system doesn’t have the headroom for unrealistic planning’, and there must be genuine concerns that emergency activity in hospitals will continue to rise above expected levels even before the advent of next winter.

Source: The King’s Fund QMR15, QMR26
Note: Data shows the percentage of respondents who expect activity to increase from 2014/15 to 2015/16 (labelled April 2015 data), and from 2017/18 to 2018/19 (labelled May 2018 data). Data reflects the aggregate views of all surveyed providers and commissioners, ie, commissioner and provider plans have not been individually matched.

NHS finances

An increasingly broken system

Silver linings are hard to find when it comes to NHS finances. The NHS provider sector was initially expected to balance its books in 2017/18. But this target was quickly revised to a £496 million deficit once providers submitted their financial plans. By the end of the year, the sector reported a deficit of £960 million even with £1.8 billion of support from the Sustainability and Transformation Fund and substantial efficiency savings.

2017/18 was also challenging for CCGs, which ended the year with an overspend of £250 million, even after money held back throughout the year (ie, the risk reserves) was released. 75 CCGs overspent their budgets, with 57 of these overspending by more than 1 per cent. That the commissioning sector as a whole delivered an underspend of £955 million is entirely down to underspends in central NHS England budgets, including specialised commissioning and the Cancer Drugs Fund.

In aggregate, NHS providers overspent their budgets, but commissioners underspent theirs by a similar amount. This then is a system that has – on the face of it – once again balanced. But this is becoming a financial balancing act on the strangest of tightropes.

Figure 3 shows the now-familiar pattern of provider deficits and surplus (the 'S-curve' of provider finances). NHS Improvement has always been clear that the Sustainability and Transformation Fund is used for 'incentivising greater efficiency savings in future without rewarding past poor- or under-performance'. But the consequence of this is that the release of central funding is not evening out financial pressures across the provider sector – it is contributing to a growing gulf between the 'haves' and the 'have nots'.

The guidance for the Sustainability and Transformation Fund also suggests it 'continues to accelerate the financial recovery trajectory of trusts that are in deficit'. But while some trusts with large deficits are aided by the funding – including at least one trust that missed its financial control total – others miss out and plunge further into deficit. Three of the five trusts with the largest deficits did not sign control totals and received no sustainability and transformation funding in 2017/18 – these three trusts ended the year with an aggregate deficit of £270 million. Meanwhile, other providers with large surpluses – some of which were attained through one-off sales of land or assets – see their financial position bolstered further with monies from the Sustainability and Transformation Fund.

The Prime Minister has set an ambition that in the medium term 'no NHS organisation is in financial deficit'. Even with a new funding settlement, it is hard to see how some providers will achieve this when they are currently overspending by £100 million each year under the current financial management regime, as staff shortages and demands on services continue to rise.

^{Source: NHS Improvement 2018}

It is clear that the financial management systems in the NHS are increasingly complex and opaque – as one finance director said: 'We have a Frankenstein mishmash of financial management rules and systems that are all being overlaid but none have been hardened yet. How will we normalise this?' And with the introduction of a Commissioner Sustainability Fund in 2018/19, CCG finance leads have been quick to spot the potential problems in how central funding is now meted out.

Looking ahead to 2018/19 the financial prospects for the NHS once again look challenging. In our survey, nearly two-fifths of CCGs were expecting to overspend their budgets. To help manage financial pressures, nearly 80 per cent were considering extending the number of low-value treatments and prescriptions that will no longer be funded.

Turning to NHS providers, 42 per cent of trust finance directors are expecting to end 2018/19 in deficit. 80 per cent of providers said they will again depend on central funding support – though this year this will come from a £2.45 billion Provider Sustainability Fund rather than a £1.8 billion Sustainability and Transformation Fund. And despite being nearly a quarter of the way through 2018/19 the provider financial plans have still not been published – suggesting it is proving difficult for some trusts and NHS Improvement to reach agreement on what a credible and realistic financial plan looks like.

For finance directors in foundation trusts, the days in which they ran quasi-autonomous organisations with considerable financial and commercial freedoms must now seem very far away. And for non-foundation trusts a timely reminder of how much the world has changed recently came in the form of NHS Improvement guidance on their statutory duty to break even. A duty that will be more honoured in the breach than the observance for the foreseeable future.

National bodies have a difficult job. They must set challenging but achievable financial targets and ensure that poor financial management is not rewarded. But as we see record levels of financial deficits in some trusts (including one trust that has said it is in negative equity due to its high level of loans) and booming surpluses in others, it is now surely time to rethink the current control totals regime to ensure financial management in the NHS is more proportionate, fair and effective. NHS Improvement has said a 'new financial architecture' will come into place from 2019/20. This, together with the proposed funding settlement, provides a clear opportunity to improve the current approach to managing NHS finances.

Where do NHS finances and performance go from here?

Previous QMR surveys have painted a fairly bleak portrait of how the NHS is performing. This survey has been no exception. Despite the efforts of frontline staff, and despite both CCGs and NHS trusts delivering impressive cost improvements over 2017/18, patients continue to wait longer for care and financial deficits are rampant. 51 per cent of trust finance directors and 29 per cent of CCG finance leads felt patient care had worsened in their area over the past year.

The picture was not unrelentingly negative though, with several finance directors noting performance on delayed transfers of care had improved as extra funding for social care services had started to have an impact.

Looking to the future (albeit before the recent announcements of a new long-term funding offer for the NHS), 76 per cent of trust directors and 80 per cent of CCG leads were pessimistic about the financial state of their local area over the next 12 months. No wonder that in this challenging context staff morale has returned to the top of the pile of issues that keep finance directors up at night (Figure 4).

^{Source: The King’s Fund QMR15 to QMR26
Notes: Respondents could select three top causes for concern from a list of options. Data is shown for the top five concerns where data was available for each QMR.}

So where might some hope be found? One source is the greater alignment between providers and commissioners that was mentioned earlier. Closer working through sustainability and transformation partnerships and integrated care systems is starting to pay some dividends in both common cause and a shared view of reality across the purchaser-provider split. This emerging alignment was often emphasised in the comments from our survey: 'Joint working has significantly improved, and finances are better aligned so that system can focus on solutions' (NHS trust finance director).

A second source of hope comes through the offer of a new long-term funding settlement for the NHS. The government has proposed an increase in spending on services covered by the NHS Mandate of 3.4 per cent a year on average over the next five years. Although less than the 4 per cent increases The King’s Fund believes is needed to improve and transform care for patients, the proposed settlement does offer some relief for the current pressures on staff and services. But as always, there are some clouds circumscribed by this silver lining, not least the ongoing workforce shortages that will limit the impact of any new funding.

The recent national announcements have focused on NHS funding with promises that social care and public health will have their turn… in the fullness of time… at the appropriate juncture. But the NHS now faces a clear choice of where to invest any new funding. Acute trusts account for 87 per cent of all trusts in deficit and could once more be the first port of call for additional funding. But when asked what they would prioritise, providers and commissioners were once more in agreement that the services that support patients in their own homes and communities should be at the front of the queue for support (Figure 5). The NHS has spoken of developing, transforming and sustaining community services for decades. The thrust for the 10-year plan must be to finally achieve this goal.

^{Source: The King’s Fund QMR26
Notes: Respondents were asked for their top three priority areas to receive additional NHS funding. Data is the percentage of mentions each priority area received from trusts and CCGs.}

Realistic expectations of what services can deliver in return for this extra funding are also needed. Eight years of austerity have left the health and care system with considerable ground to make up – a point illustrated by our survey, in which the majority of CCGs and trusts were not confident that there was sufficient funding in place to deliver The five year forward view for mental health, in part because, 'Any additional funding [is] being used to address trust's underlying deficit caused by historic reductions in CCG funding'(CCG finance lead).

And finally, the need for realism certainly extends to ambitions on national waiting time standards. The Secretary of State has said that meeting core performance targets – for example, for A&E and planned consultant-led treatment – will be an early milestone for the NHS in any new long-term service plan. A point echoed by the Prime Minister, who is prioritising ‘getting every part of the health service back on the path to delivering core performance standards’. But given the position the NHS is starting from, and the fact that additional funding does not translate into additional staff or hospital capacity overnight, a return to constitutional standards across the board, even by the end of this parliament, might be a tall order. Perhaps it is for this reason that the Prime Minister has left the door open for a more fundamental look at the targets regime in the coming 10-year NHS plan, noting 'we would like clinicians to confirm the NHS is focused on the right targets – for both physical and mental health'.

So, even as we approach the height of summer, a winter gloom remains in NHS finance and performance. But some cautious hope is also emerging from a new funding settlement and closer working between providers and commissioners. The long-term NHS funding settlement, a Green Paper on social care reform and a 10-year health and care workforce strategy reflect a recognition that national action is required to tackle the pressures facing frontline services. Any one of these initiatives on its own would be a potential game changer for the service. Taken together, they might provide the best opportunity in a decade for health and care services to both find some stability and use that stability as base for more fundamental transformation and improvement in how services are delivered for patients in the future.

See the box below for further details of recent measures that have been put in place to manage NHS finances and performance. 

This quarter’s report is based on an online survey of 90 NHS trust finance directors and 34 clinical commissioning group (CCG) finance leads (covering 44 CCGs). 

Respondents were asked about their organisation’s forecast end-of-year financial situation for 2018/19 and the financial outlook for their local health economy over the past and forthcoming financial year; the state of patient care in their area; the key organisational challenges facing trusts and CCGs; workforce issues. We also asked respondents about the ability of their trust or the trusts they contract with to meet accident and emergency (A&E) milestones by March 2019.  

1. Forecast end-of-year financial situation: 2018/19

• In our recent survey, 42 per cent of trust finance directors forecast their organisation would end 2018/19 in deficit (Figure 6) and 53 per cent reported that their forecast position for 2018/19 would depend on significant financial support from the Provider Sustainability Fund (Figure 8). Trusts providing acute (hospital) care were more likely to be in deficit. 
   
• Of the 73 trusts we surveyed who had agreed control totals for 2018/19 (or were in the process of agreement), 34 per cent were either fairly or very concerned about meeting their target (Figure 11). 22 per cent of providers expecting to receive Provider Sustainability Fund monies still forecast a deficit by the end of 2018/19.
   
• 9 per cent of all CCGs forecast a surplus for 2018/19, and 39 per cent were expecting to overspend (Figure 7). Furthermore, 64 per cent of all CCGs were expecting to delay or cancel spending plans to support their finances in 2018/19 (Figure 9). 55 per cent of all CCGs were fairly or very concerned about meeting their expenditure control total for 2018/19 (Figure 12).
   
• 79 per cent of CCG respondents were considering extending the number of low-value treatments and prescriptions that will not be funded, and 44 per cent were considering extending waiting lists or reducing activity for certain elective specialties (Figure 10).

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2. Cost improvement programmes (CIP) and quality, innovation, productivity and prevention (QIPP) programmes (2018/19) 

• The average cost improvement programme (CIP) target for trusts for 2018/19 is 4.2 per cent, ranging from 1.8 per cent to 8 per cent of turnover (Figure 13). 
   
• The average quality, innovation, productivity and prevention (QIPP) target for CCGs for 2018/19 is 3.5 per cent, ranging from 1 per cent to 7 per cent of allocation (Figure 13). 
   
• 36 per cent of all NHS trust finance directors were either fairly or very concerned about achieving their CIP targets this year (Figure 14). 
   
• 50 per cent of all CCG finance leads were fairly or very concerned about achieving their plans this year (Figure 15).

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3. The state of patient care 

• 51 per cent of finance directors and 29 per cent of CCG finance leads felt that patient care had worsened in their local area in the past year (Figures 16 and 17).

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4. Organisational challenges

• For trust finance directors, staff morale is the main concern for this QMR (Figure 18), followed by bed occupancy rates (introduced as an option in QMR21) and the A&E four-hour waiting time standard. 
   
• For CCG finance leads, the A&E four-hour waiting time standard continued to be their main concern for a sixth QMR in a row (Figure 19). Their second biggest concern continued to be pressures on general practice, introduced as an option in QMR23.

5. Waiting time standards

• As a condition of receiving money from the Provider Sustainability Fund, trusts are expected to develop credible plans for maintaining the delivery of core standards for patients, including the A&E four-hour performance standard. 
   
• We asked trust finance directors how confident they were in their organisation’s ability to deliver on the A&E four-hour waiting time standard by March 2019. Worryingly, 70 per cent of all trust finance directors (Figure 20) were either fairly or very concerned that their organisation would not be able to deliver this performance standard by March 2019. At the same time, 76 per cent of CCG finance leads felt fairly or very concerned that the organisations from which they commission services would not be able to deliver this performance standard by March 2019 (Figure 21).

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6. Elective/non-elective activity planning

• We asked NHS trust finance directors about their plans/expectations for non-elective and elective (planned) activity in 2018/19 compared to 2017/18. 51 per cent of trust finance directors (Figure 22) and 53 per cent of CCG finance leads plan for or expect elective activity to increase in 2018/19 (Figure 23).
   
• 71 per cent of trust finance directors expect or have planned for an increase in non-elective activity this year (Figure 24). At the same time, 53 per cent of CCG finance leaders have planned for or expect an increase in non-elective activity in the same period (Figure 25).  

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7. NHS funding settlement

• The government has proposed an increase in spending on services covered by the NHS Mandate of 3.4 per cent a year on average over the next five years. Although less than the 4 per cent increases The King’s Fund believes is needed to improve and transform care for patients, the proposed settlement does offer some relief for the current pressures on staff and services. 
   
• We asked NHS trust finance directors and CCG finance leads what areas should be given priority for this investment. The survey was sent out before details of the offer had emerged, and respondents were asked to select their top three areas for investment. Social care was the highest area of priority for NHS trust finance directors, followed by community health services and mental health services (Figure 26). Closely aligned to finance directors’ responses, CCG finance leads primarily opted for general practice as the top area in need of investment, followed by community health services and social care (Figure 27). 

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8. Funding for The five year forward view for mental health implementation plan 

• 62 per cent of mental health trusts are fairly or very concerned about receiving enough funding for mental health services in 2018/19 to deliver in full the implantation plan as set out in The five year forward view for mental health (Figure 28). At the same time, 30 per cent of commissioners feel fairly or very concerned about receiving enough funding for mental health services this year to deliver the implementation plan (Figure 29). 

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9. Looking ahead...

• When asked for their views about the financial state of their wider local health and care economy over the next 12 months, 76 per cent of trust finance directors and 80 per cent of CCG finance leads were fairly or very pessimistic (Figures 30 and 31). 

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