The Health Foundation has published a report which underlines the challenges facing NHS finances. The report Hospital finances and productivity: in a critical condition?concludes that financial performance of NHS providers in England has deteriorated sharply since 2013, from a net surplus of £582m in 2012/13 to a net deficit of £108m in 2013/14. At the end of the third quarter of 2014/15 the deficit had grown to £789m. Other key findings included:
Despite an expected under-spend from commissioners of £197m, the NHS is projected to overspend by £626m by the end of 2014/15.
Staff costs are the biggest driver of rising operating costs. Spending on temporary staff grew by £1bn (27.8%) in 2013/14 and continues to rise. Acute hospitals are hardest-hit: 76% were in deficit at the end of Q3 of 2014/15, up from 19% in 2012/13. Hospitals’ crude productivity fell by almost 1% in both 2012/13 and 2013/14.
NHS hospitals have only improved efficiency at an average rate of 0.4% a year over this last parliament. This is substantially below previous estimates and the 2-3% set out in the NHS Five year forward view.
The analysis suggests that while the NHS improved its productivity in the early years of the last parliament, performance tailed off sharply and the crude productivity of hospitals has gone backwards over the last two years. The Heath Foundation further states that there is scope for further productivity gain, and the NHS should strive to improve efficiency and eliminate waste.
It added that unlocking this potential will require a different approach and focus over the next five years. In addition, there will need to be much less focus on individual organisations’ performance, and much more on looking at the health system holistically.
Commenting on The Health Foundation’s report, Rob Webster, chief executive of the NHS Confederation, said: “There is strong support for the Five Year Forward Viewanalysis that shows the NHS needs at least an extra £8 billion a year above inflation by 2020. We are calling on all political parties to commit to this and the service changes that the NHS will need to make to deliver a further £22bn of efficiency savings, requiring productivity improvements of 2-3% a year. “This is a daunting task, confirmed by this timely report from The Health Foundation. The report makes clear that investing in extra staff to boost quality and safety comes at a price. It underlines that the NHS requires a new focus on ‘allocative’ efficiencies – by doing things in new ways that are better, simpler and more cost effective. It is vital that the public are involved in this conversation. “If we are to succeed, the political parties must be straight with the public about the huge scale of the savings and increases in productivity required over the next parliament, even with extra investment. It means we will need to fundamentally change the way we provide care for millions of patients which itself will require funds for double running services and investment in estates, IT and innovation.”
