A bad week for the NHS

11 August 2015

It might be silly season for the papers, but there was nothing funny about last week for the NHS. Healthcare regulators wrote to NHS hospitals, demanding they go further and faster to reduce their deficits. NHS England penned a similar letter to commissioners. Meanwhile it emerged that the Department of Health had to eat into ring-fenced reserves last year to balance the books (just).

None of this will come as a surprise to healthcare leaders. Over half of NHS providers ended last year in the red with a deficit of more than £800 million, up from £100 million in 2013-14. This is forecast to spiral to nearly £2 billion this year. As David Bennett wrote in his letter to Trusts this week, this is “simply unaffordable.” There is now considerable pressure from the centre to keep the deficit at just £1 billion this year.

Yet while it came as no surprise, this suite of interventions set a sombre mood. According to the Health Service Journal, the message for Chief Executives was loud and clear: “cash is king again.” While quality had been the due north of health reform in the wake of the Francis and Keogh inquiries, “now it’s going the other way.” As one Chief Executive put it, “You have to make a choice: are you going to be sacked as a chief executive for the money or are you going to be sacked for the quality? Personally I’d rather be sacked for the money, but there’s genuinely no option.”

These comments raise interesting questions for policymakers, no more so than for the Government. Speaking straight after the Election, the Prime Minister told healthcare leaders unequivocally that “there is no choice between efficiency savings and quality of care.” Indeed Hunt’s mantra of “better care costs less” does not fit well with this Chief Exec’s analysis either.

There is certainly truth to Cameron’s comment. As Professor Michael Porter, the Harvard business guru, told Reform “value for patients means delivering excellent health outcomes…and doing that very, very efficiently.” Indeed, “If you think strategically about how we can restructure and streamline our care delivery process [coordination of services around the patient], what we’re finding is that cost reduction opportunities in healthcare over and over again are 25, 30, 35, 40 per cent.”

But, whether true or not, it clearly doesn’t feel that way on the frontline. Why? The Chief Executive’s comment that you won’t be “sacked for the money” is telling. While staff are held to account, often very publically, for performance and quality of care, the consequences for financial failure are much less clear. As the King’s Fund recently remarked, “When caught between an apparently clear conflict between quality of care and financial balance, so far the conflict is being decided in favour of the former.”

Take the special measures trusts, for example. While many are showing signs of quality improvement, getting there left the 11 original trusts with a combined deficit of more than £140 million in 2014-15. Just last week CQC removed King’s Lynn from special measures even though Monitor warned that the trust had a long way to go to clear its £14 million deficit.

For all hospitals the choice seems clear: maintain performance by hiring more staff (often at great expense), or face the stern consequences of failings of care. As the National Audit Office has warned, trusts now assume that a bailout from the centre is guaranteed to be given. It is easy to see why the choice seems simple and the recent confusions over safe staffing have certainly done little to change that.

The danger, of course, is that now the pendulum will have to swing too far “the other way.” Having failed to make sustainable improvements to efficiency in the last Parliament, Monitor and the Government are now having to demand much quicker turnaround of balance sheets. This is likely to mean loosening targets for performance and clinical indicators in the short term, including waiting times. No doubt some in the NHS are still hoping for another cheque from the Chancellor in the Spending Review this Autumn to make sure that doesn’t happen. But with other departments on track for 40 per cent cuts, they are likely to be sorely disappointed.

Cathy Corrie, Senior Researcher, Reform



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