Sustainability and transformation in the NHS
The Department of Health and Social Care (the Department) is ultimately responsible for securing value for money from healthcare services. It sets objectives for the NHS through an annual mandate to NHS England and in 2016–17 gave it £105.7 billion to plan and pay for services and patient care delivered by the NHS. NHS England allocated the greatest share of this budget to 209 clinical commissioning groups, which largely bought healthcare from 235 hospital, community and mental health trusts. Trusts manage their expenditure against the income they receive, while NHS Improvement oversees and monitors the performance of trusts. The Department has made NHS England and NHS Improvement responsible for ensuring the NHS balances its budget.
In 2016–17, NHS England, clinical commissioning groups and NHS trusts and NHS foundation trusts (trusts) reported a combined surplus of £111 million against their income, a significant improvement compared to the combined deficit of £1,848 million they reported in 2015–16. This improvement was the direct result of the Department’s £1.8 billion Sustainability and Transformation Fund, paid by NHS Improvement to trusts for meeting financial and performance targets. Without this Fund, the combined financial position of the NHS would have been only slightly better than in 2015–16. As well as balancing its books each year, the NHS needs to invest in new ways of working that can better serve the changing needs of patients and increasing demand for services. To facilitate a more long-term approach to achieving sustainability, local partnerships of commissioners, trusts and local authorities have been set up to develop long-term strategic plans and transform the way services are provided more quickly.
Conclusions and recommendations
1.The Department of Health and Social Care’s (the Department) system for funding and financially supporting the NHS focuses too much on short-term survival and limits the NHS’s ability to transform services to achieve sustainability in the long term. The Department used the £1.8 billion Sustainability and Transformation Fund in 2016–17 to address the financial deficit in the trust sector, rather than improving and developing services for patients. While it succeeded in improving the overall financial position, some trusts received no payments while others received bonus payments which increased their existing surpluses further. HM Treasury gave the Department £337 million additional funding in 2017–18, partly to cope with winter pressures, but this was announced in November 2017, too late for trusts to effectively plan how this would be spent. With less than a month to go until the end of the financial year, the Department had still not decided how to allocate £50 million of this additional money. It does not appear the Department has learnt lessons from this and would not commit to giving trusts earlier notice of any future winter funding to enable them to plan longer term. These cash injections paper over the cracks in NHS finances rather than achieve lasting improvement. Even with additional funding, clinical commissioning groups and trusts are increasingly resorting to non-recurrent, one-off savings to balance their books. These reactive, short-term measures are not sustainable.
Recommendation: The Department should, by mid-July, write to the Committee with details of its progress towards achieving a coherent package of measures that support more stable long-term funding arrangements in the NHS. This should include its plans for future sustainability funding, its plans to reduce one-off savings, and its plans to secure a long-term funding settlement from HM Treasury which reflects a realistic level of funding needed.
2.Staff shortages across the NHS are having a serious and negative impact on both the sustainability and transformation of services. Between October and December 2017, there were 36,000 full-time equivalent registered nursing vacancies across NHS providers; a 10% vacancy rate. We are concerned that some hospitals adopted unsustainable staffing models to meet the needs of patients over the winter period, with existing staff working more hours. Faced with so many vacancies, the Department and NHS England lack a coherent approach to attracting more nurses into the profession. The decision to scrap the nursing bursary seems short-sighted when the Department is now promoting NHS funded nursing apprenticeships as a route into the profession. As well as keeping services afloat, an expansion in the responsibilities of key roles, such as those of GPs, is needed to shift more care out of hospital and into the community. NHS England has a string of initiatives to boost recruitment and retention of GPs. However, in the last year the number of full-time equivalent GPs has fallen, driven partly by GPs retiring early. There are also worrying variations in unfilled GP training places across the country.
Recommendation: The Department and NHS England should, by May 2018, report back to the Committee on what action they are taking to tackle key workforce issues, including nursing shortages and high levels of GP retirement and also provide evidence to show whether current plans are adequate to tackle this serious problem.
3.The support offered by the Department and NHS Improvement to those trusts with deep-seated structural problems, including large levels of debt, appears to be working against each other, posing a significant risk to the long-term stability of the NHS. The Department and NHS Improvement currently lack an agreed method for measuring the scale of these structural problems, but agree that there are a small but significant number of trusts with large underlying financial deficits that it will take several years to resolve. In July 2016, NHS Improvement introduced a financial special measures regime for the most financially challenged trusts. This was designed to support trusts to better manage their finances and produce and deliver recovery plans. The regime improved trusts’ year-end financial positions in 2016–17 by £96 million compared with forecasts prior to the support. However, at the same time, the Department punishes trusts who enter financial special measures by imposing a 6% interest rate on loans that it gives for cash support, compared to 1.5% for most other trusts. The high interest rate may discourage these trusts from accessing additional financial support and is likely to limit how quickly these trusts can improve. Trusts with large deficits and those missing financial targets are less likely to receive payments from the Sustainability and Transformation Fund, potentially exacerbating the problems that they face. Some 40% of payments from the Fund in 2016–17 created or increased trusts’ surpluses rather than supporting those most in need.
Recommendation: The Department and NHS Improvement should, by summer 2018, publish a coherent strategy for addressing long-term structural problems in trusts. This should include:
- an agreement on how the underlying deficit in trusts will be measured;
- a series of interventions and expectations covering what trusts can realistically achieve given the scale of the problems concerned;
- an improved allocation of sustainability funding that better targets the most challenged trusts; and
- an agreed position on the effectiveness and impact of a high rate of interest on loans to challenged trusts.
4.Despite previous concerns raised by the Committee, the Department has still not sufficiently considered the long-term consequences on services and patient care of repeated raids on its capital budget. Capital funds are used to cover many essential areas of spending, such as maintaining buildings, facilities and equipment and investing in new technologies, care models and the infrastructure needed to transform services. The NHS already has a shortage of capital funds, needing an additional £10 billion by 2020–21 to maintain and transform services. It is therefore worrying that the Department has chosen to transfer money from its capital to revenue budget every year since 2014–15. In 2016–17, the Department transferred £1.2 billion of an initial £5.8 billion capital budget to meet day-to-day spending. The Department could not tell us exactly when it would stop capital to revenue transfers, but confirmed that it wanted to do so by the end of this Parliament. When we last examined financial sustainability in the NHS in February 2017, we were concerned that these repeated raids could result in ill-equipped and inefficient hospitals, and recommended that the Department, NHS England and NHS Improvement should review and improve national and local planning for capital expenditure. It is therefore disappointing that the Department is only now beginning a review of how capital budgets are spent in the NHS. It is particularly concerning that the Department continues to transfer much-needed capital without assessing what impact this is having on the sustainability of services and the delivery of patient care in the long term.
Recommendation: The Department should ensure its review of how capital budgets are spent is expanded to assess the impact on services and patient care of repeated capital transfers.
5.NHS England and NHS Improvement could not clearly articulate how accountability will work under the new integrated care systems being set up. Since 2016, healthcare commissioners, trusts and local authorities have been working closer together in 44 sustainability and transformation partnerships to collectively plan how to meet the rising demand for services. NHS England and NHS Improvement are encouraging partnerships to evolve into integrated care systems, which involves them taking control over the health budget covering their entire population. Ten integrated care systems expect to operate from 2018–19 and more areas of the country are enthusiastic about becoming one. Currently there are no plans to enshrine the status of the new integrated care systems in law. Individual health commissioners and trusts will therefore remain accountable for the areas outlined in the legislation covering their organisations. However, as the new integrated care systems will seek to bring together the budgets, functions and care offered by the organisations involved in the interests of the patient, it is worrying that NHS England and NHS Improvement could not clearly explain how this will sit alongside each organisation’s existing responsibilities. For example, they provided no reassurance to our concerns about how they will ensure that patients’ complaints are effectively heard and addressed if care services are delivered jointly by different organisations.
Recommendation: NHS England and NHS Improvement should work with the new integrated care systems to define and test how accountability should operate under these new arrangements, and should publish model guidance by September 2018.
6.NHS England and NHS Improvement have not yet coordinated their approaches to regulating partnerships and integrated care systems, meaning local organisations which should be working together receive mixed and confusing messages. Different organisations involved in sustainability and transformation partnerships are regulated in different ways. NHS England regulates health commissioners and NHS Improvement regulates trusts. It is therefore difficult for the regulators to give clear, system-wide messages. They are beginning to work together in new ways, but have yet to identify how they can jointly regulate and oversee partnerships and integrated care systems. In particular, NHS England and NHS Improvement have agreed financial targets for the ten integrated care systems, but individual organisations are still being regulated on their own financial performance. This means local organisations receive mixed messages from the two regulators on the balance they expect between ensuring the financial sustainability across all organisations as a whole and protecting the finances of individual organisations. NHS England told us that it was reviewing whether sustainability payments currently paid to individual organisations can be turned into system-wide incentive payments from 2019–20.
Recommendation: NHS England and NHS Improvement should write to the Committee by May 2018 to set out how they will better integrate their regulatory functions and more effectively oversee the performance and operation of integrated systems.
7.The patient voice is at risk of being lost as sustainability and transformation partnerships’ engagement with the voluntary sector and local government is variable. The partnerships are laying the foundations for more strategic system-wide planning and delivery of services for patients, but the pace and scale of change can make consultation with patients and the public difficult. The extent to which partnerships are working effectively is variable, including their level of engagement with local government and the voluntary sector. This engagement is needed to ensure patient and service users’ experiences and their concerns are heard and addressed, and services improve as a result. NHS England is involving charities in its national programmes on cancer, diabetes and mental health, but recognised that it needs to stimulate and ensure more involvement of the voluntary sector at a local level.
Recommendation: The Department, NHS England and NHS Improvement should, by summer 2018, set our clearer guidance and evidence of how the NHS, local government and the voluntary sector can work more cohesively as a whole system, including communication and engagement with patients.
8.The financial pressures facing NHS providers has led to the Department using money to prop up services but not to transform them to provide better care. The Department has focused funding on sustainability not transformation despite its commitment to transforming care delivery models to deliver savings by integrating care. Although it has introduced a vanguard programme to pilot new models of care in certain areas of the country, the Department told us that spending on the vanguards in each year of their existence will have been less than one tenth of 1% of the NHS budget and has not been a big investment. The Department is looking to expand the programme and believes that early signs suggest it is helping to relieve pressures on hospitals. However, whilst so many trusts and CCGs are working to simply keep services going it is not clear how the Department is sharing what is working well in the vanguards and sharing best practice across the country. This best practice should not just include better financial management but also how vanguards are delivering a better service for patients and how models of care can be tailored to different areas such as rural communities versus urban areas. If the Department wishes to counter accusations of these new models of care being simply vehicles for cutting spending, it must demonstrate that vanguards not only deliver more efficient services but also services that lead to better outcomes for patients.
Recommendation: The Department should report back to the Committee by summer 2018 on the work it is doing to promote new ways of working and examples of good practice by vanguards to all areas of the country.