The financial challenge is starting to bite. As reported here, eleven foundation trusts are in serious breach over their finances, to such a degree that they would not be authorised if being assessed for FT status today. The review by Monitor of FT annual plans raises concerns about the viability of a number of trusts too.
And then there are the non-foundation trusts, where viability issues are more likely. The slowing of the ‘pipeline’ and the rising talk of reconfiguration suggests that a good proportion of the remaining 100 or so may be unable to achieve FT status in their current form.
So we have a developing crisis in the acute sector. Hospital trusts must achieve 5% and upwards each year in efficiency improvements, without the annual income increases they have had before. They must also, according to received wisdom, reduce bed capacity as care ‘shifts to the community’. And they must do these whilst maintaining at least current levels of operational performance, quality, and safety.
It is hard to believe the sector will survive the coming years unchanged. But what options do boards have?
Roughly speaking, the annual efficiency requirement is the same as in recent years – that is 4-5% for trusts without deficits they have carried forward. But a careful look at trust accounts will show that few have genuinely achieved this on a year-on-year basis. Most have topped up their efforts with non-recurrent (one off) measures, or offset them with income growth that has come with increased activity.
To do 4-5% in the present ‘flat cash’ situation is hard, even unprecedented. Other measures have to be explored, especially as the present economic constraints are likely to continue for some years yet. But what other measures are there?
Seeking new work, or growing activity in some specialties, is unlikely to be the answer. Even if there are opportunities, they are unlikely to be material and, anyway, it is a zero sum game so the health economy will compensate by spending less elsewhere.
Disinvestment is difficult. The politics are well known to all. Seemingly it is easier to rationalise more specialist services (stroke, major trauma, vascular surgery are examples), but smaller trusts in particular find the loss of income often exceeds the costs they can take out to compensate.
In the South West, a group of trusts is examining how savings can be made by reducing the cost of the workforce. This is predictably contentious, and it does feel counter-intuitive to risk demoralising staff at the very time we need their support in such a challenging climate? I suspect this will yield little unless there is a national lead given.
And then there is reconfiguration, of either services or trusts. But the evidence for savings from mergers is difficult to find. Reducing boards generates little – savings really need to come from rationalising services. Maybe there are possibilities with specialist services, as hinted at above, if very large organisations are created? Even on our scale (three hospitals, £600m turnover) we have found opportunities to be limited, but maybe the mega-trusts emerging in London will demonstrate the ability to generate efficiencies?
Hospitals alone, therefore, seem to be facing an insurmountable challenge? I suspect the solution, assuming there is one, must come from a ‘whole system’ approach. This will require hitherto unseen levels of collaborative working, in order to drive down demand across the health economy. It would also require a different kind of leadership, a sharing of risk and reward, and a commitment to a common goal that transcends the narrow interests of individual organisations.
This would be truly transformational. Are we up for it?
This article was published on HospitalDr on 26 September 2012