Key points

Pressure has been applied on NHS leaders to submit “unrealistic“ plans in order to publish balanced budgets.

Future plans look likely to rely on unachievable savings in the face of rising demand and costs.

This year many Integrated Care Systems relied upon one-off savings, with next year looking tighter still.

There is a disconnect between the presentation of the national picture and the local reality on the ground of unnecessary deaths in A&E, delayed discharges and a continuing crisis in staffing.

Before the 42 Integrated Care Boards established last July have fully gathered details of their financial performance over their first nine months, it’s already clear that many if not all face a much tougher struggle to stay afloat in the new 2023/24 financial year.

NHS England heard at their March Board meeting that 16 Integrated Care Systems were forecast to overspend compared to their plan for 2022/23, with a combined forecast overspend of £517m. The Board was assured that the deficits equate to less than 1% of total allocation, and seems to have asked no more searching questions about how these results were achieved.

However, a new Lowdown survey of 21 ICBs (in North East and Yorkshire, North West, South East and South West) suggests this may well be an underestimate and unrealistically optimistic on the situation ahead.

While in some areas there is little or no useful information publicly available, it shows that the reality in most areas is that deficit figures have only been reduced to the reported level after additional funding of £1.5 billion was distributed towards the costs of inflation by NHS England, and by resort to one-off “non-recurrent” measures by trusts or ICB finance directors, which effectively conceal the scale of the underlying gap between cost pressures and resources.

The problem is then the even larger challenge to bridge the gap between needs and resources the following year.

Tougher this year

NHS England bosses know full well that however tough the financial regime has been for 2022/23, it is set to get even tougher in the next two years – in which the NHS is expected to deliver £12 billion in “efficiency savings”, while reducing waiting times and waiting lists and somehow coping with problems including:

  • continuing high levels of cost inflation,
  • under-funded pay awards,
  • staff shortages that force up spending on agency staff,
  • thousands of beds filled with Covid patients (for which there is now no additional funding),
  • and thousands more filled with patients who cannot be discharged for lack of community health and social care.

Last autumn NHS England warned ministers before the budget that it faced a £7bn deficit for 2023/24, but Chancellor Jeremy Hunt’s response was to increase spending by less than half this amount.

The HSJ, with the benefit of leaked information, revealed early in March that the first draft of plans for 2023/24 projected a combined deficit of £6 billion, almost half of which came from just two regions, the Midlands (£1.5bn) and the North West (£1.4bn). The HSJ reported one ‘senior source at an ICS’ saying the deficit was the “biggest… by some way” they had seen at this stage in their 25 years in the NHS, and predicting the planning round would last until July.

However, it seems that the main focus of NHS England has been on closing their eyes and putting their fingers in their ears, suppressing public evidence of bad financial news, while pressing behind the scenes for improbably large “savings”.

The Lowdown reported how back in November NHS England set up tough new rules to deter ICB finance chiefs from giving early reports of any negative change in their financial situation – effectively encouraging ICBs to cover up reality and delay any unpleasant news (and any consequences) until the last minute.

This has further developed into moves tantamount to urging ICBs to lie about the reality they face, with NHS England subsequently also bouncing back revised plans for deficit budgets in 2023/24, which according to the HSJ still collectively add up to a deficit of £3 billion.

Turning the screw on trust bosses

Now the HSJ reports NHS England is applying new pressure directly on to trusts which have failed to submit a balanced budget for 2023/24. NHS England’s chief finance officer Julian Kelly has told chief executives that around a quarter of trust submissions for 2023-24 were still unacceptable.

Sources told the HSJ that NHSE was now “turning the screws,” going through trust plans to identify further savings, and applying “intense” pressure. One acute truss boss said: “Every trust in the country is having to go back and take more out of its budget.”

But while NHS England tries to ratchet up the targets for cost savings, Nuffield Trust research suggests that trusts have generally been unable to deliver savings of much more than 1 percent.

NHS England is demanding new plans be drawn up which, like last year, appear to balance the books by assuming increasingly unrealistic levels of savings can be made.

The whole process of developing plans for the new financial year has largely been conducted behind closed doors, with ICBs revealing only the most sketchy details of their plans to Board members, and keeping the public in each area in the dark. Whenever this has been done in recent years (as with the development of Sustainability and Transformation Plans in 2016) the result has in almost every case been rubbish plans that are swiftly discarded as unworkable.

The HSJ now cites one example from North East and Yorkshire in which savings of seven percent of the total ICS turnover are assumed, and one ICS leader responding: “How anybody is going to do 7 per cent without hitting patient care is beyond me. This isn’t planning, it’s just making figures up.

It also quotes a chief financial officer in another system commenting: “We’re into numbers now that are not doable by just efficiency, they have to be cuts.” Although there are next to no details of how the claimed savings have been made so far, or how they are being planned for the new financial year, the Lowdown’s survey finds evidence that supports this view.

Serious plans for efficiency seem to be few and far between – and some trusts and local systems have been relying on reduced levels of elective activity (some areas still below 2019 levels) to keep their costs down – quite the opposite of an efficiency saving.

One-off schemes

Many ICBs have been relying upon non-recurrent or one off savings to cover a large proportion of their underlying deficit, raising the question as to how future costs will be met.

In North East and North Cumbria, for example, where a failure to deliver £64.5m of recurrent “efficiency” savings was partly covered by £57.5m of non-recurrent measures, only one of the 11 providers forecast achievement of recurrent savings (p197).

In Greater Manchester, just £22m of £119m forecast full year savings are recurrent, and the HSJ has published a £paywalled report that the underlying deficit is as high as £800m.  The financial problems in this early implementer of ‘devolved’ power and integration of NHS and social care are obviously severe.

By month 9 the system was in deficit by £67.8m against a planned deficit of £8.0m. As a result, the ICS has been placed into a formal financial recovery process, alongside crisis measures including a continuing vacancy freeze with a rigorous process to support “recruitment to business critical roles only,” and the “launch of the STAR process to review any new expenditure requests at an earlier stage in the decision making and procurement process.”

The real picture is harder to decipher in some local systems, such as Cheshire and Merseyside, where the ICB itself is projecting a substantial surplus, largely at the expense of providers (most commonly the acute trusts) facing substantial deficits (p56).

Frimley ICB in the South East is projecting break-even, largely on the back of one-off measures including a lucrative land sale.

In Bath, NE Somerset, Swindon and Wiltshire (BaNESSW) a planned ICB surplus of £51.1m “has been transferred to cover the planned provider deficit” (p58).

By contrast in Bristol, North Somerset and South Gloucestershire (BNSSG) the ICB admits it is expecting to deliver NONE of its “System Transformational Savings Programme” target of £13m (p10).

Acute and emergency services

Pressures on acute and emergency services are central to the concerns and the deficits in many areas, with acute trusts generally facing the biggest problems. For example in Humber and North Yorkshire: “[Hull University Teaching Hospitals Trust] started the year with an underlying deficit of £43.5m …  additional in-year pressures will move this to a position of between £50m – £56m.” (p277)

North East and North Cumbria ICB reports “There are 2 providers with long standing financial issues and forecasting a combined deficit of £64.14m, which the remaining providers will need to cover in order to deliver the system plan.” (p294)

Four Cheshire and Merseyside acute hospitals have combined deficits of £76m: the Countess of Chester Hospital Trust (which planned for a £3.1m deficit, but the actual is £20.6m); Liverpool University Hospitals £29.9m; Mid Cheshire Hospitals NHS Foundation Trust Planned  £11.7m; Southport and Ormskirk Hospital £13.7m.

The deficit in Liverpool University Hospitals is put down to the need for 78 escalation beds, (down from 115) to meet high levels of emergency need: and “corridor care” remains in place, and a significant driver of additional staffing requirements: meanwhile elective activity levels remain below the pre-pandemic levels. In Mid Cheshire the Trust is experiencing increased unplanned demand, requiring additional escalation beds and newly opened discharge lounge. Wirral University Teaching Hospitals has also had to open 64 escalation beds, and use “corridor care” in the Emergency Department.

In the South East, provider deficits in Hampshire and the Isle of Wight total £70.8m at month 11. In Buckinghamshire, Oxfordshire and Berkshire West acute hospital trusts are running combined deficits of almost £39m.

Human cost of A&E delays

However, money is not the only measure of a system under pressure, and the Royal Cornwall Hospital Trust is the only one in this survey to call attention to the increased risk these delays pose for patients. Cornwall ICB’s only acute hospital, Treliske in Truro, has seen a worrying further drop in A&E 4-hour performance, from 44.26% in January to 41.99% in February. The ICB notes:

“Ambulance handover delays have not reduced in line with the planned trajectory …  Evidence indicates that when handover delays exceed 1 hour there is a direct correlation with patient harm. In January, the total time patients spent over 4 hours in ED equalled 25,591 hours equating to 34 cubicles per day and 511 extra nursing shifts for the month.

For every 82 patients who stay more than 8 hours in ED there is an extra death in the next 40 days. NHSE data has recorded 13,924 episodes of excess 8 hours in past 12 months this equates to 170 excess deaths due to ED crowding in the past 12 months.” (p7)

Delayed discharge

Other delays also have a human – and a financial cost. In Kent and Medway the Month 9 deficit of £61.9m is blamed on the number of “medically fit for discharge patients in beds” which requires escalation beds “which have remained open for the whole year”, because the system has been unable to close them: they are staffed by medical and nursing agency.

For Sussex ICS the problem is “expenditure on Continuing Healthcare Services running at around 20% higher compared to 2021/22, …. The significant forecast of £20m overspend is around 13% of this year’s budget.”

In BaNSSW ICB  the problem is mental health and community services: the Avon and Wessex Partnership trust are reporting a £29.6m deficit, but with non recurrent sources supporting the position. It’s not clear how they are nonetheless forecasting to break even at year end.

In BNSSG the issue has been vainly seeking savings from earlier discharge of patients. The ICB notes that despite high hopes: “Whilst there is demonstrable benefit … in terms of impact of the key investments in Discharge to Assess and Home First schemes from a performance point of view, this has not translated to cost release, but has been mitigated by non-recurrent measures in-year.”

Staff shortages

Another major problem in almost all areas is staff shortages, combined with an unrealistic cap on spending on agency staff imposed by NHS England. Some ICSs have overshot their targets by considerable amounts, such as Cheshire and Merseyside where £43m above plan equates to almost 4% of the system’s total pay bill.

Lancashire and South Cumbria ICB’s “state of the system” report notes spending on “expensive agency staff” adds up to more than £300m a year (p16).

BaNESSW ICB notes spending on agency “over double planned levels, and bank at 98.5% above,” while in the south west Cornwall Foundation Trust reports overspending on agency staff of £18.8m above a £3.4m maximum target! (p83)

Costly private sector

But many ICBs are also including costs of contracting out care to private hospitals and providers as reasons for their overspending.

North East and North Cumbria forecast overspending on “independent sector” contracts at £21m. However “Additional funding of £5.7m has now been received from NHSE in respect of additional IS activity performed in the first 6 months of the year. Further information is awaited on any additional funding for the second half of the year.” (p186)

Humber and North Yorkshire ICB “continues to experience financial pressures in relation to the price and volume of CHC [Continuing Health Care] packages, prescribing inflation and contracting with the independent sector.”

Cheshire and Merseyside reports overspending on independent sector Community Services, and using “independent sector capacity” to treat patients needing gastroenterology, ENT, general surgery and orthopaedics.

Greater Manchester includes “private sector surgical activity” in its list of “operational pressures” and forecasts £12m overspending on Independent Sector Acute activity “principally linked to two ophthalmology providers SPA and Optegra”.

Lancashire and South Cumbria ICB notes “Independent sector acute costs are forecast to overspend.”

In the South East, Kent and Medway makes clear it utilises independent sector capacity only “for less complex patients.”

Devon ICB reports spending £33m of its £1 billion acute sector budget on independent sector provision, to treat “suitable” orthopaedic patients “who are willing to move provider” … but it doesn’t say how far or where they have to go.

Dorset ICB complains that “activity with our Independent Sector Provider continues to overspend against plan” – “mainly driven by overperformance at Spa Medica (ophthalmic patient choice) and BMI.” Nonetheless they are responding to increased demand and staff shortages in audiology by outsourcing to Specsavers , even though they can “only assess and fit simpler cases”. Mental health beds have also been block booked at Marchwood Priory Hospital “to minimise distance away from Dorset.”

Gloucestershire reports receiving extra funding from NHS England to cover the costs of “over delivery by the independent sector providers”.

However Cornwall and Isles of Scilly ICB admits to having problems: the mental health acute beds it has block booked in Exeter have been rated as “requires improvement” in all areas by CQC.

Seeking NHS solutions

But while it’s clear most of the ICBs who reveal information on use of the private sector are using it to fill gaps in their own capacity and staffing, in South Yorkshire and Bassetlaw ICS there is a glimpse of what a progressive alternative might be. Plans are well advanced for a new, NHS-run Montagu Elective Orthopaedic Centre (MEOC) in Mexborough, with the specific ambition of repatriating work from the private sector.

Doncaster and Bassetlaw Teaching Hospitals trust has developed the business case on behalf of the ICS, “together with its partners The Rotherham Hospital Foundation Trust and Barnsley Hospital Foundation Trust. Future developments may include capacity for Sheffield patients, potentially including paediatric activity.” (p39)

“There will be training opportunities and career progression into new and advanced roles. Career progression opportunities will be available to retain and ensure experience and knowledge.  The MEOC facility will have good staff facilities and be well equipped. The whole unit will be run as a single service, supporting development of a cohesive team thriving on excellent outcomes. The plans to further develop the MEOC facility beyond this proof-of-concept stage into a larger Centre of Excellence will provide staff with further opportunities and an exciting future.” (p43)

Another similar scheme is at Hallamshire Hospital and focusses on the Sheffield waiting list and includes HVLC orthopaedics and enhanced recovery. (p39)

And NHS solutions are also being explored in Lancashire and South Cumbria, where a backlog of more than 2,500 cases awaiting assessment for Continuing healthcare (CHC) – packages of care has built up. The ICB is now looking to “quickly build an in-house service to manage CHC in a consistent way across Lancashire and South Cumbria so we can quickly fix this backlog.”


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