A survey by John Lister of board papers and other information for ICBs in East of England, London and Midlands, available December 12-16, 2022.
Recent estimates suggest Integrated Commissioning Boards are headed for a combined deficit this year of £1.3bn (an average of around £30m per ICB): this would appear to be based more on hope than experience. The final total is likely to be much higher.
However with a very uneven approach by ICBs to reporting and response to the impact of financial pressures it is difficult even five months in to assess the actual situation on the ground in many areas or what the implications might be for patients and staff of any “savings” measures that might be taken.
In most areas most of the cost pressures seem to have landed on the acute hospital trusts. The squeeze on capacity has meant acute trusts have struggled to return even to levels of activity equal to 2019 before Covid, let alone hit the 104% target set for them by NHS England, and therefore begin to reduce the 7.2m waiting list.
This in turn raises questions over whether the trusts will receive the promised additional funding for elective recovery. In some ICBs this is being retained by commissioners where trusts have failed to deliver to target, in others it has been promised to trusts.
A common factor across almost all but the most hopelessly unrealistic of the finance reports are four key concerns which are also making it impossible to deliver savings as planned:
- Higher than expected levels of inflation affecting energy prices, drugs and other non-pay expenditure
- Over-spending on agency and temporary staff to cover vacancies and sickness absence – meaning that the ‘cap’ on agency spending is being exceeded.
- Continued, unfunded, pressures on beds and staff from Covid patients in a pandemic that has so far refused to die
- Problems coping with non-elective and emergency demand, especially with so many beds filled with patients who cannot be discharged
In this complex situation the level of engagement with the harsh reality of the financial pressures on ICBs has varied widely between regions and between ICBs. A striking lack of detail undermines confidence in the viability of the ‘savings’ plans that are the basis on which any of the ICBs hope to balance the books.
And there is an even greater question mark over the ‘savings’ that are admitted to be non-recurrent of “one off”, since they leave the underlying problem unresolved, and pose the need for even bigger savings going in to an even tougher financial regime in 2023/24.
East of England
Five of the six East of England ICBs, (including Norfolk & Waveney, chaired by former Labour Health Secretary Patricia Hewitt who is now “reviewing” the working of ICBs for Jeremy Hunt and the NHS) appear to have largely discounted the effects on their plans of double digit inflation, continued high levels of Covid and other additional cost pressures.
Bedfordshire Luton and Milton Keynes, for example, has only published a financial report based on Month 4, which notes:
“In March we submitted a deficit plan of circa £40 million, the two key drivers of the deficit were the ongoing impacts of COVID and inflation, particularly inflation as it related to energy. There was an additional £1.5 billion available to the NHS. As a system we received £22 million additional funding to cover our forecast for inflation at that point in time. … If inflation continues to rise it will present an additional risk for the system.…
But the conclusion, without additional explanation is “We are reasonably confident of a year-end break even position.”
Other East of England ICBs, despite showing that deficits have occurred in the first (easiest) months of the year, also continue to assert that their local health systems will nonetheless ‘break-even’ at the end of March, with little or no detail or attempt to explain how this might be achieved. Many of these reports will no doubt need to be revised in the new year.
For example Cambridgeshire and Peterborough ICB identifies £54m of risks that might threaten a balanced budget (p52), but also assure us that this exact sum £54.13m is balanced by conveniently identical income (Ambulance handover funding exactly balancing extra costs of £5.65m, undefined “national support” of £14.464m; undefined “non recurrent efficiencies and slippages” adding up to £16.4m; and dipping in to Reserves for £17.619m). Without any more explanation it would seem unlikely that this is enough to answer concerns that have given a red risk-rating to the ICB’s financial situation.
Only Mid and South Essex ICB bites the bullet and admits the grim situation:
“As a system, MSE continues to be financially challenged due to increased and sustained system pressures and a lack of financial efficiency delivery. The financial deficit in our acute sector makes it increasingly difficult to assert a system breakeven position for 2022/23.
”… The system continued to plan to deliver a breakeven position by the year end, with unmitigated risks of £95.4m and a need to deliver £84m efficiencies. At the end of M5, the system position was a deficit of £40.3m, £29m adverse to the £11.3m deficit expected in the profile for delivering a breakeven position by the year end.”
Few of the five London ICBs, all currently running deficits averaging £50m (London North Central £47m; NE London £57m; NW London (most up to date figure only available from NW London Acute Providers) £38.5m; SE London £50m; SW London £59m) seem to have any convincing or tangible plans to contain or reduce them across what is widely expected to be another hugely stressful winter in the run up to the end of the financial year.
Indeed North West London ICB (chaired by prominent McKinsey director Penny Dash) has opted only to meet quarterly, and so will not even begin to engage with financial reality until its board meets up in January. Its October meeting heard an evasive financial report of the situation in September, summarised as:
“NWL financial position remains in deficit in September, although the ICS has committed to break even this year. This will be achieved through one off initiatives. The NWL underlying financial position has deteriorated in September to (£283m).”
It’s not easy to see how, in the absence of any increase in NHS funding, such a large underlying deficit can be ignored by NHS England or resolved without large-scale reductions in service.
North Central London seems untroubled by the level of risk:
“The ICB reports a balanced risk position at Month 7, with £28.6m of risks (circa 1.2% of the ICB total budget). Risks are fully mitigated by use of use of nonrecurrent funding. Recurrent risks that emerge in year may adversely impact on the ICB’s underlying financial position.
“NCL ICS is reporting a net unmitigated system risk of £47.6m …, mostly relating to excess inflation and Service Level Agreement risk on contract baselines from out of London ICBs.”
North East London also takes a relaxed view despite obvious warning signs, and remains determinedly vague:
“The ICB has a number of underlying run rate pressures, however at month 7 it is continuing to report a forecast breakeven. … To enable this position to be achieved the ICB will need to deliver a number of mitigating actions in the latter part of the financial year.
“Delivery of mitigating actions will be challenging in the latter part of the year, and will need to consider non recurrent and recurrent measures. This will include; continuing to review and deliver efficiency opportunities, working with system wide partners to drive a sustainable financial position across the ICS, reviewing the delivery, profiling and impact of all investments, and analysing non-recurrent opportunities including a review of all balance sheet items and provisions.”
South East London’s November Board papers consisted of only 36 pages, with no financial report, so projections have not been updated from September figures.
South West London is also laid back in its report, noting:
“The year to date plan at M6 is profiled to be £59.0m deficit, with actuals of £60.6m deficit, therefore, giving a £1.6m adverse variance. The report identifies that there are significant risks attached to the delivery of the financial plan across SWL, due largely to the scale of the savings target and inflationary pressures. …
… The total system planned efficiency for the year is £280.6m and delivery remains the system’s key risk.
… Efficiency delivery year to date is on plan, however, £195m will need to be delivered in the second half of the year of which £83m is currently unidentified.”
Midlands ICBs however have tried more seriously to engage with the reality of the situation, and been less ready to simply assert that break-even can be achieved in four months time.
Black Country ICB, for example, acknowledging the Year-to date financial position of a £45m (3.6%) “adverse variance to plans,” admits:
“In line with NHSE’s protocol on changes to in-year revenue forecasts, organisations continue to report a break-even forecast position while developing mitigation and recovery plans. However, it is becoming increasingly difficult to see a route to achieving a break-even position.”
Coventry and Warwickshire ICB, admitting that £60m of the £84m target for efficiency savings is ‘non-recurrent’, posing serious problems for next year, is the only ICB of the 22 surveyed that discusses the October decisions and policies adopted by NHS England. It warns of the need for very significant savings or “disinvestment”:
“There are operational delivery and performance pressures in many areas: Elective recovery, Urgent and Emergency Care, Cancer and diagnostics, Learning disabilities and Autism, support to the Social Care market etc which will need to be addressed within the financial plan as they have been supported non recurrently in year. Whilst transformation opportunities have been identified which could deliver up to £100m of benefit, not all of this may be cashable financial benefit and so further savings schemes or planned disinvestment will need to be found.” (p117)
Derby and Derbyshire ICB also confess to a bleak outlook, in which the ‘Best case’ projection is a £12.9m deficit, the most likely is £39.8m and the worst case would leave the system £96.7m in the red, facing even tougher times coming next year.
The ICB also has some answers for those such as the IFS who have questioned why the increases in staff and limited increases in funding since 2019 have not yielded an increase in productivity:
“The University Hospitals Derby and Burton (UHDB) and Chesterfield Royal Hospital activity variance is driven by an increase in delayed discharges. With current months’ delays being higher than historic winter delays, this has led to an inflated length of stay and occupied bed days. … Emergency Department length of stay has also increased on previous performances due to the impact of delayed discharges and the acuity of patients in attendance.
“UHDB outpatient underperformance is driven largely by new attendances resulting from reduced clinic frequency due to staffing levels and the inability to undertake waiting list initiate sessions. This is compounded by low clinic throughput through reduced physical capacity and late cancellations due to sickness of both staff and patients.” (p92)
And again: “From an urgent care perspective, the key structural issue underpinning poor flow across our hospitals is exit block – with around 200 patients at any one time ready to be discharged but aren’t. Excessive long stays (21 day+ or more) are of a particular concern – with two-thirds of patients waiting for discharge to assess support. The effect of exit block on the front-end aspects of the urgent and emergency care pathway within the hospital are significant – with the older person who needs to be admitted waiting between 8-14 hours to access a bed and around 36 hours of lost ambulance crew time per day due to handover delays.” (p115)
Herefordshire and Worcestershire’s Board papers sum up the ‘wishful thinking’ school of financial projection:
“The Integrated Care Board (ICB) plan requires a surplus of £6.6m. This was not without risk and required the ICB to stretch its financial plan around efficiency savings and use nonrecurrent opportunities/flexibilities to support the overall ICS financial position reducing the financial gap to a £14.8m deficit. [But] At Month 6 the ICB is reporting a £3.1m deficit to plan.”
Leicester Leicestershire and Rutland (December Board) are among the few to have recognised the need to look beyond short term self-delusion to warn of the even worse medium term prospect:
“LLR have used underlying positions which are reported monthly by each organisation as the start-point for our plans. Using the latest figures and ensuring alignment across the system there is an underlying exit deficit as a system of £104m in 2022/23. This is that start-point used to project future deficits. …” (p162)
It goes on to itemise the pressures underlying a recurrent deficit rising from £139m in 2023/24 to £375m in 2027/28, and notes that:
“Given the scale of the challenge at the outset it is going to be extremely challenging to achieve financial balance in the earlier years, as the table below highlights to break even the system would need to generate an efficiency of over 5% in 2023/24; traditionally organisations have been able to deliver between 2-3% each year.”
Lincolnshire ICB’s November Board combines the initial aspiration to break even with a candid admission that this is most unlikely to happen:
“The system has a target of £2.9m deficit at month 7, and a plan to breakeven against allocations by the financial year end. The actual position is a deficit of £16.1m which is £13.2m adverse variance to plan.
“The full year forecast outturn position is unchanged from previous periods and is to break even, and this has been reported to NHS England. However, our ability to recover the shortfall that has materialized in the first half of the year over the remaining 5 months is extremely unlikely, and as reported in the risk section of this report there are further material risk in the second half of the year; the ICS is therefore preparing for an adverse forecast position.
As it stands the risk adjusted position (year to date actual plus unmitigated risk) stands at a £35.1m adverse variance to plan; …
“Communication has been sent to NHS England to enact the protocol for the system to be able to report a position adverse to plan, and we therefore expect to report a c£35.1m deficit at Month 8 reporting round.”(pp 98-99)
Northamptonshire ICB Board has also chosen to come clean rather than pretend:
“The ICS has a deficit of £32.7m at the end of month 7 which is £17.1m worse than planned. The system is still forecasting that it will deliver a small surplus of £0.1m at year end but there are still a significant level of savings to be generated in the remainder of the year.
“[…] The forecast financial position for 22/23 contains £46.9m risk that is currently still unmitigated and this will therefore inevitably lead to a substantial deficit at year end unless further mitigating actions are identified.
“Each organisation within the system is currently working on an assessment of those things that would improve the financial position which may include but is not limited to:
- Non-recurrent measures, including a review of provisions and contingent liabilities
- Investments that can be further slipped
- Expenditure that can be ceased
- Controls on expenditure that would slow run-rate” (p116)
Nottingham and Nottinghamshire ICB’s 2022/23 Financial Plan “was a balanced plan that required a 3.7% efficiency saving:” it has now been effectively abandoned as efforts are focused on tryin g to limit the deficit to £17m:
“at the end of month six, the NHS System reported a £36.3 million deficit position, which is £12.9 million adverse to plan. The ICB position reported a breakeven position, acute provider position reported £12.3 million adverse variance and the mental health/community trust a £0.6 million adverse to plan. The main drivers of the deficit related to Covid costs, efficiency shortfalls, Community Diagnostics Centres (CDC) funding gap, pay award shortfall and urgent care capacity above planned levels.
“… the forecast position remains breakeven against the £17 million deficit plan; however there are significant risks to delivery, particularly high risks relating to Covid, efficiency and CDC income.”
Once again the Notts Board shows how unrealistic were the starting assumptions:
There are a number of risks to delivery of the plan. Highest areas of risk are:
- Covid – the 2022/23 plan was based on a low covid environment from Q2. This is not being experienced and continuing levels of covid related workforce absence is leading to high levels of overspend.
- Efficiency – £102.7m efficiency programme in place (2.9%). Plans in place to deliver with full commitment of Financial Directors. However, delivery will include non-recurrent items, which will increase the recurrent efficiency ask in 2023/24.
- Community Diagnostic Centres – £8.5m income assumed for CDC. Available national funding has been diverted to support the 2022/23 pay award leaving this at risk. Dialogue with the national team continuing. (p297)
Shropshire Telford and Wrekin ICB was one of only five to make clear from the outset that they could not balance the books, projecting a £19m deficit. Since then Month 7 figures show things have got worse:
“The System holds a £19m deficit plan for 2022/23 and carries a significant underlying deficit. Local challenges that impact on expenditure include those associated with geography, configuration of estate and availability of substantive workforce.
“The Month 5 system financial position shows an overall £8.1m adverse variance to the plan submitted. The current forecast outturn (FOT) position shows a £4.1m adverse variance to plan ….”
The ICB has received a stern letter from NHS England warning them that they now face intervention as finances threaten to get further out of hand. The letter expresses concern on four key issues, all of which are to some extent a problem facing all 42 ICBs:
“• High agency costs in YTD, at M05 the system has spent 62% of the year’s expected spend
“• The costs classified as Covid appear to be disproportionately high
“• Efficiency delivery ambitions are heavily weighted to the second half of the year, with expectation that 78% will feature in the last six months
“• Whilst there has been a 9.5% increase in workforce, productivity has reduced by 2%.”
Only Staffordshire & Stoke on Trent ICB, in their November papers, appear to have made any serious attempt to draw up a strategy to address the scale of the financial problems coming down the track– although the “strategy” itself would be laughable for its naivete if the situation was not so serious. The starting point is of course NHS England’s insistence on ICBs drawing up “balanced” plans when the sums don’t balance:
“We had a planned deficit of £28.6m but we were requested by NHSE to get to break even.
“To achieve this we had to make some nationally agreed assumptions e.g. no inflation impact, no Covid impact.” But, of course: “There are inflation costs and costs relating to Covid in the hospitals and in Primary Care so a predicated gap of £20m is forecast and within the ICB, Continuing Healthcare (CHC) is a driver for this.”
“A System efficiency target of 4.2% has been set and we are at 85% of delivery of this target.”
There is a massive incentive for this ICB to attempt the impossible in order to escape a grim legacy of a decade of under-funding: “The regulator has requested a break even position and the Chief Finance Officers are working to achieve this. If break-even is achieved for two consecutive years then the CCGs’ legacy debt of £300m will be written off.”
However the ICB is faced with an underlying deficit which is currently on course to rise from £140m per year to £550m by 2027-28, so the “strategy” is faced with an impossible task. The response? Base it on some impossible hopes, not least a magical change of heart by government and the Department of Health and Social Care, to fund the NHS fully to cover inflation:
“Inflation: We have also carefully considered the impact of inflation, which is a major concern for the public sector and the economy more generally. Predictions vary, but all show costs outrunning public sector growth. This is a cost that we cannot control.
“If unfunded, it would lead to very significant service cuts. In this plan, going forward we have decided to plan on an assumption that further inflation is funded.
“This is the best case, but is what has happened in all previous years. It emphasises that as a minimum we should be living within our means before the inflationary impact.”
From there the Strategy goes on to set out some goals:
- Increase the proportion of the workforce employed substantively
- Increased activity through the existing physical and clinical capacity to address backlogs – using digital and other means so that this also improves the quality of the clinician’s experience
- Portfolios encouraged to ‘stretch every pound’ to address priorities
- Targeted system activities to make savings and get more for the SSOT pound
- Eliminate the underlying deficit over time [!!!!]
- Find non-recurrent solutions to keep the system on track in the intervening years.
But it’s the explanation of how this is to be done that sums up the hopelessly unrealistic approach. Apparently all that is needed is to achieve all of the policy goals that the NHS has consistently failed to deliver since at least the 1990s, while of course giving no practical idea of how any of them might be delivered now, without capital or revenue to invest in any changes, and growing numbers of staff vacancies:
- Reducing unnecessary NEL [non-elective] attendances through interventions that keep people at home
- Better flow – more timely discharge through use of Out Of Hospital interventions / social care / etc.
- New pathways – alternatives to improve the patient journey / digital first
- Eliminate unwarranted variation
- Better value from enabling functions e.g. more efficient use of estate, reduced internal transactions. (page 80)
The Strategy – which assumes unprecedented savings of £42m-plus per year from “demand management” – adds in one more perfectly reasonable objective, but one that runs counter to the main policies announced by NHS England. That is to reduce, rather than increase, the use of private providers, to keep the resources in the NHS:
- See more patients through the existing clinical capacity – repatriate spend on IS [Independent Sector], etc.
In a way the complete lack of realism in so much of the SSOT Strategy sums up the dilemma facing NHS leaders across England. In an impossible situation, with an unworkable cash limit that ignores the key problems, only fantasy appears to offer any hope of escape.
It seems the ICB themselves have begun to recognise this, because they follow up their flight of fancy with a call to consider possible outright cuts in spending:
“This is a tough ask, but…
- The model leaves us with a gap that would have to be filled non-recurrently
- And assumes that inflation is fully funded – clearly a best case assumption
- So it is possible that we may be asked to do more
- And if so, we need to be ready to explain whether we could, and if so what shape that solution would look like.
“So we also need to consider our options for reducing some services:
- This is clearly not at all what we would want to do, but we would need to be prepared to explain the implications
- In doing this, we should ask the system to advise on any areas where this could be done, and the impact
- And maybe this could help in those services where we are short of people, so maybe concentrating workforce on a smaller number of services might have some benefits?
- The proposal is to ask each Portfolio to advise on options for making a further 1% or 2% saving in terms of service reductions. These would only be adopted in a scenario where inflation was underfunded and we felt as a system that we had no other option.” (p83).
So the bottom line, when all the pretence and daydreams have been shattered by the new grip of austerity, is cuts in spending, staff and services that will further undermine the integrity and performance of the NHS.
Only a change in government policy, to reverse the decade-plus squeeze on revenue and capital, can repair the damage that has been done and is still being done to the very fabric of our most popular and universal public service.
- The Lowdown will examine the plight of the remaining 20 ICBs (North East and Yorkshire, North West, South East and South West) early in the new year. Readers with any relevant information or updates on actual changes on the ground in any of the 42 ICBs should please contact John Lister at email@example.com: any and all requests form confidentiality will be respected.
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