‘Integrated Care’ set to be a system of austerity and crisis

Following the passage through Parliament of the Health and Care Bill, 42 Integrated Care Boards (ICBs) are set to become the statutory bodies controlling health care systems across England from July 1 – and almost all of those for which figures are available are already projecting substantial deficits in their first year in charge.

This brings them into conflict with guidance from NHS England, which was revealed back in March by the Health Service Journal, which reported “Every health and care system — including those carrying huge deficits going into the pandemic — will be told to deliver financial balance in 2022-23.”

The HSJ quoted from draft guidance circulated to local leaders which set out a hard line and attempted to crack the disciplinary whip: 

“NHS England and NHS Improvement intend to use additional powers in the legislation to set a financial objective for each integrated care board [the local commissioning body] and its partner trusts to deliver a financially balanced system, namely a duty on break even.”

But as the HSJ report commented “it is unclear what the consequences will be for an ICS that fails to meet what is described as a “new joint legal duty”. 

It may be a while before we find out: the full financial picture is only slowly coming to light as initial budgets are grudgingly revealed and efforts continue to invent “cost improvement programmes” and other ways of apparently making deficits disappear.

The funding issue is absolutely crucial for trusts and ICBs seeking to balance the books. Too little was allocated in Rishi Sunak’s autumn spending review, with no significant change in the Spring Statement. and that limited increase in spending is being rapidly eroded by rising inflation.

Despite the incessant empty government rhetoric claiming that NHS funding is at ‘record’ levels, and increasing from this year, many commissioners and trust finance directors are stating clearly that they are faced with “flat cash” levels of funding. 

All of their projections are potentially being undermined by the growth of inflation. The Institute for Fiscal Studies estimated in March that even on forecasts before the Russian war on Ukraine “higher-than-expected inflation could wipe out one quarter of the planned real-terms increases for departments.” 

Nonetheless in April NHS England issued tough guidance that insists ICBs have a duty to break even, and urged trusts to seek to maximise their income from private patients:

“Whilst continuing the focus and priority on core NHS service delivery, it is expected that the NHS will return to working towards securing the benchmarked potential for commercial income growth, overseas visitor cost recovery and private patient services.”

But inflation has now risen more sharply still, piling added pressure on to NHS budgets, and effectively wiping out the value of the 3.3% cash increase for ICB allocations. On April 26 the HSJ  headlined “Every health system to face real-terms funding cut in 2022-23” and calculated the real terms cuts ranging from 2.1% in North Central and South East London down to 0.2% in Buckinghamshire Oxfordshire and Berkshire West.

But these calculations are on the basis of the official forecast of inflation of 4% in the public sector this year – which came before the Bank of England announced general inflation had risen to 7% and was set to rise to 10.2%. Hopes that the public sector will not face as high a level of inflation hinge on the number of supply contracts already in place at fixed prices – and the assumption that health workers will accept a brutal real-terms cut in pay as price rises outstrip the 3% maximum increase proposed by the government for 2022/23.

As all this takes shape, the Lowdown has been conducting an in depth search for the most up to date information, and this is the first of two articles that will try to explore the issues facing all 42 ICBs. 

“As our table shows, the initial estimates of deficits in the first 24 ICB areas surveyed in this Lowdown project add up to just short of £2 billion, even though several ICBs and their forerunners in CCGs have been too shy to reveal the full facts and figures. All of the initial budgets were drawn up before the latest spike in inflation.

This suggests that the total underlying problem across all the ICBs will be upwards of £3bn – far more than can be wished away by jacking up the level of “efficiency savings”.

Most of the initial estimates have been subsequently reduced, not least by ever-more ambitious and unlikely targets for CIPs (“cost improvement programmes”) – aiming as high as 5% across the system in some schemes like Lancashire and South Cumbria ICS, even though targets above 2% per year have seldom been achieved or sustained.”

The financial context this year (2022/23) is unusual in that – with some exceptions – most Clinical Commissioning Groups and trusts have emerged from the pandemic years in balance or in surplus, having benefited from a return to block contracts and from numerous special one-off payments.

Indeed a number of NHS bodies that had been projecting deficits in 2019/20 managed to substantially improve their financial situation from 2020.  South Tyneside and Sunderland FT, for example, delivered a £15m surplus rather than a projected £2m deficit (p34).

However the constraints on capacity imposed by Covid – shortages of staff and reduced numbers of beds in use – have at the same time significantly worsened already bad waiting times for elective care and for emergency admissions. In March the England average performance for A&E plunged to below 60% of the more seriously ill Type 1 patients being treated and admitted or discharged within 4 hours, with seven ICBs below 50% and one (Cambridgeshire and Peterborough) below 40%.

Much of the money that bolstered up the balance sheets of commissioners and providers since the spring of 2020 has been non-recurrent, and linked either to Covid or to the Elective Recovery Fund (ERF). 

Much of this is to be stripped back out of the system for 2022/23. Covid funding is cut by more than half, despite almost 9,000 Covid patients still in hospital beds on May 4, and large numbers of staff still off sick with Covid or post-Covid problems. 

The opportunities for many trusts to gain additional income from the £1.8 billion ERF have been limited by their lack of capacity, the lack of capital to invest in remodelling hospital buildings to convert admin space to clinical areas, and the lack of sufficient staff. 

To make matters worse all the funding levels of all but four of the 42 ICBs are currently deemed to be “over target” in relation to the funding required to match their demographic profile. For some the difference is relatively small, but hard-pressed rural areas like Lincolnshire and Herefordshire and Worcestershire are deemed to be 5.5% and 5.7% above target. Derby & Derbyshire are above target by 7.5%; Devon by 7.7%; Lancashire & South Cumbria by 8.2%; Cambridgeshire & Peterborough 8.9%; and SE London a hefty 11.1%. 

As a result, a “convergence” process has brought reductions in funding allocations, with those most over target losing 1.1% or as much as 1.4% for 2022/23 – with the threat of more reductions to come.

Another issue affecting all ICBs is that the additional Hospital Discharge Plan funding provided as an emergency measure during the peak of the pandemic to speed the discharge of older patients who were medically fit but required additional support (implementing the so-called “discharge to assess” system) has come to an abrupt halt in April. Rather than make cuts elsewhere to continue the scheme (which has always been controversial with doctors and professional staff), it appears both trusts and commissioners have opted to close it down – with likely negative effects on both emergency and elective treatment as beds fill up again with patients for whom there is no available social care support.

The picture that emerges from a dive into the obscurely-worded documents and reports to shadow ICS Boards, Trust Boards and CCG governing bodies is alarming. Most have been preoccupied right to the end of 2021/22 with retrospective balancing of that year’s books. Some organisations appear to be consciously avoiding any open statement on the scale of the problems they face as the new year has begun: others appear to be desperately addressing the finances for this financial year far too late in the day.

But several trusts and CCGs seem to have made their minds up that they would rather face the wrath of a more distant NHS England for breaching financial guidelines than the anger of local news headlines and angry punters if services are cut back to the point to crisis or collapse. Some seem to have recognised that theirs is by no means the only trust or CCG facing problems, and concluded that it’s not possible for all of them to be pushed aside and replaced.

So whether it’s a push-back or simply a refusal to cut services to the point of collapse it seems most unlikely given the scale and spread of the problems that NHS England can ensure all, or even most ICBs do balance their books, especially if the major factor impeding this is a local trust or provider collaborative.

All of the information in the round up by ICB is drawn from Board papers and official publications: very few of them have made the task at all easy.  The sheer size of England’s NHS, and the and complexity of finding information on bodies that in most cases lack any public face or web presence, requiring us to check out sometimes hard to find Board papers for commissioners and providers means this study will have to be done in two parts.

And because there is too much to incorporate into a regular Lowdown article, we are making the survey details available separately online by region, beginning now with 18 ICBs in North East and Yorkshire, the North West, and the Midlands.

The remaining regions (East of England, South East, South West and London) will be explored in our next instalment.