This post is from The King's Fund Blog
It’s not surprising that NHS finances continue to hit the headlines. NHS providers of hospital, ambulance, community and mental health services ended 2016/17 with a deficit of £791 million and are currently planning for a £500 million deficit in 2017/18. The challenging financial situation is also increasingly spreading to the commissioning sector, with several CCGs expecting to overspend their allocated budgets.
To respond to the spread of financial deficits a new process has been added to the list of NHS financial controls, and another TLA (three-letter acronym) has joined the NHS lexicon. The capped expenditure process (CEP), administered by NHS England and NHS Improvement, aims to contain or cap spending in 14 areas of the country. The central bodies say these areas are spending more than their ‘fair share’ of NHS funding and are at risk of breaching their financial targets in 2017/18.
The CEP flew under the radar for the early part 2017/18, with little information on the process released into the public domain compared to previous initiatives such as the July 2016 ‘financial reset’. Despite this, reports on the CEP are increasingly prominent as the scale of the proposals to cap NHS spending becomes apparent and concerns have grown about the pressure placed on local NHS leaders to comply with the process and about the potential impact on patient care of some of the options under consideration. Our explainer provides more details on how the CEP has worked to date, but it is worth standing back from all this to ask two questions.
Will the CEP proposals really deliver the savings we need?
It is understandable that national bodies wish to assert greater control over areas carrying significant financial risks in 2017/18, and NHS England and NHS Improvement can’t simply sit back and watch as parts of the country overspend their budgets. But if the purpose of the CEP is to contain spending in 2017/18 then it is hard to see how some of the more radical options under consideration will achieve this goal.
Many changes that involve reconfigurations of services will require significant consultation with the public, politicians and competition authorities, or they may be challenged in the courts. Similarly, savings opportunities from buying out private finance initiative (PFI) contracts or reducing outsourcing to the private sector will require contracts to be either renegotiated or redesigned. For these reasons, dividends from some CEP proposals are unlikely to materialise within the next nine months. The CEP’s focus on the 2017/18 financial year may also be driving tactical decisions that have an effect on NHS finances in the short term but not in the longer term – the rapid disposal of assets and land being just one example.
Repatriating planned elective activity from non-NHS providers to the NHS in 2017/18 may also prove to be a double-edged sword for NHS finances. Bed occupancy has remained stubbornly high in the NHS, and reducing how much the NHS spends on outsourcing surgical work may eventually be offset by increasing costs of expensive ‘waiting list initiative’ sessions, as NHS hospitals put on extra operating lists in evenings and weekends to catch up with increasing demand.
Have the CEP proposals been developed in an effective way?
The CEP was introduced very late on in the annual planning process. This unwound some of the stability that the new approach to NHS contracting – based on agreeing longer contracts earlier in the year – was meant to achieve. The CEP also adds to a raft of existing measures to control NHS finances, such as control totals, success regimes and financial special measures – the additive nature of these schemes take up considerable management time both locally and nationally.
The signals sent to local areas involved in the CEP have been unclear. For example, when looking just at planned elective care, it is hard to determine whether the message from the CEP is to adhere to pledges in the NHS Constitution on 18-week referral-to-treatment waiting times, or whether areas should be cutting back on planned surgery to reduce spending and prioritise A&E performance.
People involved in the CEP have noted that ‘thinking the unthinkable’ on delivering service changes in a short space of time has led to very robust conversations within local systems, and between these systems and the national bodies. The recent clarifications from NHS Improvement on safeguarding patients’ access to care acknowledge the level of top-down pressure that has been exerted on local leaders to comply with the process, and the risks this can pose when decisions are made without local backing.
The CEP has been a very opaque process to date and the urgency of the work has left little time for consultation with clinicians, politicians and the public. There is a big difference between ‘thinking the unthinkable’ and actually doing it in practice, and it would be helpful for national leaders to learn the recent lessons from the sustainability and transformation plan development process and take a more open and collaborative ‘build in public, with the public’ approach from the start.
Over recent years there have been multiple calls for a ‘national conversation’ over what the NHS can and should provide within its limited financial envelope. In some ways, the CEP is helping to start this conversation by highlighting just how difficult it is to maintain quality of care and transform services at a time of austerity. But the rapid, tactical and closed nature, of the CEP has so far been more of a hindrance than a help to this wider debate on what kind of health service we want and how much we are willing to pay for it.