Why some NHS trusts are near financial breaking point: The financial problems of South London NHS trust show how quickly trusts can find themselves in trouble, says Mike Farrar
Financial pressures are mounting on the NHS and a growing number of hospital trusts are finding themselves pushed towards a cliff edge.
The NHS budget is flat when other public services are facing cuts but we still have to battle unrelenting inflation, driven by the needs of an older population and by the cost of new drugs and equipment.
To keep pace, we must find £20bn of efficiency savings in five years, something that has never been done before. While the NHS budget overall is in the black, some trusts are near breaking point. We've seen the first NHS trust to go in to administration at South London Healthcare trust. And it will not be the last.
We have just completed interviews with chief executives at 10 of the worst affected NHS trusts in England in order to pinpoint the common issues. They told us that the issues at the SLHT were typical of the problems these organisations are facing. What is needed is a fundamental overhaul of where and how their services are provided.
The trusts commonly face a relentless rise in emergency admissions for which they are often paid less than the cost of provision. This is exacerbated by the insufficient investment in health and social care services in the community, leaving hospitals as the last port of call, to pick up the pieces.
Non-emergency care, for which trusts get paid more, is gradually migrating to specialist hospitals where concentrated services can often get better outcomes. This is good for patients but financially destabilising for some smaller hospitals.
Once financial problems emerge, trusts quickly can get caught in a spiral of decline; recruitment of doctors and nurses becomes more difficult, leaving them with expensive short-term staffing. Frequently they struggle to attract good senior managers, leaving them reliant on expensive interim directors, and there is usually significant change at board level – three of the chief executives we interviewed were the third person to do the job in as many years.
Blaming and sacking managers has been a frequent response to the pressures. But firing managers simply doesn't work unless the organisation is able to address its fundamental problems. This means looking at the whole health system in which the hospital sits.
Incoming chief executives said much of their time is consumed by the crescendo of regulation and oversight that comes with a trust in distress. This is compounded as hospitals get penalised financially for under-performance.
It all adds up to pressure and insecurity for those at the top – not a recipe for confident and bold management actions. The chief executives we spoke to said there was little by way of assistance or understanding of how the issues needed time to resolve if solutions were to be sustainable.
A lot of political attention has focussed on the impact of the private finance initiative (PFI). But our interviews showed it is simplistic to give PFI schemes all the blame – it was only identified as an issue in three of the 10 trusts, and even then a minor one.
To get to the real issues you must dig deeper. The trusts we interviewed say they could be sustainable if they could make significant changes to the design of their services. But the problems can not be resolved by looking at one organisation in isolation. It is necessary to take the bull by the horns and produce joined-up, whole-system solutions.
This may mean centralisation of some services, which can improve outcomes for patients by making services more specialist. It definitely means investment in community services to build capacity and help people manage their conditions and need hospitals less.
And it means allowing hospitals, once alternatives are in place, to contract their services and reduce their fixed costs, but safe in the knowledge that outcomes can be improved if care is provided differently.
However, political, and sometimes public, resistance to radical change is huge. Services can end up trapped in limbo for many years. Trusts need the freedom to grasp the nettle sooner if they are to avoid being forced to act against a backdrop of crisis.
We have to adapt services to the needs of today's population. What we need is better local services provided closer to patients' homes, with more specialist services covering larger populations. This is the way to build a financially stable NHS that achieves clinical outcomes matching the best in the world.
Mike Farrar is chief executive of the NHS Confederation Guardian Professional.
Financial pressures are mounting on the NHS and a growing number of hospital trusts are finding themselves pushed towards a cliff edge.
The NHS budget is flat when other public services are facing cuts but we still have to battle unrelenting inflation, driven by the needs of an older population and by the cost of new drugs and equipment.
To keep pace, we must find £20bn of efficiency savings in five years, something that has never been done before. While the NHS budget overall is in the black, some trusts are near breaking point. We've seen the first NHS trust to go in to administration at South London Healthcare trust. And it will not be the last.
We have just completed interviews with chief executives at 10 of the worst affected NHS trusts in England in order to pinpoint the common issues. They told us that the issues at the SLHT were typical of the problems these organisations are facing. What is needed is a fundamental overhaul of where and how their services are provided.
The trusts commonly face a relentless rise in emergency admissions for which they are often paid less than the cost of provision. This is exacerbated by the insufficient investment in health and social care services in the community, leaving hospitals as the last port of call, to pick up the pieces.
Non-emergency care, for which trusts get paid more, is gradually migrating to specialist hospitals where concentrated services can often get better outcomes. This is good for patients but financially destabilising for some smaller hospitals.
Once financial problems emerge, trusts quickly can get caught in a spiral of decline; recruitment of doctors and nurses becomes more difficult, leaving them with expensive short-term staffing. Frequently they struggle to attract good senior managers, leaving them reliant on expensive interim directors, and there is usually significant change at board level – three of the chief executives we interviewed were the third person to do the job in as many years.
Blaming and sacking managers has been a frequent response to the pressures. But firing managers simply doesn't work unless the organisation is able to address its fundamental problems. This means looking at the whole health system in which the hospital sits.
Incoming chief executives said much of their time is consumed by the crescendo of regulation and oversight that comes with a trust in distress. This is compounded as hospitals get penalised financially for under-performance.
It all adds up to pressure and insecurity for those at the top – not a recipe for confident and bold management actions. The chief executives we spoke to said there was little by way of assistance or understanding of how the issues needed time to resolve if solutions were to be sustainable.
A lot of political attention has focussed on the impact of the private finance initiative (PFI). But our interviews showed it is simplistic to give PFI schemes all the blame – it was only identified as an issue in three of the 10 trusts, and even then a minor one.
To get to the real issues you must dig deeper. The trusts we interviewed say they could be sustainable if they could make significant changes to the design of their services. But the problems can not be resolved by looking at one organisation in isolation. It is necessary to take the bull by the horns and produce joined-up, whole-system solutions.
This may mean centralisation of some services, which can improve outcomes for patients by making services more specialist. It definitely means investment in community services to build capacity and help people manage their conditions and need hospitals less.
And it means allowing hospitals, once alternatives are in place, to contract their services and reduce their fixed costs, but safe in the knowledge that outcomes can be improved if care is provided differently.
However, political, and sometimes public, resistance to radical change is huge. Services can end up trapped in limbo for many years. Trusts need the freedom to grasp the nettle sooner if they are to avoid being forced to act against a backdrop of crisis.
We have to adapt services to the needs of today's population. What we need is better local services provided closer to patients' homes, with more specialist services covering larger populations. This is the way to build a financially stable NHS that achieves clinical outcomes matching the best in the world.
Mike Farrar is chief executive of the NHS Confederation Guardian Professional.
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