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Government’s efficiency targets “ineffective” and “caused long-term damage”

Government’s efficiency targets “ineffective” and “caused long-term damage”

Government’s scheme for efficiency targets has been both “ineffective” and “caused long-term damage”, the Public Accounts Committee concluded in a damning new report
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Government’s 4% efficiency targets for trusts has been both “ineffective” and “caused long-term damage”, the Public Accounts Committee (PAC) concluded in a damning new report.

The report, Sustainability and financial performance of acute hospital trusts, stated that the 4% efficiency savings for trusts set by NHS England and Monitor, more than double the 1-2% efficiency savings that is historic in the NHS, “proved overly ambitious”.

However, the Department of Health told PAC – chaired by Meg Hillier, MP (pictured) – that “some trusts should have even tougher targets placed on them”.

Meanwhile NHS Improvement recognised that “efficiency savings of this magnitude were unachievable for many trusts” and NHS England agreed “that aggressive efficiency targets had caused long-term damage to trusts’ financial positions” and 2% would be “more reasonable”.

NHS trusts’ and foundation trusts’ finances have deteriorated “at a severe and rapid pace”, the report also concluded, with trusts’ £843 million deficit in 2014–15 representing a “sharp decline from the £91 million deficit reported in 2013–14.”

“The Department, NHS England and NHS Improvement told us about the £1.8 billion sustainability support that will be available to trusts in 2016–17 to provide ‘breathing space’ to help trusts’ finances get back on track, although we heard that this fund would not itself clear the deficit,” the report read.

The six conclusions and recommendations from the report:

·      Conclusion: The financial performance of NHS trusts and NHS foundation trusts has deteriorated sharply and this trend is not sustainable. 

·      Recommendation: The Department, NHS England and NHS Improvement should make sure all trusts in deficit have realistic recovery plans by the start of the 2016–17 financial year that will lead to timely and sustainable improvements.

·      Conclusion: The targets set by NHS England and Monitor for providers to make efficiencies were unrealistic and have caused long-term damage to trusts’ finances. 

·      Recommendation: The Department, NHS England and NHS Improvement should set informed and realistic targets for providers to make efficiencies.

·      Conclusion: The data used to estimate trusts’ potential cost savings targets is seriously flawed. 

·      Recommendation: NHS Improvement should set out how it will work with trusts in the 2016–17 financial year to improve the quality of the data on which its savings targets are based.

·      Conclusion: The current system of paying providers through a national tariff does not support financial sustainability nor incentivise joined-up services. 

·      Recommendation: NHS England and NHS Improvement should set out proposals for changing the payment and contracting system for providers to one that supports financial and service sustainability, incentivises integration and service collaboration and reduces the need for reactive financial support to providers in difficulty.

·      Conclusion: Acute hospital trusts’ spending on agency staff has contributed to their financial distress. 

·      Recommendation: NHS England and NHS Improvement should be clear that spending on agency staff is only one contributing factor to the deficit. They should set out how they will support providers to secure the collective action that is needed to get value for money from the use of agency staff as a matter of urgency.

·      Conclusion: There is not yet a convincing plan in place for closing the £22 billion efficiency gap and avoiding a ‘black hole’ in NHS finances.

·      Recommendation: The Department of Health, NHS England and NHS Improvement should report to PAC jointly in September 2016 on their progress with implementing the NAO’s recommendations and the further recommendations we make in this report.

See the full report here

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