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Nearly £3bn in efficiency savings from providers is not enough, says NHS Improvement

23 May 2016

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Analysis from NHS Improvement into providers’ financial performance has found that the sector has made £2.9 billion in efficiency savings – £316 million less than planned.

Overall, the Quarter 4 sector performance report found that the NHS provider deficit has reached £2.45 billion, which is £461 million worse than was expected.

Adam Roberts, head of economics at the Health Foundation, described these deficit numbers as “the tip of the iceberg”.

He said: “The deficit is clearly a systemic problem affecting the NHS as a whole and is directly the result of an unprecedented squeeze in funding for both health and social care.

“Three of the key problems behind the deficit are a shortage of trained NHS workers, problems discharging patients who are well enough to go home but will need support in the community, and changes to financial penalties from commissioners.”

It was found that between April 2015 and March 2016, providers paid £751 million in fines and readmission penalties to commissioners.

While £253 million was re-invested in improving patient services, the report says “these sanctions nevertheless further exacerbated financial stress” on providers.

Of the 240 providers questioned, 65% reported ending the year in a deficit.

Richard Murray, The King’s Fund’s director of policy, said this is “unprecedented”.

He said: “Despite additional funding and a huge effort to reduce deficits, record numbers of NHS trusts overspent their budgets last year and the overall deficit is about three times higher than in 2014/15.

“Overspending on this scale is not down to mismanagement or inefficiency in individual trusts – it shows a health system buckling under huge financial and operational pressures. At the same time, performance against key targets is deteriorating and concerns about quality of care are increasingly widespread.”

He added that the overspend also has “worrying implications for NHS trusts this financial year, as they will be starting 2016/17 with a collective deficit of around £1 billion more than planned, eating into the funding needed to maintain services and provide patient care”.

Nevertheless, analysis showed that many providers are using the recently introduced financial control measures effectively.

For example, the report estimates that the sector spent £3.64 billion on agency and contract staff.

Although this was £1.4 billion more than was budgeted for, prior to control measures implemented in October 2015, agency staff cost the NHS £4 billion.