Covid-19 vs cost improvement planning delivery in the NHS

By - Integrated Care Journal

Covid-19 vs cost improvement planning delivery in the NHS

"Financial management and control - haven't we got enough on our plates at the moment?" is maybe something many in the NHS would say in these unprecedented times.

The need to support the NHS with whatever it needs is beyond question. Financial and operational planning for 2020/21, contracting processes and cost improvement programme (CIPs) delivery have been suspended temporarily so the NHS and its staff are entirely focused on going into battle without worrying whether there are the resources or funding to do what is needed. But maintaining financial control over this period and ensuring that underlying financial issues are not forgotten is essential to avoid the NHS having an almighty thump when landing after the battle with Covid-19 has been won.

As a publicly funded service, the NHS still has a primary responsibility to ensure the stewardship of funds and ensure it achieves value for money for every penny spent. Effectively it has an open cheque book from the Government to spend what it needs to fight this thing. Guidance has been clear that the Government will fund all Covid expenditure and the impact of this on our hospitals and the wider NHS will be neutral.

It will, however, only reimburse clearly Covid attributable costs and NHS England and Improvement (NHS E/I) will be collecting information to validate (and even possibly audit) this. Strong financial control and governance needs to remain in place so that the finances are managed alongside the huge operational and clinical effort being delivered.

It is inevitable that some financial policies and governance processes will need to be flexed to be more agile and adapt to the nature of these circumstances. There will be changes in roles, responsibilities and even accountability alongside fast-tracked processes but underpinning controls and financial reporting needs to remain in place so that when we finally appear from this period, financial control is in place and we are in no worse position financially than we were at the reported position at month 11 before this all kicked off.

The fact that the NHS financial year end is on us has probably gone unnoticed to many other the finance departments and people like me who work closely with them.

The anxiety about where our NHS organisations and systems will finish the year financially has disappeared. Annual battle lines between commissioners and providers (or is it now systems and NHS E/I?) on planning for the new year have been paused – we have come together for a bigger, wider cause.

The pause button may have been pressed but when play is resumed there are a whole lot of lingering and emerging issues to sort. In the pre-Covid period (yes it was only 3-4 weeks ago), financial performance issues and non-delivery of control totals were spreading across NHS nearly as fast as the virus.

The causes of the deterioration in financial performance can, of course, vary depending on the organisation and area – there will always be some specific localised factors and even structural and geographical issues. But increasingly, we were seeing consistent issues indicating more widespread, systemic problems which have led to a deterioration of NHS financial performance. Some of the issues we were seeing were things like:

1. Agreeing to unachievable control totals 

For 2019/20, organisations and systems were asked (maybe that’s too polite) to agree by the regulators control totals that many of the numbers, previous performance and trends suggested were unachievable. The current financial rewards through PSF funding is based on the delivery of control totals meaning there was a strong financial incentive for local systems to agree to control totals and achieve additional funding even for part of the year.

Rejecting a control total you did not agree with meant potential lost funding for the local NHS system.

2. Setting undeliverable back-ended plans 

Plans were set that, at a high-level, were plausible but were ultimately undeliverable. Many organisations and systems had savings, CIP and QIPP plans that were not developed sufficiently, over-optimistic in terms of in-year financial asks or with unidentified gaps well into quarter one and even quarter two – gaps that were never recovered.

Unsurprisingly given the current financial regime, the ask and challenge is always phased into the last six months of the year. Trusts were able to achieve PSF funding for Q1 and Q2 by delivering performance against modest phased plans. No surprise, therefore, that at month 7 and 8 suddenly forecast outturn projections move out and by the end of Q3 the scale of the perceived poor financial performance is unearthed.

3. Lack of an agreed understanding of activity and demand 

Commissioners and providers agree plans as part of the planning process that do not reflect the actual activity being delivered.

They often assume unrealistic demand (in particular for emergency and non-elective activity), heroic elective performance and trajectories (a double whammy if non-elective demand is not planned) and high-level QIPP plans which are not formed sufficiently or have buy-in (with many trusts not planning for any of the assumptions made).

As a result, both sides have difficulty working to those plans, undermining financial delivery and creating risk. This creates unnecessary tensions in health systems and leads to no common understanding of what was being delivered and how to manage it.

4. System working in name only 

Many systems worked together in delivering 2019/20 financial and operational plans.

High-level strategies and even system-wide savings plans were outlined. New more collaborative contractual models were agreed and these shared risks across the system. Numbers were collated to provide system-level control totals. All good signs but in many cases these plans were built up from a series of organisational level plans and that meant that systems savings plans were not sufficiently formed, agreed or engaged with to deliver the transformational delivery and financial ask in one year.

5. Lack of maturity of longer-term cost out and waste reduction CIPs

We are still seeing a lot of transactional, non-recurring and even income-driven CIPs. But, if we want to deliver financial sustainability, longer-term cost and waste reduction plans need to be developed.

Individual organisations and particularly acute trusts have already made a lot of progress. Of course, more could be done in managing service delivery and variation. But increasingly real cost and waste reduction can only be achieved by working as a system, mainly where services cross over with acute care in primary, community and social care.

We are going to need investment, detailed planning and clinical engagement to deliver that kind of change. These are long term change programmes and not quick fixes. Systems and, more importantly, regulators need to accept that addressing long-term financial sustainability can not be achieved in one year - well actually 10 months by the time delivery plans are in place.

I’m struck by how often we find ourselves working on these issues – probably because they are hardest to resolve?

My colleague Malcolm Lowe-Lauri wrote recently about the need for boards and middle management to connect to deliver improvements, particularly operational and service management.

We often see that the causes of financial underperformance can include a lack of awareness, understanding, engagement and buy-in from middle management and from the operational and clinical shop floor. As the movement towards system control totals progresses, having an agreed understanding of activity and costs of delivery care is critical. While not always palatable, it provides an accurate baseline for real discussions surrounding if, how and where that activity could and should be delivered in the future.

Sounds mad but I am sure we would all prefer to be grappling with these issues rather than facing what we are now. The impact of Covid will undoubtedly change how we work and how the NHS operates moving forward.

Let us use this learning from before the crisis when we get back to business as usual - hopefully in the not so distant future.

Please find the original article here.

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