“It’s been tough balancing the books in the last few years and been getting tougher, with next year likely to be the toughest yet. We’re finding it more difficult to identify areas in which to make big savings which we can then reinvest in patient care, like saving £1m by procuring our supplies better and using that money to employ more consultants in our emergency department. That means we’ll really struggle financially to keep providing the level of services we provide now,” he says.
For McNeil, negotiating a financial squeeze unprecedented in the NHS’s 66-year history has meant, for example, having to extend the expected life of some of Addenbrooke’s scanners, which identify cancer and other serious diseases. One of the £500,000 CT scanners is being replaced but an older one – which is used particularly for brain scans – is being kept in service.
It is not an easy call. Such equipment has to work perfectly and there is also the risk that parts may become unavailable for some machines if they stay in use beyond a certain date. “We are constantly making decisions based on clinical need and costs,” McNeil explains.
Addenbrooke’s has been cutting costs since 2011 to help deliver its share of the £20bn NHS-wide, four-year savings drive ministers have demanded, which ends in March. The quest for economies has prompted the 1,000-bed hospital to increase its use of longer-lasting gases to anaesthetise patients for surgery in its 38 operating theatres, because they are cheaper. That has cut by a third its £400,000 annual bill for such agents. A reminder service for those coming into an outpatient clinic, to reduce the number of time-wasting no-shows, has freed up 5,000 appointments and saved Addenbrooke’s an estimated £600,000.
But contributing to the quest for efficiencies is only part of the picture. Much like the NHS in recent years, the hospital has been facing a financial double whammy. It has been confronted by sharply rising costs at the same time that it has had to make millions of pounds of savings.
The spectre of the Mid Staffs scandal, in which understaffing led to notoriously poor care of patients, looms large. A serious shortage of experienced nurses in some of Addenbrooke’s key departments – cancer, neurosurgery, intensive care – has seen its annual spend on agency nurses jump 50% from £1.24m in 2013-14 to a projected £1.82m this year.
An ongoing dearth of nurses in England has forced it to pay employment agencies fees of £2,500-£5,000 each time they find them a new permanent nurse. Officials attending recruitment fairs across the UK and abroad have secured 156 extra nurses. They visited the Philippines last month in search of 70 more. The growing number of people attending the A&E department at Addenbrooke’s, which topped 100,000 last year, has required spending £1.6m to hire 23 new staff, including eight consultants and two junior doctors, to ensure rotas are fully staffed 24/7.
These may seem small sums for a trust with an income of more than £700m and which treats almost 900,000 people a year. But they all add up. McNeil points out that costs are rising because the twin phenomena of ageing and lifestyle-related illness is bringing them more and more patients who often have several serious things wrong with them – “multiple co-morbidities” in medical vernacular – and so are more complicated, and more expensive, because they need more of everything: more tests, more treatment from more specialists, and longer stays at a typical cost of £236 a night. These are the frail, elderly people who may have osteoporosis, heart failure and dementia and may have just fallen, or the obese patient who also has diabetes and kidney problems.
McNeil is worried. “This year, we will be there or thereabouts financially, but next year will be very challenging. We are going to really struggle to balance the books in 2015-16 and continue to provide the level of services we do now and meet all the NHS’s targets for treating people in A&E within four hours, treating cancer patients within set periods and giving people planned treatment within 18 weeks. Although it’s been hard so far, 2015-16 will be even harder. That’s when the real crunch is going to come.”.
Sliding into a black hole
When the coalition took power in May 2010, ministers hoped that a combination of the £20bn savings drive and the real-terms annual increases in the NHS budget they promised – a generous settlement given the austerity-driven deep cuts elsewhere in Whitehall – would help the service in England cope with the anticipated rising demand. The Department of Health’s (DH) planned budget this year of £113.035bn for the NHS in England is £12.6bn higher than the £100.4bn of 2010-11, the year the coalition took power. Despite that, money problems are piling up fast. Almost every week yields new evidence underlining the service’s increasingly precarious finances. NHS England has warned that the inexorably rising demand for care will leave a £30bn black hole in its budget by 2020-21 without unprecedented improvements in productivity.
There were 66 NHS trusts that ended 2013-14 in the red – incurring overspends of more than £750m – up from 45 a year earlier. They include 41 of the 147 foundation trusts, double the 21 seen a year earlier. Those are the trusts that, semi-independent of the DH and NHS, are meant to have the best-run finances. Surpluses generated by other hospitals almost balanced out that £750m, but not quite, leaving the sector to post its first deficit – totalling £107m – since 2005-06, the last time the service hit financial turbulence. That cost the then chief executive, Nigel Crisp, his job.
The service’s financial health went downhill fast in the first few months of the current NHS financial year, which began on 1 April. By the end of July, 98 NHS trust hospitals showed a deficit of £300m and were predicting it to rise to £563m by the end of March. For example, Leeds Teaching Hospitals NHS trust believes it will have a deficit of £49m, almost 5% of its turnover. The sector’s net deficit, £241m at the end of March, is likely to be twice that by the end of the year.
The most recent figures from the supposedly more robust foundation trusts show they neared financial meltdown in April, May and June. By the end of that quarter, an astonishing 66 (80%) of the 83 trusts that provide acute medical services, such as A&E and emergency surgery, had lurched into deficit, twice as many as at the end of March. Monitor, which regulates the sector, blamed “unprecedented financial and operational pressure” for the dramatic deterioration.
An overall surplus last year had suddenly become – for the first time – a collective deficit of £167m by the end of June, with 86 trusts overshooting their budgets. Hospital bosses now warn that the NHS is on course to end 2014-15 almost £1bn in the red. That has never happened before. Anita Charlesworth, chief economist at thinktank the Health Foundation, says the service will be £2bn short of what it needs next year.
Worryingly, April, May and June are usually not that demanding for the NHS. Some experts fear that former NHS chief executive Sir David Nicholson’s warning that the service could slip over a “financial cliff edge” in April 2015 was a year out and that the major cash crisis he foresaw is already happening.
Although last year’s deficit among hospitals is a mere 0.1% of the NHS’s £100bn-plus budget, its origins in an inexorably rising demand for healthcare made it significant – and possibly ominous. Hospital leaders talk of unprecedented and “unceasing” demand as the number of people being treated rises relentlessly. The ageing population and NHS-wide desire to reduce late diagnosis of cancer mean more people are being sent to hospital for CT and MRI scans and ever larger numbers are receiving chemotherapy, radiotherapy or surgery. Similarly, A&E units are seeing record numbers of arrivals.
The King’s Fund thinktank says the NHS is “a service under huge pressure” with its finances now “stretched to the limit” and “cracks beginning to appear in NHS performance” on key waiting times as a result. Prof John Appleby, its chief economist, says the mounting evidence “highlights a truth now widely acknowledged within the NHS, that it is heading towards a financial crisis in 2015-16, if not before.”
According to Chris Hopson, chief executive of the Foundation Trust Network, care providers “are facing the broadest range of challenges for more than a generation while dealing with an ever tighter budget and rising demand”.
Dr Mark Porter, chairman of the British Medical Association, puts it more vividly. “The year-on-year reduction in resources in many areas is leading to a service that’s palpably fraying at the edges,” he says, citing the NHS’s gradually deteriorating performance on a number of key waiting times indicators, such as for A&E, cancer treatment and routine surgery.
The waiting list for treatment, mainly planned surgery, has recently topped 3 million people for the first time since 2008. Lengthening waits for tests and treatment “point to a system which is struggling to keep up with demand”. “The NHS has now endured several years of underinvestment and the system is starting to buckle. We cannot continue to meet rising demand on our NHS with underfunding without the quality of patient care being affected,” Porter warns.
NHS experts and medical bodies are increasingly vocal in warning that the money the NHS receives is not enough for the job in hand, even if it has risen year-on-year as the result of the coalition’s ringfence around health spending. Prof Chris Ham – the King’s Fund’s chief executive and one of the NHS advisers Downing Street consulted for a while in 2011 – predicts that, without extra money in 2015-16, hospitals will have to cut staff, including doctors and nurses, waiting times will deteriorate, and inevitably – despite Mid Staffs – the quality of care will be compromised. The Health Foundation believes the NHS would need £17bn of extra funding to remain viable for the five years of the next parliament: £2bn right away, then an extra £3bn a year until 2020.
The NHS as a key election issue
Politically, the NHS’s two-sided coin of financial health and performance – its ability to treat patients within set waiting times – matters hugely.
Worryingly for the main parties, both are deteriorating sharply. Targets to treat A&E patients within four hours and those on waiting lists for planned treatment within 18 weeks have been slipping. Even targets for treating cancer patients have been missed in the past six months.
The near-certainty that the state and future of the NHS will be a key issue in next year’s election campaign has forced the parties to set out their own solutions at their conferences.
David Cameron earned cheers for pledging to maintain the DH ringfence for the full five years of the next parliament, despite that meaning deep cuts in other Whitehall budgets. Labour vowed to protect NHS spending and give it an extra £2.5bn a year, though there is confusion over when that extra cash will actually be available. The Liberal Democrats are similarly promising to extend the ringfence and give the NHS an extra £1bn a year from 2016. At £115.1bn, the DH’s budget for next year is already due to be just over £2bn more than this year.
As the parties were devising their policies over the summer, pressure on the NHS mushroomed further, beyond even what was seen in April to June. Some hospitals saw record numbers of visitors to the A&E department. The NHS has been meant to reduce emergency admissions for years but they have risen by up to 15% year-on-year in some places. “The NHS is currently on a knife edge,” says Dr Peter Carter, the chief executive of the Royal College of Nursing. The reality on the ground at the NHS frontline is “intense pressure, long waiting times, rising demand and undervalued and demoralised staff,” he adds.
Almost all hospitals have opted to throw money at extra staff to meet rising demand. In a recent message to staff, Peter Morris, the chief executive of Barts Health trust – which runs five hospitals in London – admitted that August had been “a particularly rough patch in terms of A&E and emergency admissions. We are spending a great deal of money (frankly money we haven’t got!) on extra staff and bed capacity to help cope”. Winter – when flu, norovirus and bad weather often combine to put the NHS under its greatest stress – was not far away, he warned.
So will all the extra money promised by the parties be enough? The King’s Fund says not. Ham says none of the parties match the scale of the funding challenge facing the service. While productivity can certainly be improved “unless this funding is found, patients will bear the cost as staff numbers are cut, waiting times rise and the quality of care deteriorates”.
Hopson believes nless politicians think more ambitiously, and confront the inescapable demands caused by changing medical need, they will soon face unpalatable options, he warns.
An urgent debate is needed “on the choice between more money for the NHS or a lower level of care.” With an election looming, the second is unlikely to be an option.
