May 3, 2011 by sharonbrennan
A good day to hide bad news seems to be becoming a modern day adage in UK politics, and the Royal Wedding last Friday proved no exception. While the nation was giddy with nuptial fever, Monitor, the regulator of NHS Foundation trusts warned that hospitals may have to make ‘efficiency savings’ of 6 – 7% for each of the next five years. This is even worse than the original target set by the Department of Health of 4% for each year.
Worryingly these ‘savings’ were highlighted in a letter to Foundation Trust (FT) applicants – i.e. hospitals that wish to become a Foundation Trust but haven’t yet. The Government has set a deadline of April 2014 for the remaining 85 hospitals and mental health units to achieve FT status. As such to become an FT they MUST achieve the financial savings demanded by Monitor. Aside from the fact that ‘enforced savings’ are really just a euphemism for cuts, the real question is what happens if these hospitals cannot achieve such savage savings?
The Government has avoided providing a Plan B for such hospitals, and it is unclear whether a hospital will be allowed FT status even if it is unable demonstrate it can balance its books under such stringent demands. An alternative would be to allow an extension to the April 2014 deadline (a possibility considering the climbdown on the GP commissioning deadline). But a third option is also very possible: hospitals will just be allowed to close down.
The ‘Liberating the NHS: Legislative framework and next steps‘ document recognises that some “organisations” will not manage to “thrive” under the “tough financial times ahead”. As a clear warning to those that struggle to balance their books, it states on page 134:
“Taxpayers’ funding needs to be used to pay for the services that patients need, not to prop up failing organisations that make ineffective use of the resources they receive. The transitional arrangements will ensure that there is no unnecessary failure: if there are simple steps that can be taken to make an organisation succeed Monitor will retain a role during the transition to ensure that these steps are taken.” (My own italics)
Furthermore, Dr David Bennett, head of the economic regulator Monitor, admitted to the BBC in March, that hospitals that get into financial difficulty will “ultimately close”. So clearly the Government can envisage a scenario where a hospital will be allowed to fail and the implicit assumption is that the Government will place the blame squarely on that hospital for doing so.
Yet this is incredibly unfair on those hospitals that are yet to achieve FT status. They are now attempting to do so under a harsher remit than any of those who have achieved it to date: indeed these savings are so tough that leading health economists doubt they are achievable.
A 4% saving has already been criticised as unrealistic by health economists. But speaking to the BBC about these latest statistics, John Appleby, chief economist at the health think tank the King’s Fund said: “I can see a hospital doing this [6% savings] for one or two years, but not five years”.
So either the financial bar has been set so high as to be intentionally unachievable (allowing the Government to prune its expensive stock of hospitals) or the Government has no real understanding of what a 6% saving actually means to a hospital. Either way by 2014 patients will be understandably angry if their local hospital is under threat of closure, when in reality it was the savings targets themselves that were financially unviable, not the hospital struggling to meet them.