This report examines the financial performance of the NHS in England. The main focus is on the finances of NHS providers and the financial position of the commissioners of care (NHS England and clinical commissioning groups).

Download A perfect storm: an impossible climate for NHS providers’ finances? 

The report examines commissioners’ budgets and how spending has changed by type of provider, as well as the specific issues facing NHS providers. It also includes the findings of a statistical analysis that set out to identify factors that are most strongly associated with an acute or specialist provider’s deficit.

Our analysis finds that organisations with a high proportion of their pay bill going on agency staff coupled with more of their income being paid through the PbR tariff rather than negotiated prices are associated with being in deficit. We also find that poor quality ratings either from CQC or the hospital’s own staff are associated with poor finances. This is not causation and our analysis can’t tell us if finances cause quality problems, quality problems cause finance problems or, as is most likely, they are bound together in complex inter-connected ways.

A slide pack of charts and tables from the report is also available to download. There is also a technical appendix that provides more detailed information about the methodology used.

Further reading


Pete Chamberlain

A sobering and comprehensive overview that dispassionately outlines and unpicks the factors associated with the tumble in NHS finances over the last 5 years. Factors including impact of Francis report, employee pay analysis, goverment funding trends and which factors are statistically linked to provider financial health. Leaves as many questions about the future as answers from the past from what are mainly descriptive but presentable statistics. A must read for anyone in local system leadership in the NHS.

stephen black

There are interesting implications of the observation that the two biggest factors driving deficits are agency staff use and the extent of block contracts. But they can be misinterpreted.

Agency staff use driven by the perceived need for minimal staff cover is the easiest to interpret. It looks as though workforce planning is a mess and that attempts to constrain staff costs have had counterproductive unintended effects. Good planning would foresee potential future needs and use flexibility in pay and recruitment to provide the right levels of staffing. short term panic leads to a loss of control over costs as the only option is agency staff where trusts are price takers and the staff are expensive. Perhaps more flexibility over pay and conditions could have solved the same problem far more cheaply but is prevented by national pay constraint.

The issue around tariff is harder to interpret. Having a larger proportion of block contracts seems to be good for hospital finances. But this doesn't mean--as many have argued--that tariff is broken. It might, but an alternative explanation is that hospitals have disproportionate strength compared to naive commissioners (as they seem to have had around specialist commissioning where NHS England has not been smart). Giving more market power to providers is not a solution to the problem and is likely to make it worse in the long term.

Given that many trusts don't have much of a clue what their actual internal costs are (as repeated audits of pricing data have shown), the solution is surely to encourage better bottom-up costing inside trusts. This would create the environment where actual productivity could be improved which would be better for everybody than simply letting trusts negotiate higher prices to cover their lack of productivity.

Sadly the system is more likely to interpret the relationship between deficits and non-PbR contracts as a reason to redesign tariff rather than a reason to encourage better cost data and constrain the market power of providers.

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