Why do SHAs appear to average a 15% surplus on turnover, while 25% of community matron posts remain unfilled?

by Andy Cowper, editor, Health Policy Insight

Money is interesting stuff, and eloquent with it. In a great lyric by Chief Medical Officer Liam Donaldson’s hero Bob Dylan, “money doesn’t talk, it swears”. So what four-letter word would sum up a surplus of £1.658 billion – just over 2% of the NHS budget?

The NHS surplus should make the news tomorrow, but probably won’t. There are two main reasons for this. One is that NHS’s improved financial reporting system has allowed accurate tracking of the fiscal picture across the year. It has been generally known for months that the service was heading towards a surplus in excess of £1 billion, and for the past three that it would be nearer to £2 billion. The second is the ‘man bites dog’ newsworthiness rule of the media – if things are working well, it’s not really as interesting as disaster, shock, catastrophe and failure. Deficits = government incompetence = failure. Surplus = no story. That’s life, as they say in France.

And let’s be clear: financial stability in the NHS is a good thing. There are a whole bunch of reasons why. Paying greater attention to costs often reveals waste, bad practice or unacceptable variation in output or outcomes. Public confidence in the system’s stewardship of taxpayers’ money also requires it. It gets HM Treasury (a little bit) off the backs of DH and ministers. The NHS financial world of yore, when prudent organisations found out what their share of the big local teaching hospital’s deficit would be only at the end of the financial year, was about as useful a guide to planning the future as Mystic Meg.

Down in The Quarter

The DH’s release of The Quarter
(www.dh.gov.uk/en/Publicationsandstatistics/Publications/DH_085244) has the draft figures, and notes that “In previous editions of The Quarter, we reported that the NHS was predicting to deliver a healthy surplus of approximately £1.8 billion at the end of the 2007/08 financial year. The NHS (excluding Foundation Trusts) is reporting an overall surplus of £1,658 million. The move from quarter three is a result of investment programmes in some areas starting early. The surplus is a small proportion of total NHS resources, just over two percent and represents good financial planning. It also demonstrates a real improvement in the consistency of NHS forecasting during the year”.

The Quarter also quotes David Flory, DH Director General for NHS Finance, Performance and Operations as saying, “our success over the last year will count for nothing unless the momentum we have achieved is used to push on with the changes we need to make to be able to tackle health inequalities and create the kind of personalised services that our patients and local communities demand”.

I like The Quarter: it’s a good thing. Much of the first half of the document is a general NHS performance report, highlighting the good progress on waiting time targets and healthcare-associated infection targets. Fair play – targets are numbers too. And if you do read on, some interesting things come out later on. Like the figures in this table below.

The surpluses of SHAs

Surpluses by SHA (from ‘Annex 3 - forecasts by organisation’ 2007-8 draft accounts)

SHA Surplus (£000) as % of turnover

YORKSHIRE & HUMBER 223,198 30.3%

NORTH EAST 85,826 25.4%

NORTH WEST 206,829 24.2%

EAST MIDLANDS 55,151 13.8%

SOUTH WEST 56,710 13.8%

SOUTH EAST COAST 36,142 11.5%

LONDON 146,196 9.3%

SOUTH CENTRAL 27,192 8.2%

WEST MIDLANDS 33,500 7.2%

EAST OF ENGLAND 32,683 6.0%

Average SHA surplus 14.97% of turnover

SHAs’ percentage-of-turnover surpluses look strikingly big. For individual trusts in each SHA, the vast majority’s surpluses are in a range between 0.1% and 2.5% of turnover. Yet these figures show the minimum SHA surplus as 6%, the average as 15% and the top three averaging over one-quarter of their turnover. Canny Northerners!

Training derailed

Why do SHAs seem to be spending so little of their turnover? Certainly, SHAs were the vehicles for keeping the last two financial years’ overall national surpluses to acceptable levers, through the slash-and-burn policy of their Multi-Professional Education and Training (MPET) budgets.

Is it related to the much-publicised early achievement of workforce targets set in The NHS Plan of 2000? The House of Commons Health Select Committee’s 2007 ‘boom and bust’ report on workforce (www.parliament.the-stationery-office.co.uk/pa/cm200607/cmselect/cmhealth...) recommended that “the 10 new SHAs improve their understanding of workforce demands and take collective responsibility for improving planning at national level (and) ensure that as commissioners, PCTs help SHAs to analyse future workforce demand and ensure that service planning and workforce planning become integrated and complementary processes”.

Health economist Professor John Appleby of the Kings Fund notes that “SHAs aren’t big organisations financially, they cost nearly nothing, don’t make or provide any healthcareSome of the SHAs’ surplus is probably from underspending training budgets, but some of this may also be SHAs holding PCTs’ money through the top-slice. It would be really useful to see what the surplus is made up of.”

A simple-ish explanation

Mike Farrar, chief executive of NHS North West SHA explains the confusion: “virtually all our surplus is money saved by our PCTs. Once you’ve disaggregated the figures, the surplus doesn’t relate to the actual turnover of the SHA. We collect and ‘bank’ the surpluses of our PCTs in the North West. So what looks like SHA surplus in these figures is actually PCT surplus.

“Our surplus looks huge against my directly-controlled SHA budget. But really, you’ve got to set the surplus against the total £11.7 billion NHS spend in the North West. My figure is about 3.5% of the total allocation banked with us. The way DH publish these results is confusing. My only real direct budget is my running costs (and education and workforce spend). And it’s not from top-slicing PCTs, which I think only one SHA does now”. A Department of Health spokesperson added, “SHAs have differing levels of surplus, which reflects their financial strategy and the future plans of the economy. The surpluses expressed as a percentage of the revenue resource limit for each region shows a range of 1% to 3%”.

Nigel Edwards, policy director of the NHS Confederation confirmed Farrar’s point that only one SHA top-sliced its PCTs’ budgets in 2007-8: “what has happened in other SHAs is about developent funds being lodged with the SHA by the PCT and various similar mechanisms – to restore financial balance and to fund future development work.”

Do the DH and SHAs trust PCTs?

However, all of this raises more questions. Why do SHAs bank PCT surpluses? Why don’t PCTs keep their surpluses on their books? What does this say about the DH’s willingness to trust PCTs to become good financial managers and world-class commissioners? Is this decentralisation? It neither looks nor feels like it.

Nick Bosanquet, professor of health policy at Imperial College London and consultant director of Reform, describes the confusion over SHA surpluses as “another one of the bottomless mysteries of the NHS financial system. It’s also proof of the urgent need to move to a simple NHS economic constitution, where every NHS body can declare what they are spending on, what their costs are and what their income is.

In it for the long term?

Long-term conditions are the core business of healthcare. You will probably remember that a few years ago, case management was coming from the USA to save the world. It was impossible to go to an NHS event without seeing the ‘Kaiser pyramid’ slide of case management for long-term conditions. Particularly zealous DH policy staff probably got it tattooed on their backs.

And then case management rather faded into the background as the deficits hit. Figures again found towards the back of The Quarter show that plans to get those people charmingly dubbed ‘Very High Intensity Users’ (inevitably, VHIUs) under case management are missing the mark. The aim was to have 227,806 VHIUs in active case management, but the achievement was 193,682. You cannot. of course, case manage without case managers, and since ‘bringing back matron’ has an archetypal aoppeal in health policy, we were going to have community matrons to do this case management. Yet only 2,174 of the expected 2,817 posts have been filled. 25% remain unfilled.

This matters quite a lot. The considerable impact of poorly-managed long-term conditions, not only in higher costs of acute treatment but more important on the worsening quality of life of patients, should not need restating in a moderately sane world. Evidently, it does.