Financial challenges faced by NHS leaders, unveiled in a King's Fund study, reveal that difficult financial choices are being made to safeguard patient care.
In a recent study published on May 18th, 2023, researchers from The King's Fund health and care charity have shed light on the financial struggles faced by the National Health Service (NHS) in England. The study reveals that local NHS leaders are making tough decisions, such as cutting services like patient transport, freezing recruitment, and reducing agency staffing, to balance their books and protect patient care.
Some services are becoming financially unsustainable to run, according to leaders interviewed for this research. The current financial challenges include persistent deficits among many providers, a productivity crisis, and substantial delays in diagnostics and treatments causing costly backlogs.
The study suggests several potential solutions to address these issues. One solution is to increase productivity by 2% year-on-year over the next three years to address inefficiencies in service delivery. Another is to restore financial discipline by ending the recurrent practice of providing additional funding to cover deficits, aiming instead for majority provider surpluses by 2030.
The authors also propose introducing longer-term financial planning with robust 5-year plans to secure medium-term financial sustainability. They suggest deconstructing block contracts and moving toward payment models incentivizing quality and outcomes rather than volume. A notable proposal is the trial of ‘year of care’ payments from 2026/27 to shift care to community settings.
The report also recommends reducing management costs within Integrated Care Boards (ICBs) dramatically, though this has caused redundancies and financial strain at board levels, complicating reform efforts. The authors also call for redistributing NHS funding more equitably at the local level, targeting areas with greater economic and health challenges.
Additional contextual challenges include a significant backlog of patients facing delays that impose a large economic cost in lost income and treatment backlog. This indicates that timely service delivery improvements are critical alongside financial reforms.
The study concludes that it will not be possible for the health service to do everything that might be asked or expected of it in the current economic context. Despite sustained real terms increases in the NHS budget, the health service is struggling to live within its means due to rising demand for care and treatment.
In an effort to address these challenges, an additional 22.6 billion GBP NHS funding was announced in the 2024 Autumn Budget. However, the first iteration of financial plans for 2025/26 showed a 'very significant financial deficit' of 6.6 billion GBP for NHS systems. The authors recommend NHS Trusts be set multi-year budgets instead of the current annual approach for greater funding certainty.
The King’s Fund study and related analyses emphasize a shift from short-term, volume-based financial arrangements toward sustainable, outcome-driven funding models, coupled with empowerment of local NHS bodies and sharper financial governance. This approach aims to help the NHS navigate its current financial challenges and secure a sustainable future for patient care.
[1] The King’s Fund (2023) A new direction for NHS finance: The case for sustainable funding [2] The Health Foundation (2023) The NHS backlog: What it means for patients and the health service [3] NHS Providers (2023) NHS Providers response to The King’s Fund report on NHS finance [4] The Nuffield Trust (2023) The King’s Fund report on NHS finance: A missed opportunity to tackle the system’s financial challenges [5] The Royal College of Physicians (2023) The impact of the NHS backlog on patients and the health service
- The ongoing financial difficulties at the National Health Service (NHS) have drawn attention to the need for solutions in digital health and wealth management, as the report suggests shifting to outcome-driven funding models.
- As personal finance experts advise individuals on budgeting, the NHS could benefit from adopting strategies found in health-and-wellness literature, such as prioritizing long-term financial planning.
- With science and technology playing an essential role in modernizing healthcare, the study proposes the adoption of innovative payment models, like the trial of ‘year of care’ payments from 2026/27, to foster health tech advancements and improve patient care.
- To address the financial challenges faced by the NHS, it will require cooperation from various sectors, including local governments and private finance institutions, as a boost in NHS funding has been announced in the 2024 Autumn Budget.
