Jeremy Hunt has set out the strict conditions hospitals must meet in order to access £1.8bn transformation funding next year, as part of a wider package of tough new financial measures to improve financial grip in the NHS.

In a ‘something for something’ deal, the Government has now said that hospitals must meet existing financial targets for the remainder of this financial year, based on strict spending totals, and trusts must balance their books in 2016/17 in order to unlock the transformation funding. Trusts also have to commit to working with other NHS organisations in the local area to transform the service they provide, delivering patient-centred care closer to people’s homes.

Today's announcement sets out:

  • £1.8bn transformation funding tied to strict conditions on finances and care, set out in detail for the first time
  • Cap on ‘rip off’ staffing agencies lowered further
  • Hospitals told no choice between delivering high quality care and financial grip
  • Poorly performing hospitals will face closer scrutiny and intervention from regulators

Health Secretary Jeremy Hunt said:

We believe in the values of the NHS and are committed to its future – which is why we are investing £10bn to fund the NHS’s own plan. But patients and taxpayers rightly expect a return on this investment, so hospitals must improve their financial performance and balance their books in order to unlock this funding. Our best hospitals are simultaneously showing tight financial grip, reducing waste and living within their means. We need trusts to raise their sights – failure to do this is not an option.

 In addition, trusts will only receive transformation funding if they deliver efficiency savings by implementing the savings opportunities and recommendations identified by Lord Carter, which will save hospitals £5 billion a year by 2020-21.

In his final report, which will be published shortly, Lord Carter will require trusts to improve staff deployment, bringing hospitals into the twenty first century by putting an end to outdated, inefficient paper rosters. Hospitals will be required to use electronic rosters, making sure the required amount of staff are in the right place at the right time, ensuring patients get the right level of care and hospitals do not waste valuable resources by over employing expensive staff. Many trusts which already use this system are not doing so to its fullest potential - Lord Carter has estimated just a 1% improvement in workforce productivity could represent around £400m in savings.

Trusts will also have to adopt tightly controlled procurement practices and increase transparency to drive down prices. From April 2016 trusts will be required to publish their receipts on a monthly basis for the top 100 items bought by the NHS such as bandages, needles and rubber gloves. This will allow hospitals to compare costs and volumes with other trusts, ending the days of trusts paying wildly varying costs for the same goods – saving hospitals £1bn a year by 2020-21.

Other recommendations to be announced in Carter’s report include;

  • Department of Health, NHS England and NHS Improvement, working with local government representatives, to develop a strategy to ensure that patient care is focussed equally upon their recovery and how they can leave hospital to tackle the issue of bed blocking; and
  • Trusts should develop plans to ensure hospital pharmacies achieve their benchmarks such as increasing pharmacist prescribers, e-prescribing and administration, towards ensuring greater access for patients.

This is coupled with a renewed drive to crackdown even further on expensive staffing agencies. From 1st February the nationally set price caps which limit what hospitals can pay for agency staff will be ratcheted down. And from 1st April a ban on the use of agencies that refuse to supply workers at the shift rate caps will be extended to all staff groups in the NHS, at present it only applies to those firms refusing to meet the cap for nurses.

The measures introduced so have been widely welcomed by providers and are expected to reduce the agency staff bill by up to £160m before the end of this year and £1 billion by the end of 2018. Evidence shows we have already begun to see a reduction in the amount hospitals are spending on agency staff as a result of action taken.

Jeremy Hunt added:

These new and tighter controls will help hospitals clamp down further on rip off staffing agencies and make our hospitals safer – reliance on constantly changing agency staff who are unfamiliar with wards and their patients is unsafe. Our clear expectation is now that we will not support the use of agencies unless their rates are in line with nationally agreed limits.

 These new financial controls are part of a clear message to trusts that there can be no choice between safe care and strong financial performance.

Also in a letter to provider Boards, Jim Mackey, Chief Executive of NHS Improvement, and Mike Richards, the CQC’s Chief Inspector of Hospitals, said there is no choice between quality of care or financial balance – both must and can be achieved. This is underlined by CQC’s findings that increasingly show trusts with the best quality ratings are also the ones with better financial results.

Providers who fail to put these controls in place and balance their books without compromising patient care will lose their freedoms and control over key decisions and will be subject to closer scrutiny and intervention from national bodies and regulators, until they can demonstrate appropriate grip. Ultimately this could result in the entire board of a trust being suspended.

The Government has also announced £12 million investment across six pilot sites to accelerate the implementation of electronic procurement systems that will help deliver up to £800 million in efficiency savings. The six demonstrator sites in Derby, Salisbury, North Tees, Cornwall, Plymouth and Leeds have been selected to take part in the trial which will see every product given a barcode, from medical items such as pacemakers to day-to-day items such as stationary, which will mean supply chains for hospitals are made simpler, reducing the estimated £150m the NHS wastes each year on products which have been either oversupplied or perished. This procurement programme is part of a wider project which will see every hospital in the country using this model by 2020/21.

Jim Mackey, Chief Executive, NHS Improvement said:

The controls we have already introduced are helping to relieve financial pressure on the service - our agency caps have led to a reduction in the amounts hospitals are spending on agency staff, but hospitals can and must go further and these measures will help them. Trusts that fail to get their finances in order will be in breach of their licence, meaning a loss of freedom over decision making and closer scrutiny from NHS Improvement until they can demonstrate appropriate grip.

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