He said that 2019-20 would mark “a year in which we make a significant move towards putting the NHS provider sector back on to a sustainable financial footing, moving away from a system where deficits have become the norm”.
Two £1bn funds – one to support those struggling with the rising costs of emergency care, and the new “financial recovery fund” – which is specifically targeted at helping trusts achieve and maintain balance – will help reset provider sector finances, he explained.
“The 19-20 settlement recognises that we cannot go on with most providers being in deficit and that we need to make a definitive and decisive move towards ensuring that we return to the situation in which efficient providers breakeven and indeed that the sector as a whole moves back from deficit year in, year out to break even.”
He also said the increased resources reflected the fact providers have “seen an increasing divergence between the income that trusts get for providing care and the cost of delivering that care, the so-called scaling factor, that currently stands at around 10 per cent.”
As well as the previously announced decision to reduce the provider sustainability fund and CQUIN scheme, Mr Dalton revealed that in 2019-20 control totals will be rebased on 17-18 outturns and then abandoned along with the PSF for subsequent years.
Mr Dalton said the new resources for the provider sector would only be available to trusts that accept their 2019-20 control totals.
He added that during 2019-20 each trust would have to “produce a multiyear recovery plan”, which NHSI would “need to understand” and which accounted for “the levels of cost reduction and efficiency that needs to be generated.”
The NHSI chief executive said: “We’d expect to see strong link to things like GIRFT and back office consolidation and procurement savings and workforce productivity, so that we can see a locally owned and credible trajectory to take trust back financial balance.”
The financial recovery fund “reflects the deficit position of the provider sector in 17-18 of just under a billion pounds” explained Mr Dalton. “So, the fund is large enough such that we can support most, if not all trusts in the sector.
“The aim is to match the size of the support to the size of the deficit in return for a plan which beats the control total. Once a trust has reached financial balance with the help of the FRF, it tapers away against an agreed profile.”
The planning guidance published today also revealed the NHSI is working with government to review “the rate of interest both on historic debt and on all new loans”. It added, NHSI was “considering a process for the restructuring of historic debt on a case by case basis once a recovery plan has been agreed”.
Mr Dalton said: “I’ve said before that many of the debts are unlikely to be paid back. [But] the first piece of the jigsaw though is that the trust needs to prepare a credible financial recovery plan”.
The NHS long term plan announced that NHSI would be launching an “accelerated turnaround programme” for the 30 trusts in the worst financial position.
Mr Dalton said NHSI would soon publish full details of its “approach to both financial recovery and the delivery of the LTP”.
As part of this he added: “We’re going to be working intensively with the NHS on an implementation delivery framework. And part of that will be a conversation with trusts, including those that are in the most challenged deficits category, about what is the right level of support and scrutiny to enable us to put them back on an improvement path.
“We’re in the process of defining how we will deal with all deficit trusts and what the ask of boards is and what the support offer is, and what we need to do if trusts aren’t able to play their role in this. And within that there’s a specific conversation about the trust with the biggest deficits, which will necessarily take the longest to fix and where there may be significant structural issues.”
Referring to the £400m savings the LTP said providers would have to deliver, Mr Dalton said: “You will see references in the planning guidance to some ideas and where that will be coming from in terms of simplifying contracting and payment process, as well as looking at the cost of the transactional services that underpin much of the NHS, particularly in providers and looking at what we can do over the five years to free up as much of that resources is practicable for reinvestment in services.”