Road to Recovery

Achieving financial balance and sustainability in healthcare

Achieving financial balance and sustainability in healthcare providers

Financial control is the vital first step to making the NHS sustainable. It’s the platform upon which long-term transformative change can be built. While individual trusts aren’t always fully in control of their own destiny, and strong leadership is needed at the national level to address the funding gap, there is more that can be done to ensure the processes and systems are in place to avoid financial trouble. The NHS Long Term Plan provides a route map to sustainability - the key remains how to implement it whilst dealing with the day to day.

The lessons shared in this document are important for a successful financial recovery. The efforts to improve the financial performance of organisations are often hindered by over complicating and failing to grasp the basic pillars of change. Improvements in areas such as communication within the NHS and with its stakeholders are a big step in the right direction but more can be done with strong financial control being that vital first step and platform upon which long-term transformational change can be built.

 

The NHS continues to face unparalleled financial and operational pressure with a deficit of £1.65bn at the end of Q2 2018/19.

Introducing the recovery curve

In this report, we have used a traditional corporate demise curve to illustrate a range of considerations and priorities for organisations during a journey of financial improvement and recovery. The demise curve refers to the period of time from the decline of an organisation through to its recovery, before becoming sustainable. We have refined this for the NHS and are terming it ‘the recovery curve’.

The phases of the recovery curve are:

Fundamental principles

We have identified six fundamental principles to achieve a successful turnaround:

  1. Leadership – reacting to the changing requirements of turnaround
  2. Data – ensuring all decisions are based on good quality, widely-trusted data
  3. Culture & mindset – fostering a genuine belief at all levels that turnaround is possible
  4. Stakeholder management - clearly stating the purpose internally and managing the health economy
  5. Technology – increasing efficiencies and minimising duplication of effort
  6. Governance – strengthen all aspects of governance to support the turnaround

Decline

In order for trusts to determine the drivers of their financial position, they need to understand what is causing the deficit and, where relevant, what has continued to cause it. 

There are four key steps to go through to start understanding and addressing your financial decline

1. Identify the causes and drivers of financial performance, including a financial baseline review to understand your underlying financial position

2. Undertake a discretionary spend review

3. Rapid assessment of in-year cost improvement opportunities

4. Prepare your financial recovery plan (FRP)

Recovering from within

Having arrested the decline in financial performance and stabilised positions, organisations have decisions to make as to where to go next. To move beyond cost improvement plans and focus on enduring sustainability they should consider the following:

  • Workforce – reviewing the demand and capacity of workforce can give rise to both cost out and productivity opportunities
  • Operational improvement – theatre productivity, outpatient productivity and patient flow are three key opportunities that should be focused upon
  • Budget setting – engage the whole organisation in the budget setting process as early as possible. and consider alternative approaches to budget setting such as zero-based budgeting, rather than simply basing budgets on last year
  • Zero-based budgetting  a way to reset costs based on the organisation’s priorities by helping management to strip out any cost-generating activities and external spend while maintaining optimum service levels and quality.
  • Understanding the activity value stream – consider how you can understand the value driven from every activity in the organisation to give greater insight
  • Making the most of the Model Hospital – it is an extremely useful tool for helping guide an organisation to where potential opportunities may lie

Recovering across the system

As an organisation moving up the curve, the next steps are to consider how to work wider across the system, rather than simply within the organisation itself:

  • Collaboration within the system – benefits should include: temporary pay efficiencies, opportunities through pathology collaboration, and, system-wide service configuration and estates planning
  • Data quality and sharing information across the system – for Integrated Care Systems (ICSs) to succeed, organisations need to work closely together to understand, analyse and form ‘one version of the truth’
  • Contracting and commercials – explore innovative ICS focused solutions and draw on the best and most applicable models from the private sector

Sustainability

As organisations look to the longer term, reaching a sustainable position requires more radical approaches in particular, how technology is impacting the sector:

  • Technology will have the potential to save the health sector both time and money, through both a short-term focus on costs where technology can enable greater visibility on the true costs for deliver, and longer-term changes to service delivery
  • Technology such as 5G, robotics and automation will increase accuracy and speed of back-office functions and add clinical facing time to ensure patients get the best and most appropriate care

How we can help

Our specialists are working with providers across the country to support them through the stress of turnaround and assist them in their journey to transformation. The lessons shared in this document are drawn from that extensive experience and are vital steps to ensuring successful financial recovery.

Specifically, PwC can help you:

  • Review the drivers of your deficit and support the trust in identifying the quantum of those within its control and those outside of its control.
  • Develop your CIP programme both in year and for next year, identifying new opportunities, stretching current opportunities, and improving delivery.
  • Understand your cash position, what the key drivers are, and how to develop a cash flow forecast.
  • Implement ‘Perfect Ward’ – a tool that allows for easier, digital recording of ward metrics to save time for patient facing staff.

Contact us

Damien Ashford

Partner, Business Recovery Services, PwC United Kingdom

Tel: +44 (0)7787 120228

Shamil Ganatra

Director, Operational Restructuring, PwC United Kingdom

Tel: +44 (0)7852 191622

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