In October 2016, Jeremy Corbyn, leader of the Labour Party told the House of Commons that 80% of acute hospitals were in deficit. A fact checking website Fullfact.org corrected that claim by saying that the real number was 75% of acute hospitals.
Both numbers pointed to an alarming situation in the NHS - that trusts were not making profits. At the end of the financial year 2018, that number fell to roughly 53%. But the question still arises, why are more than half of all NHS trusts facing such massive deficits that some are merging with other trusts?
I wanted to know why this was the case, especially because it happened in the aftermath of the Brexit vote. Did Brexit push NHS trusts into deficit?
Before I got to that, I needed to delve into the workings of the NHS so that I understood all the different people and organisations involved in it. The key question to understand was: what happens between the central government sanctioning a budget for the NHS and the patients actually receiving care?
The entire process has differed greatly under different governments since 1948 – the year when the NHS was founded. But when the Conservative government passed the Health and Social Care Act 2012 (which came into effect in 2013), the NHS found itself in an "internal-external market."
What is an internal-external market?
As far as the NHS is concerned, an internal external market consists of both public funding and private organisations that aim to make profit. Also in 2013, Clinical Commissioning Groups were formed. These commissioning groups replaced the Primary Care Trusts (PCTs) and bought healthcare from the health providers. Usually, these health providers are the NHS Trusts that run hospitals and clinics.
The issue with this process in connection with the internal-external market followed by NHS England is that the NHS trusts and CCGs must make profit in order to stay in business.
Trusts and CCGs can make profit in a variety of ways, but some of them include:
· Offering private treatment where the patients choose to pay for their treatment
· Charging for prescriptions
· Saving money on branded drugs by offering cheaper alternatives
However, Professor Carol Doyle, Head of School for Nursing and Midwifery at Birmingham City University took issue with this system. At a lecture about the state of the NHS in 2018 at Birmingham City University, she said, "Smaller trusts are not making profits, accumulating huge deficits, and they are merging with the bigger ones. This is the NHS of 2018."
James Morrison in his book Essential Public Affairs also said that as far back as mid-2000, NHS trusts had "begun to accumulate substantial deficits in their efforts to pay back interests for new hospitals…which were funded through Private Finance Initiative deals."
The crux of the matter is that private finance had been forcing NHS trusts into debt ridden organisations for about 18 years. So, the issue goes far beyond Brexit. I spoke to Ted Ryan, who is currently Special Projects Director at the RnR Organisation, which aims to improve data literacy in the voluntary sector. Ryan also co-authored a paper about discussing ways in which the voluntary sector can positively impact public health services. He told me:
"The problem is much deeper than just an urban-rural divide because the percentage of trusts in deficit is very high." He said, "while the trusts are supposed to make profits, the NHS cannot borrow money to invest in capital.
They must pay for services like IT, and other related services from the allotted budget. This model is flawed because, it is difficult for a big organisation to be expected to make profits but not allowed to borrow."
"The situation is much more alarming because the CCGs are also in massive deficits."
In the months of April and May 2018, many CCGs have begun to report deficits of millions of pounds. Whitby CCG said that it had overspent its budget by £5.6 million for 2017-18. Shropshire CCG's annual report said it ended 2017-18 with a £27.045 million deficit, Vale of York with £20.1 million, and South Devon and Torbay CCG with a £13 million overspend in the year ending 2018. Meanwhile, 4 Cheshire CCGs will merge in 2020.
Ryan said that an ageing population is adding to the woes of hospitals as they must pay for older people with the same budget. Carol Doyle had also spoken of this. Suggesting that it is creating huge problems for the NHS, she estimated about 40,000 nurses' positions vacant in all of England. Doyle also went on to say that less and less people want to become nurses due to the long study process – while the average age of nursing graduates is rising.
Another major reason for trusts going in deficit is that the government is not funding inflation. This article explains that while costs of clinical supplies and salaries of NHS workers rise every year to adjust inflation, payments made to NHS trusts do not account for that. The trusts are then left to pay for the inflation, and because many could not, they simply fell into deficit. Ted Ryan also confirmed this, and went on to tell me that even though salaries and costs have risen, the NHS budget has not been in parity with costs.
All this is being worsened by cuts to the NHS following the Brexit vote.
Brexit will increase deficits
The issue is that the government plans to cut funding for the NHS so they will get less and less money. Putting this in perspective is that the UK population is rising, but the NHS workforce is ageing, and also losing its European nurses due to Brexit. Elisabetta Zanon, writing for The UK in a Changing Europe states that, “If we combine health and social care, there are more than 160,000 EU/EEA nationals working in the sector. Many NHS trusts are struggling to fill vacancies and Brexit risks exacerbating this problem.”
One example of trusts merging is the Heart of England NHS Foundation Trust. After a series of clinical and financial losses, the trust merged with University Hospitals Birmingham Foundation Trust this year. Other planned mergers for 2018 include 18 CCGs:
· Aylesbury Vale and Chiltern
· Birmingham CrossCity, Birmingham South and Central, and Solihull
· Bracknell & Ascot, Slough, Windsor, Ascot & Maidenhead
· Bristol, North Somerset and South Gloucestershire
· Leeds West, Leeds North, and Leeds South and East
· Newbury & District, North & West Reading, South Reading and Wokingham
