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NHS “financial system is caught in a time warp”

In an extended blog for members of the Healthcare Financial Managers’ Association (HFMA), Rt Hon Alan Milburn (former Health Secretary in the Blair government), welcomes the promise of a financial birthday present for the NHS but argues that without widespread reform to the current NHS financial system this measure will fail to deliver results.


The focus, Milburn says, needs to change from increasing activity in the hospital to improving outcomes in the community; it needs to prioritise prevention rather than just treatment; and should be long term, not short term in its focus.


Milburn makes these comments following the publication of the report - ‘Making money work in the health and care system’ – published by PricewaterhouseCoopers LLP (PwC), led by healthcare partner, David Morris and in association with HFMA. Alan Milburn chaired the Steering Group that oversaw the research.


The report surveyed over 200 individuals working in finance roles in the NHS. 


Some key findings of the report: 

* 91% said unpredictable annual cycles of funding need to be reformed if systems are to be able to engage in sustainable financial planning


* 76% felt that the current funding structures in the NHS were not fit for purpose


* 78% thought that there should be a single budget for each local health, social care and public health economy


* 77% believed outcomes would be improved through greater certainty of funding levels over a longer timeframe 


“It is safe to conclude that those in charge of NHS finances believe that today’s structures are past their sell-by date,” says Milburn.


Capital funding & backlog maintenance

The report calls for a redesign of the capital funding system so longer term investment can be planned to address the growing problem of backlog maintenance. It wants to ban capital to revenue transfers and create a National Restructuring Fund aimed at developing out of hospital assets and infrastructure, including the adoption of technology, that are necessary to tackle the challenges of future care needs. 


In his blog, Alan Milburn says: “Banning capital to revenue transfers - which have robbed the NHS of billions of desperately needed infrastructure spending in recent years - would provide more investment in out-of-hospital care.”


The report supports the proposals of the Naylor review around the disposal of land and estate as a means to access capital funding, but says Trusts need to be realistic about the space that can be released and therefore the level of funding that may be available via this route.



In his blog, Alan Milburn sums up the key recommendations of this report. Alongside increasing the level of funding, he calls for visibility over resourcing with a long-term “line of sight” of 5 – 10 years, which will provide the necessary time for services to be changed into a more integrated, community-based model. 


Reforms are also necessary. “Today the NHS is in an organisational no-man’s land. In particular, there is a misalignment between the ambition of creating integrated, place-based and outcome-led care and the operation of the current financial system. Money talks in the NHS. Not just the volume of money, but how it is used, deployed and how it moves around the system.”


Failure to introduce the necessary reforms will run the risk that any extra cash injected into the health system will ultimately be wasted. He goes further, to say that if nothing is done the financial system will be: “a stumbling block to the service transformation that is so desperately needed.” 


To achieve this, not only do health and social care budgets need to be brought together at a local level, but how providers are paid should be changed to reward improvements in outcome rather than the number of patients treated.


Read the full blog here.


Download the PwC and HFMA report here.