NHS financial shortfall

The NHS will face a significant financial shortfall of £8-£10bn from 2011 as the impact of the recession and rising costs take their toll, according to a report from the NHS Confederation.

Dealing with the Downturn suggests that the decline in investment could stretch beyond this time and that managers face an 'extremely challenging' financial outlook. In addition, the report suggests that the need for 'strong leadership and radical productivity has never been greater'.

'Time is short and experience of previous spending tells us that failing to rise to this challenge now will have serious consequences for the NHS, its patient and staff,' the report states.

The report warns that any modest increase in cash investment would be outstripped by the rising cost of healthcare. The cost of new treatments and the ageing population are two factors putting a significant strain the health service budget.

'Demand is likely to continue to increase from long-term trends in ageing, increasing disease burden from improved survival and rising fertility (particularly in older women), as well as from the negative health effects of recession in areas such as mental health and alcohol use,' according to the report.

The NHS Confederation says that it 'will need to strip away the obstacles that stand in the way of innovation and change, and be prepared to challenge much of what we currently do'.

In the report, the confederation calls for a focus on using quality and process improvement and the adoption of innovative, evidence-based practice to overcome the hurdles ahead. In an aim to respond to the impending financial shortfall, the confederation has recommended that the health service look at improving quality and efficiency; cost improvement within support functions; strategic changes in provision and resource allocation.

It has warned against the previous 'slash and burn' approach to cost-containment, including letting health service pay fall out of line with the rest of the economy and allowing waiting lists to grow.

Compounding the financial challenge is the tendency within the NHS to solve problems through growth not rationalisation. As such, it will be difficult to create a viable provider plan that takes into consideration skrinking income and even more challenging to keep staff and stakeholders engaged. 'The policies and approach that we have used to manage growth will need to adapt to a new and more challenging environment,' the report says.  

Unions, such as Unison and the British Medical Association (BMA) are concerned that the NHS is unlikely to expand to meet the growing demands put on services and that the push towards greater efficiency could lead to increased use of and reliance upon private healthcare providers.