National Health Service’s Financial Crisis is Top of Voters’ Agenda

Great Ormond Street Hospital in London is one of the world’s most prestigious children’s hospitals, caring for the sickest kids in Britain, but it’s also part of an organization losing millions of pounds a year. It’s not an outlier.

Dozens of hospital operators in England aren’t breaking even, potentially threatening the quality of care they can offer. More than 40% of these entities, called National Health Service Trusts, had an operating deficit in the fiscal year ended March 2023, a dramatic deterioration from the previous year when less than 20% were losing money, according to an analysis by Bloomberg News.

While the network of more than 200 operators largely broke even overall, operating losses among trusts in deficit amounted to roughly £1.3 billion ($1.6 billion), the latest financial data from NHS England show. Because of the way the the health service is structured, deficits force trusts to focus on balancing the books, limiting much-needed improvements to reduce waiting times and improve care.

At Great Ormond Street factors such as higher than planned spending on pay and more expensive drugs weighed on finances. Waiting lists have remained stubbornly high, with 33% of patients waiting over 18 weeks for care.

Ahead of national elections on July 4, the data analysis – backed by interviews with experts – reveals the depth and breadth of the crisis facing the NHS, an issue that’s top of mind for voters. Both the ruling Conservatives and the poll-leading Labour Party have made proposals to fix the creaking health service, but key details remain unresolved.

“The elephant in the room is how these improvements will be funded,” said Jennifer Dixon, chief executive officer of The Health Foundation think tank.

As a group, NHS Trusts are in their worst financial situation since before the pandemic. During the Covid-19 outbreak, the government injected millions into the health system, providing temporary respite. Now, the situation has returned to the dire pre-pandemic levels and the deterioration has been rapid.

“NHS Trusts have faced increased pressure as a result of the much higher levels of inflation, and the impact of unprecedented industrial action,” the health service said in a statement to Bloomberg. “The NHS continues to work with all local areas to deliver the best financial position they can, as well as continuing to deliver record levels of care for patients.”

In England, NHS Trusts mainly operate hospitals, but there are also nearly 50 trusts providing mental health care and fewer than 20 offering community health. The analysis includes all of those, but excludes ambulance services because of the different nature of their operations. So-called impairments, which often relate to construction or property revaluations, are included where NHS England has added them to operating expenses.

Losses are pervasive across the country, with no region spared and some worse off than others. Trusts headquartered in the south of England have the highest proportion of deficits, with more than half of them in the red.

But there are pockets of financial health. Operators with the highest proportion of extra cash at the end of fiscal 2023 are headquartered in London and the West Midlands.

Britain’s health service wasn’t always in financial distress. At one time, directors worried about how to spend their surplus cash wisely. But around 2012, trusts’ increase in spending began to rise faster than their income.

Pressure on the health system has been driven in part by the growing size of the older population in England. In the last 40 years, the number of people aged 65 and over has increased by 52%. People are also living longer, meaning more complex treatments for long-term conditions.

At the same time, staffing is stretched. With tens of thousands of vacancies, expensive temporary staff need to be brought in for critical posts, which contributes to the financial decline for the trusts.

Personnel strains have in turn contributed to labor tensions. While NHS consultants reached an agreement with the government in April to halt industrial action, junior doctors have continued a long-running dispute over pay.

The situation has led to waiting lists climbing to 7.57 million as of June 13, in what has become a national symbol of the flailing health system.

The NHS has long been a central feature of British politics. Diverting money from the EU to the health service was one of the key pitches to encourage people to cast their ballot to leave the bloc during the 2016 Brexit referendum. Now, as the campaign nears its conclusion, polls suggest that the Conservatives will be unseated after 14 years in power, with Labour stepping in.

Read More: Britain’s NHS Black Hole Is Devouring the Whole Country

Both parties have presented proposals for the NHS. The Conservatives have pledged to recruit tens of thousands more nurses and doctors by the end of the next parliament, build more community diagnostic centers and invest £3.4 billion in new technology. Labour is promising an extra 40,000 appointments each week, double the number of cancer scanners and thousands of extra mental-health staff.

But questions have been raised by independent experts about how either party plans to fund their promises.

“The tough choices are either give the NHS the funding it needs to deliver in terms of better patient care, more access, less waiting times – or ask it to deliver less,” said Siva Anandaciva, chief analyst at the King’s Fund. “That’s the conversation that we’ve never had.”

When an NHS hospital runs out of cash, the lights don’t turn off and the doors don’t close to patients. But the impact shows up in ways that people still feel.

An operator in deficit receives loans or other financing from the government to keep going, and in return, administrators are tasked with doing all they can to get out of the hole. The typical response is large spending cuts, which means trimming staff and potentially dipping into cash meant for improving facilities.

“When you walk into a hospital and the toilet is broken or the bed can’t fit through the corridor, when you see the nurse who looks knackered because there aren’t enough staff – all of that in some way traces back to there not being enough funding,” said Anandaciva.

Read More: Ill in England? Your Location Can Determine If You Live or Die

While the level of financial distress isn’t directly correlated to long wait times, several of the operators with the worst delays also have large financial losses. James Paget University Hospitals NHS Foundation Trust in Norfolk has the second-highest deficit as a percentage of income and only 47% of patients are seen within 18 weeks. The bulk of patients are meant to be seen within that time frame.

While a business short of cash might look to boost revenue, NHS Trusts have limited options. One way is to increase the number of private patients – people using the hospital’s services but not covered by taxpayer money. Multiple operators contacted by Bloomberg declined to comment citing pre-election rules.

That has been a boon for some. The data reveal that trusts receiving at least 2% or more of their operating income from paying patients or other non-NHS sources were less likely to be in deficit. Great Ormond Street said in its latest annual report that it wanted to rebuild its private income, which is an important part of the trust’s funding model. But not every trust has the same access to people with enough income to afford private health insurance.

That leaves cost-cutting as the major lever to fix profit-and-loss statements. Top of the list is personnel. Hospitals look to cut back on expensive agency staff or freeze hiring. However, such moves threaten to compound existing pressures on capacity to care for patients.

Money meant for buildings and equipment can also be tapped. While capital spending technically comes out of a separate pool of funding, transfers can be made to support day-to-day operations.

The tactic puts more pressure on a backlog of maintenance that already amounts to £11.6 billion, according to NHS England’s own assessments. It directly leads to infrastructure failures, “whether it’s leaking roofs or sewage or lifts that are broken,” said Julian Hartley, chief executive officer of NHS Providers, the membership organization representing hospital operators.

Hartley visits trusts up and down the country and sees firsthand the differences between operators with crumbling Victorian facilities and new developments. Over the last two years, 12,000 estate-related incidents have stopped clinical services being delivered to patients.

“It’s no surprise we are where we are, given the years of austerity and the impact of levels of growth that haven’t kept pace with demand,” said Hartley.

A snapshot of trusts in the North West – the region with the highest proportion of operators with more than 5% operating deficits – reveals the challenges faced by administrators struggling to make ends meet.

In one of England’s most deprived areas just north of Liverpool, the Blackpool Teaching Hospitals NHS Foundation Trust had planned to break even in 2023. Instead it ended the fiscal year more than £15 million in the red. An inspection of the maternity services revealed serious concerns relating to staffing levels as well as the processes in place to protect women and their babies.

The future financial prospects are “challenging,” Trish Armstrong-Child, the trust’s then chief executive officer, said in the operator’s latest annual report. “People are physically tired and emotionally drained, and yet they continue to do their very best day in, day out.”

The board of the NHS organization responsible for the wider area of Cheshire and Merseyside noted in a May report that the financial plans for the current fiscal year hadn’t been concluded as spending forecasts “exceed the level of funding available.” It added that it was trying to find “the right balance” between costs cuts and maintaining core services.

The data show little correlation between local income levels and trust deficits, but patterns do emerge when it comes to demographics. Trusts in rural areas generally fare less well, with worsening finances tied to older, more vulnerable populations.

Not every trust is in a downward spiral. Some have managed to move from being in deficit, to breaking even or even coming out with a surplus.

In the North West, Mersey Care NHS Foundation Trust turned around a deficit of several hundred thousand pounds to a surplus of £21 million as its share of private income increased to 4.8% from 1.7%. Similarly, Oxleas NHS Foundation Trust in the South East came out of the red, after its share of private income rose to 1.9% from 1%.

But with deficit levels climbing across the system, a few success stories aren’t enough, putting pressure on the next government to find a longer-term solution.

“Every single trust has a financial challenge,” said Peter Saunders, head of NHS financial advisory at the audit firm Grant Thornton. It’s no longer the case of a few badly performing organizations or areas, but “it feels like this is a systemic issue now.”