Why the fuss when the NHS is in surplus?
- 31 October 2012
- From the section Health
It is easy to forget with all the furore over debts in the NHS in England that the health service actually finished the year £2.1bn in surplus.
That sum - 2% of the overall budget - would be more than enough to pay off the deficits racked up by the 34 trusts which failed to balance their books in 2011-12 five times over.
So that then begs the question: why are the deficits proving so controversial that a committee of MPs has accused the government of not getting a grip on the situation?
The simple answer is that the NHS is trying to do something it has historically struggled to do - become more productive.
It is in the middle of a five-year £20bn savings drive.
That figure is not being cut from the health service. Instead it is a sum the government has asked the NHS to find by operating more effectively so that it can invest the money saved into providing more care.
This has meant more pressure than ever before on trusts that are not balancing their books.
No easy solution
Traditionally other parts of the NHS have bailed out those bits that have overspent. This still happened last year, and it is estimated another 22 trusts would have finished in the red without help from the Department of Health or local health chiefs.
But the practice is gradually being phased out - and that is why, despite the surplus, there is so much focus on the issue.
One trust - South London Healthcare - has already been put into administration and looks likely to be broken up.
Elsewhere there are talks of mergers between organisations or the closure of services to improve efficiency.
But these matters are not easy to solve.
Trusts which run up deficits often have deep-rooted, long-standing problems that cannot just be solved by a little management consultancy.
Sometimes problems are related to costs that are very hard to control. For example, the most recent report by the Public Accounts Committee highlighted the burden of making PFI repayments - the money trusts owe for new buildings funded by the private sector.
This was one of the key issues for South London Healthcare. Two of its three main hospitals have PFI debts, and the administrator has said that if services are going to become sustainable in the long-term the government will have to cover some of those costs.
Other factors include the "wrong mix" of patients.
Hospitals rely on having a good flow of easy-to-treat non-emergency patients coming through their doors, such as those needing knee and hip replacements, as they are paid per patient treated.
If they have a large pool of elderly patients with complex conditions, or high rates of emergency admissions - both of which are more expensive to treat - it can be hard to keep costs down.
Of course, the funding system is meant to take this into account and the best-performing trusts have found ways of reducing the most expensive types of treatment by investing in prevention.
But it is often easier said than done.
Expect the NHS balance sheet to dominate the headlines for a few more years yet.