COVID-19 forces radical changes in NHS finance

Oli Hudson, content director at Wilmington Healthcare, gives an overview of the latest developments which are fully explained in a newly updated course run by the company’s Digital Learning Academy.

Introduction

The 2020 Budget, which was announced in March, marked the start of a raft of dramatic financial changes in the NHS as the government was forced to set aside additional money to fight the coronavirus pandemic.

Since then, NHS finances, resources and practices have continued to change at speed, from the announcement of further emergency funding, to wiping out historic NHS provider debt and suspending payment by results (PBR).

In this article, we give an overview of the developments here of interest to medtech, which are explained in more detail in a recently updated course on “How does finance work in the NHS?”. The course is provided by Wilmington Healthcare’s Digital Learning Academy – the leading online learning platform for the life sciences industry.

COVID-19 funding  

The onset of Coronavirus forced the government to announce more money for the NHS in the Budget, than originally planned, in the form of £5 billion in emergency response funding. This was followed, in the middle of April, by the Treasury’s announcement of another £6.6 billion for the NHS to tackle COVID-19 as part of a £14.5 billion Coronavirus emergency response fund. This was in addition to the £5 billion mentioned above and the chancellor of the exchequer, Rishi Sunak, said that ‘whatever extra resources our NHS needs to cope with coronavirus ― it will get’.

New measures

Just five days after the Budget a ‘Dear colleague’ letter was sent from NHS chief executive Sir Simon Stevens and chief operating officer Amanda Pritchard to leaders of trusts, Primary Care Networks (PCNs), Clinical Commissioning Groups (CCGs), local authorities and Social Care, Sustainability and Transformation Partnerships (STPs), Integrated Care Systems (ICSs), and NHS 111 providers. It introduced a raft of new measures.

Payment by Results (PBR)

Among the key changes was the announcement that all NHS trusts and foundation trusts would move to block contract payments for an initial period from 1 April to 31 July 2020. During this time, the usual national tariff payment architecture, payment by results or ‘PBR’, and ‘associated administrative and transactional processes’ has been suspended.

This will be of particular interest to medtech companies whose devices are used on tariff, and will be essential to establish the current payment mechanism for each procedure. If hospitals are working to block contract, what does each procedure now ‘cost’ and will there be different emphases, for example around patient safety rather than cost?

CCG funding and FRF

The letter also stated that CCG allocations for 2020/21 would remain the same; while the Financial Recovery Fund (FRF), as described in the NHS Long Term Plan, would be suspended during this period. The FRF aims to support the efforts of systems and organisations to make all NHS services sustainable, so that by 2023/24 no trust is in deficit. 

Local plans

A further key point in the letter was that the plans that local health economies were due to publish last year in response to the Long Term Plan have been delayed once again as normal financial arrangements are no longer in place so new budgets cannot be determined. Also delayed until later in the year is the NHS Long Term Plan implementation framework, which sets out further detail on how the overarching plan will be delivered.

Provider debts

At the beginning of April, health secretary Matt Hancock announced that some £13.4 billion of debt would be written off as part of a major financial reset for NHS providers to tackle the COVID-19 pandemic.

He said that the move would free more than one hundred NHS hospitals of historic debt, enabling them to invest in services and longer-term infrastructure improvements. However, this announcement was not entirely unexpected as NHS England chief executive Sir Simon Stevens had hinted in January 2020 that trust historic debt would be restructured as CCG historic debt would be written off. It remains to be seen whether this will result in new investment for the long-term after the pandemic, although it is clear such debt had been acting as a ‘handbrake’ on innovation in many providers.

Conclusion

The NHS is operating in unprecedented circumstances and it is impossible to say what else may change in its finances this year, or whether, indeed, COVID-19’s effects might be felt across the entire 10-year lifetime of the NHS Long Term Plan.

It will, of course, be essential for medtech to monitor these changes and the further updates that are expected, including one on the longer-term status of PBR, following its suspension until the end of July.   

Keeping abreast of these fundamental changes and understanding the reasoning behind them will help industry to navigate the way ahead in supporting the NHS through these challenging and uncertain times.

For details on the Digital Learning Academy, click here.