The future of the health and care system: developing the long term plan

Our Chief Executive Ian Dalton’s address to senior leaders of NHS provider organisations at the NHS Providers annual conference on 10 October 2018.

The future of the NHS has been a key theme of the conference – and rightly so.

We marked the NHS’s 70th birthday in the summer, the Government has confirmed increased funding for the NHS over the next five years, and with your input, we are leading a long term plan that will span the next decade of healthcare in England.

But before we talk about where we’re going, I want to talk about where we’ve come from.

I want to start with a thank you.

Celebrating success

There can be no denying that last year was tough for NHS providers, coming off the back of several years of challenging conditions. You have been asked to do everything simultaneously: deliver higher quality care, improve against performance standards, drive efficiency and balance the books – all against genuine constraints.

We are short of doctors and nurses, and other critical areas of workforce. In addition to our 1.1 million whole time equivalent staff, we have about 108,000 vacancies. The efforts of our frontline staff over the last the last few years has been extraordinary. And yet, you’ve taken a third out of the cost of agency staffing in the last two years – that’s £1.2 billion. That’s been reinvested into other types of staffing – and therefore directly to patients.

This has been under a backdrop of some of the most challenging financial constraints the NHS has ever seen.

At the end of quarter 1, providers were £814 million in deficit, some £22 million better than planned, but we still have some way to go in closing the gap.

And we have a substantial underlying problem. For the first time, we published the underlying deficit in the quarterly report. A deficit of £4.3 billion – that’s £1.85 billion with the provider sustainability fund (PSF) treated recurrently. This is after years of tariff deflation – the current scaling factor – the difference between the average cost of delivering care and the income the NHS pays providers for it – is nearly 10%.

Despite all these constraints, you’ve delivered more and better care for our patients.

CQC quality results have improved. 56% of Trusts are rated Good or Outstanding, compared to 45% 18 months ago.

And this is despite record levels of demand. You’re seeing more emergency patients within the four-hour standard than ever before. Last year the NHS saw 5.6 million patients within four hours. That’s 200,000 patients more than the year before. Similarly we’re seeing more patients start treatment on elective pathways. On cancer, we’ve seen a 15% year-on-year increase in patients referred with suspected cancer. Against this context, you’ve increased the numbers of patients seen within the 62-day standard each month by over 1,000 (from 10,000 to 11,000). On World Mental Health Day, it’s great to note you exceeded all IAPT standards last year.

Which is why I want to say a heartfelt thank you to the people in this room for the work you’re doing for our patients, under such demanding conditions.

Delivering quality, pushing yourself on performance, all while being constrained on both workforce and finance. You’ve done incredible things, and it is patients who have benefited.

Funding settlement and long term plan

So what of the future?

Well, given the context and constraints I have described, it’s our job now to make things better for the next phase of the NHS’s history and for our patients.

We’re at an inflexion point in the NHS. In the next five years and 10 years, we need to look after a population which is rapidly gaining in frailty. We need to look at our current models of care, our financial flows, our relationships between organisations, and even our mindsets as the leaders of the NHS. We need a radical rethink to put the NHS, in its 71st year, back on a sustainable clinical and financial footing.

We’ve been given five years of funding, and been asked to set out our vision for a 10 year plan. So I see this in two ways: a shorter term five year plan, and a longer term vision.

It’s really important that we look ahead 10 years at the key clinical areas. However, a compelling vision, important though it is, is not enough. Given the issues the NHS is facing, we owe it to the NHS to have a robust plan. We need to be clear about what services will change, and how. We need to know what we’re going to do, in phases, over the next five years, and what we need – in terms of workforce, finance, digital, and so forth – in order to execute the plan.

It can’t be a plan without your involvement, which is why so many of the workstreams are being led by the people in this room. So in addition to your busy day jobs, 15 of you are SROs or co-leads in developing the plan. I’ve met so many of you ‘behind the bike sheds’ – individual calls and meetings with groups of you to discuss the long term plan. I know the working groups have had numerous engagements with many of you.

We’ve got some tough tasks ahead of us. 3.4% is as generous a settlement as we could reasonably have hoped for. But given where we’re starting from, you’ll know we have some difficult choices to make.

We’ve agreed five tests with government, which include improving productivity and efficiency; addressing provider deficits; reducing unwarranted variation; better managing demand, and making better use of capital investment. There are a number of ways we could use this funding. So we’re going to need to prioritise. This is why we’re organising roadshows later this month, to which each and every chief executive has been invited. We want your feedback on the key elements of the plan, and then we need you to help us prioritise where to focus. And when these choices are made, we’re going to be transparent about them.

Because this isn’t my plan. It’s the NHS’s plan. And publication is just the start of the journey: after this, each area will need to make the plan ‘real’. You’ll be engaging locally, and translate the broader plan into a local vision which works for your patient populations.

We owe it to our patients to ensure that that the plan puts providers back on a sustainable footing, and that it makes the NHS simpler, offers better, more standardised, and more integrated care, and that we are all more transparent.

So let’s talk about the plan itself. I’m going to focus on a few things that I suspect you’re particularly interested in, and that’s the financial and system architecture, efficiency, and workforce we need to care for our patients.

Financial architecture

Our current financial architecture was developed at a time when the provider deficit was threatening to break £2.5 billion and needed grip. Control totals were vital to help get things back under control. But they’ve also had seriously negative consequences. A short-term mentality, a significant dependence on non-recurrent savings, and disempowered trust boards who haven’t been able to manage their financial affairs in a way we want them to do. We now have too many trusts who have no ability to break-even, with the combination of an underfunded tariff and much higher than anticipated growth – 5.1% NEL this year to date. We have trusts who can’t achieve their PSF funding slipping into a deeper and deeper hole, and increasing divergence in performance between trusts.

We now have an opportunity and an obligation to redesign a fit for purpose architecture. So what are we going to do?

We need to dramatically reshape things. No more control totals. The end of the provider sustainability fund. A dramatic reduction in microincentives.

But we can’t do this in a day, or we’ll run the risk of destabilising the NHS’s finances. Getting from here to such a radical vision will require a glide path. 2019, therefore, will need to be a transitional year, when financial controls will remain in place, but where we move towards our objectives. From 1 April, I’d like to see the PSF, which is £2.45 billion, to be very significantly reduced, potentially by a 10 digit figure, with the funds released going directly into the UEC tariff price, which we know has been significantly underfunded. We also want to get rid of the illogical marginal rate, which means admissions are being paid at less than their cost, as well as 30-day readmissions fines. This sits in a context of wanting to move away from payment by results, towards blended payment mechanisms for urgent care which will enable trusts to more appropriately resource this high-growth area of service. You’ll see this in our engagement document.

This is the first big step along a journey: a simpler, fairer system, which adequately compensates you for the work you’re doing, especially on the non-elective side. And it will need to be based on realistic assumptions about demand and activity. We can’t have trusts simply absorb a lot of risk. That’s why we propose to include a ‘break-glass’ clause, in case activity levels are substantially different than anticipated.

We’re going to need to retain control totals for the first year of the new settlement. I want to be completely honest about this – this is important to ensure the NHS as a whole balances the books. But I know the control totals need to be rebased – for too many trusts, the target is out of kilter with reality. Beyond this, I’m clear that control totals need to go, and trusts need to set their own financial plans.

So what will this mean for you? It will mean that over the next few years, we will return to a situation where providers who operate relatively efficiently are able to achieve a break-even position. It will mean honesty about what we’re really seeing. We can’t have demand or tariffs or anything else used as a balancing figure. It will mean a simpler, easier financial architecture with lower administrative costs.

So what does this mean for efficiency?

Efficiencies will not be a balancing figure either. To put that bluntly: we aren’t going to stretch levels of expected efficiency so they lose touch with reality. Your accomplishments in this area are something to be proud of, and have far exceeded the economy as a whole.

But this doesn’t mean we won’t be making efficiencies. As public servants, we have an obligation to spend every penny to maximum effect, and every penny spent on unwarranted variation is a penny less spent on patient care. The reality that everyone understands is that there is still significant unwarranted, unexplained and unacceptable variation across the NHS, from frontline clinical care to our back-office.

Let me give you some examples:

  • 300% variation in length of stay for pneumonia
  • cost per diagnostic test varies from under £2 per test, to £35 per test. We’re expecting savings of over £20 million by 2020/21 in standardising these tests

These examples show that we still have a way to go in reducing unwarranted variation. And Mike Deegan and his team are now pursuing the biggest prize of all: system-wide efficiencies. We know there’s so much to be gained by working more effectively together.

System architecture

Which leads me to system architecture. We’ve come a long way in the last 10 years. You were competitors then. But we know that that’s not the best way to deliver care for our growing population of frail, elderly patients. Integrated care cannot develop out of silos, organisations operating as islands.

Everyone in this room knows the ask is no longer confined to creating success for your institution. Performance is going to be about delivering for the needs of the population that you serve. We want you to work together, and take a more stronger shared responsibility in deciding how best to use NHS resources.

This means working more closely together. Integrated care systems are central to delivery of the long term plan, not an optional extra. Because this is the place where the NHS comes together cooperatively to ensure we deliver quality for patients. We want to roll out integrated care systems across the country. We want to see cooperative, standardised care being delivered: it might be in the form of groups, it might be about continuing (or accelerating) the trend of organisations coming together.

This will place even more importance on having strong provider organisations with strong boards — able to take accountability not just for the quality of the care they provide directly for patients, but for wider system outcomes.

And as part of that we NHS Improvement and NHS England — will support you in doing the right thing as a system. We’re going to look at institutional performance in the context of system-wide performance. We’re going to ensure we support you, and certainly don’t hold you back, when you develop care pathways which support patients who need joined-up, integrated care.


But ultimately, the realism test for this plan will come down to workforce: do we have the people we need to deliver the strategy?

During the 10 years of the plan, we want, at the least, a balance of supply and demand for all professional groups across the NHS. Jim Mackey and Navina Evans are working hard on a plan which looks at opportunities for new roles coming through new routes, expanding training dramatically, and ways to help skilled staff work to the top of their license. But all these things take time.

The plan also needs to maximise supply during the next five years. This means maximising staff coming in to the NHS, including from increased international recruitment. But it’s also true to stay the staff we will have in five years time will largely be the staff we have now. So we’ll need your help in enabling our current workforce. That might be through dealing with variation in retention rates, attrition rates, e-rostering. In job planning alone, there’s an enormous variation: across the NHS, it ranges from 7% of consultants to 100% of consultants having a job plan. We need your help with this, in supporting a culture of openness and flexibility, continuing to make the NHS a great place to work.


Amidst all this, we need to focus back on delivery now.

You’ve done a lot of preparing for winter. You’ve all been working hard to develop your capacity and demand plans. We’ve been increasing flu vaccination levels. You’ve done some excellent work on the back door, with delayed transfers of care reducing significantly (freeing up the equivalent of 800 beds last year). I know a number of you are working with the independent sector to utilise their capacity within contracted consultant hours. There’s been a £240 million investment in social care, as well a £145 million allocation of capital – which needs to be spent in a timely manner.

But demand has continued to increase inexorably. We’ve been breaking records over the summer. Which means we are far from achieving on our A&E target, and occupancy rates are 90-93% going into winter.

We spoke at Confed about a major push on length of stay, working together across NHS, local government and social care to free up 4,000 beds. It’s important we continue to push hard on this. All this concerted effort will undoubtedly enhance the capability of those in this room to support our patients over the winter.


Before we close, I want to talk about leadership.

We’ve been working in challenging conditions for long enough that we have become used to it. We have to get through winter, and in many areas, it will be some time before we begin to feel the effect of new funding.

I know your jobs are some of the hardest and most complex leadership roles in the country. But there’s a reason we’re all here.

When I met with our first and second time chief executives a few weeks ago – I see some faces in the audience now – they talked about the privilege of leading NHS organisations. I was incredibly impressed by their attitude. We come to work because we believe in the NHS, and we want to make it better. It is the most valued public institution in England, and we have the responsibility of making it the best it can be.

We have a five year settlement, and we have so many talented, capable people in this room. We all of us believe in the NHS’s mission for patients, and we know we can make it better. I’m looking to continuing to work with all of you to make it happen.