The National Health Service of England (NHS) ended 2014 with a budget overrun of £800 million, placing financial stress on the entire UK health system

According to a recently released report, nearly all hospitals in the United Kingdom are currently in financial stress. The report indicates that only seven of the 138 hospital trusts are profitable, with the remaining ones operating in a deficit situation.

Here in the United States, the UK’s National Health Service is often touted as an example of a successful single-payer health system. Thus, the extraordinary financial problems within the NHS offer pathologists and clinical laboratory managers in this country some insight into the serious challenges confronting the NHS, including increased demand for services, which puts additional stress on existing hospital budgets.

Deficit in Healthcare Spending at NHS Was Triple the Estimate for 2014-15

The National Health Service (NHS) overspent by a total of £2.26 billion (approximately $3.24 billion U.S. dollars) for the third quarter of 2015-2016, which covers the period from April to December 2015. This deficit is nearly triple the amount calculated for the entire 2014-2015 year and is projected to be the largest overspend in NHS history. The NHS finished 2014 with a deficit of more than £800 million (approximately $1.15 billion U.S. dollars) and needed to rely on the government to appropriate funds to cover the losses.

The report was published by Monitor and the NHS Trust Development Authority, which oversees NHS foundation trusts and non-foundation trusts.

Financial Crisis Compounds Several Existing Crises

The report was released at a problematic time for the NHS and could develop into a complex and embarrassing situation. Overall performance was already suffering, as there were failures to meet several critical objectives. These included Accident and Emergency (A&E) services (known as emergency departments here in the U.S.), ambulances, routine operations, and cancer care.

The major cause of the financial crisis stems from overspending on wages for outsourced staff and management consultants, according to the report. NHS providers spent £1.8 billion (approximately $2.6 billion U.S. dollars) on contract staff, which was almost double the estimated amount. Increased demand for services is also cutting into hospital revenues, and many hospitals that posted surpluses in previous fiscal periods tumbled into deficit situations.

In addition, the two regulators noted that delayed discharges are also having a negative impact on hospital profits as a large number of patients are unable to be discharged because the care they require is not fully in place. The report indicated that delayed discharges cost NHS providers £270 million (approximately $387 million U.S. dollars) during the first six months of the year.

King’s Fund Expresses Concern

The King’s Fund, an independent charity devoted to improving healthcare in the UK, expressed concern over increased pessimism regarding NHS services. They reported that one in 11 patients visiting A&E departments had to wait longer than four hours to receive care. About the same number of patients had to wait more than 18 weeks for non-emergency hospital admissions! In an article in The Guardian, The King’s Fund chief economist John Appleby referred to the financial challenges as a “make or break” year for the NHS.

NHS Establishes Price Caps on Staffing

Measures are being put into place to lessen costs and develop ways to assist healthcare providers with money-saving options. Last November, hourly price caps were established to limit wages for various types of agency staff. Methods were also put in place to make certain only agencies that maintain high-quality individuals can provide staff to the NHS.

Chief Executive Designate of NHS Improvement Jim Mackey called the figures “challenging” for NHS organizations. “NHS commissioners and local authorities need to work in partnership with local providers to help significantly improve how they tackle delayed transfers of care—a significant nationwide problem which is directly impacting on the amount of beds available to clinicians so that they can treat their patients in a timely manner,” Mackey stated in a press release.

Chief Executive Designate of NHS Improvement Jim Mackey stated in a Gov.UK press release that “the national tariff for next year will need to be set at a level that will create the conditions where NHS Trusts and foundation trusts can begin to plan to bring themselves back into financial balance, which will enable them to focus on what matters to patients: improving care.” (Photo copyright: National Health Executive.)

Chief Executive Designate of NHS Improvement Jim Mackey stated in a Gov.UK press release that “the national tariff for next year will need to be set at a level that will create the conditions where NHS Trusts and foundation trusts can begin to plan to bring themselves back into financial balance, which will enable them to focus on what matters to patients: improving care.” (Photo copyright: National Health Executive.)

Lord Carter of Coles Publishes Interim Productivity Report

In addition, it is hoped that implementing recommendations outlined in a report written by Patrick Carter, Lord Carter of Coles, will help end disparities in the quality of care and finances that are very costly to the NHS. Lord Carter found variations in operating costs, infection rates, and expenditures for supplies and services.

The Carter Review also developed a “model hospital” to advise NHS trusts on efficiency and measuring performance against other trusts. Following this model could save hospitals £5 billion (approximately $7.2 billion U.S. dollars) each year.

“My experience of the NHS and hospitals internationally is that high quality patient care and sound financial management go hand in hand. To improve the quality of care hospitals must grasp resources more effectively, especially staff, which account for more than 60 pence of every pound hospitals spend,” Carter said in a Gov.UK article.

“Giving hospitals the tools and support to better manage resources will make it easier for boards to follow the example of the best trusts, and mean every patient can receive the same world class care, and taxpayers will also receive a fair return on their significant investment in the NHS,” Lord Carter concluded.

NHS Releases Five Year Forward Review

In October of 2014, the NHS released The Five Year Forward View to outline their plans for the future of the NHS. The British government has pledged £10 billion (approximately $14.3 billion U.S. dollars) for the NHS’ plans, with £3.8 billion (approximately $5.45 billion U.S. dollars) being released next year to support hospital trusts in reducing deficits and delivering exemplary patient care.

NHS foundation trusts were established to delegate decision-making to local organizations and communities away from the central government. The introduction of the trusts altered the direction of the NHS and the way hospital services are managed and provided.

The latest World Bank figures indicate that the United Kingdom spends 9.1% of its Gross Domestic Product (GDP) on healthcare costs. In contrast, The United States spends 17.1% of its GDP on healthcare. These percentages represent the total of public and private health expenditures for each country.

What the healthcare systems of both the United States and the United Kingdom have in common is increased demand for clinical care that outstrips available funding, along with an aging population and a rising proportion of the population that has one or more chronic diseases. All of these factors are stressing the ability of the two healthcare systems to expand capacity and provide adequate access to care.

One insight that medical laboratory professionals and pathologists should take away from the current financial stress in the UK’s healthcare system is that this single-payer, universal-coverage system has challenges that are every bit as serious to patients in that country as are the challenges to healthcare to patients in this country. Advocates of single-payer health approaches in the United States are often not candid about the problems that other countries are having with their universal-coverage healthcare systems.

—J.P. Schlingman

Related Information:

NHS Deficit Soars to £1.6bn

NHS Providing Poorer Care as Funding Crisis Deepens

NHS Trust Bosses Slam £600m Hospital Fines Over Patient Targets

Hospitals Told to Cut Staff Amid Spiraling NHS Cash Crisis

Challenging Environment for NHS Providers

Review of Operational Productivity in NHS Providers – Interim Report June 2015

Review Shows How NHS Hospitals Can Save Money and Improve Care

Virtually All Hospitals Now in Deficit

Health and Quality Care for All, Now and For Future Generations – Five Year Forward View

NHS Facing £2bn Deficit and ‘Worst Financial Crisis in a Generation’

NHS Settlement May Not Be Enough For Seven-day Service, Experts Warn

American Hospital Association – Fast Facts on US Hospitals