Staffordshire health services face £141 million deficit 'if action isn’t taken'

Inflation, increased demand for continuing health care and industrial action have all contributed to the challenges faced by the area’s Integrated Care System (ICS), which includes hospital and healthcare trusts, Stoke-on-Trent City Council and Staffordshire County Council.

A plan submitted at the start of the 2023/24 financial year aimed for the system to break even. But a report presented to Wednesday’s University Hospitals of North Midlands (UHNM) Trust board meeting said that the system was instead expected to face a £141m deficit if further action was not taken.

A system recovery programme has been produced in response to the deteriorating financial forecast. It was presented to UHNM board members at Wednesday’s meeting.

The report said: “The system has achieved financial balance for the last three financial years. Two of these were during the Covid-19 period when there was more money, and so the task of achieving financial balance was much more straightforward.

“In the year to March 2023 however, financial challenges returned, and it was only due to the close system working that took place, that we were able to land balanced positions for all system partners, something that many systems were unable to do. Going into 2023/24 we knew that the financial challenges would be immense.

“In the previous year, we had been able to utilise reserves that we had accumulated and so we had a significant amount of non-recurrent support, that we used to prop up the position. However, as we approached the current financial year, we signalled a significant gap that needed to be addressed.

“After much conversation and thought, we decided to plan for a break-even position in 2023/24, recognising that it is our statutory duty to do so. In agreeing to this plan, we signalled clearly to all parties that it would require a best-case outcome across a range of assumptions.

“Unfortunately, that best case scenario has not played out. Most significantly, we have seen excess inflation (inflation above that funded through allocations) of £50m. We’ve also seen the continuation of the trend of recent years where patients requiring continuing health care has grown markedly.

“In addition, there have been unforeseen costs of industrial action and further pressures on the acute and mental health care sector. These pressures are mirrored within the local authorities who are also experiencing financial challenge.”

The potential £141m deficit includes £24m connected with UHNM, which runs Royal Stoke and Stafford’s County Hospital, if action is not taken. A report to the board said: “Recovery actions that create a route to break even for UHNM have been identified, which includes assumptions around funding to offset the impact of strike action.”

The trust’s latest financial performance report revealed a deficit of £7.2m, compared to a planned surplus of £3.1m.

It added: “This adverse variance of £10.4m is primarily driven by under-performance against the trust’s in year CIP (cost improvement programme) target, the impact of industrial action and unfunded additional winter escalation capacity that remains open.

“The trust has incurred £4.4m of costs relating to winter escalation capacity remaining open to Month 6 (September); the Month 6 position includes £1.8m of additional funding from the local ICB (Integrated Care Board). The industrial action by medical staff has cost the trust £3.9m in backfill arrangements.”