Deloitte comments on healthcare aspects of the Spending Review

Oct. 20, 2010--

Dean Arnold, lead partner for healthcare at Deloitte, comments: 

"Wide budget cuts are expected across all departments, and while the NHS is meant to be protected, even the 1.3% real growth is significantly less than what the NHS has received for the last 12 years.  Real budget growth in the last four fours has barely dipped below 5% year on year.  Activity in the NHS has risen steadily in recent years.  A&E activity in 08/09 this was up 16% on the previous year, however, until now, there has been budget growth to support this.   This settlement which feels flat when inflation is included, will feel like a significant reduction to the NHS. 

"In order to respond to a low or no growth settlement, there will have to be a significant new emphasis or approach to demand management in the NHS.  New clinically led commissioning policy in Equity and Excellence Liberating the NHS, is meant to empower GPs to control demand through control of the NHS budget.  In order to empower GPs to do this, this new policy must be implemented.  The implementation is planned to happen over the next 18-24 months, during which time there will be significant structural change, redundancies and general upheaval within the service.  There will also be a cost to implement this new policy especially in the form of change management costs and redundancy payments.

"During this transition period, there is significant risk that the NHS will not be able to live within its reduced means.  It will be paying extra to implement significant change and will not have new strengthened demand management in place.   Even now before the settlement has been announced the NHS financial position is deteriorating, with year on year comparisons to last year showing an increase in the overall deficit both at PCT and Trust level. 

"There is an argument to say that the NHS needs to learn to operate in a reduced/flat funding position before embarking on major structural change - with potentially a selected roll out by geography, testing different models, or a staged roll out by portions of the budget - starting with acute contracts while details of more specialist or regional commissioning are worked out. 

"The risk to the NHS is real.  If the NHS re-enters a period of significant deficit, drastic policy decisions about tax increases, top ups and co pays may be needed. 

Capital Budget reduction: 

"The NHS capital budget reduction of -17% does not look drastic when compared to other government departments but will have significant impact on the NHS which except for a slate of recent PFIs is struggling with an ageing infrastructure.  Pressure on the NHS estate may help push more services into the community which has been a stated policy aim since Our health our care our say in 2006.  Pressure on the estate may also stimulate more active involvement from the private sector who may be able to fund upgrades with creative financing and revenue sharing, not utilising traditional estates budgets or schemes such as PFI and LIFT. 

Social Care and Public Health - ring fenced Grants

"New Grants and budget allocations for social care and public health will cut into both NHS and local authority budgets but importantly will secure services for these areas which could have been at greater risk in the new fiscal environment.  £2bn for social care by 2014 coming from health and local authority budgets will not amount to an increase at local levels but will go some way to ensure funding is not cut significantly." 

About Deloitte 

Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited ("DTTL"), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms. 

The information contained in this press release is correct at the time of going to press.

 For more information, please visit www.deloitte.co.uk

Member of Deloitte Touche Tohmatsu Limited.

Suggested Articles

The profit margins and management of Community Health Group raise questions about oversight of managed care insurers.

Financial experts are warning practices about the pitfalls of promoting medical credit cards to their patients.

A proposed rule issued by HHS on Tuesday would expand short-term coverage, a move Seema Verma said will have "virtually no impact" on ACA premiums.