Not so fast: how to slow activity growth

This month, NHS providers received instructions from NHS England to slow 'activity growth' – the number of patients with complex needs, requiring more advanced care – by one percentage point. But with money for transformation largely being used to bail out struggling hospitals, are the two tasks compatible?

Blog post

Published: 21/10/2016

As edicts go it is neither the most catchy nor the most inspiring, but the new NHS must-do was finally articulated in last month’s joint operational planning guidance from NHS England and NHS Improvement: activity growth moderation.

Activity growth moderation means what it says on the tin: slowing the pace at which the amount of activity the NHS does grows. That’s not the same as an absolute reduction in the level of activity or number of patients being treated but it does mean reducing the amount of care provided in the future compared the amount of care that would be providing were activity to continue to grow at the current trend.

That current trend is around three per cent extra care a year – measured in terms of more patients, with more complex needs, receiving more advanced health care, at a higher quality. All things being equal, the current level of funding would be able to sustain an activity growth rate nearer 2.4 per cent a year. But that would leave zero headroom to cope with periodic shocks such as a disease epidemic or the potential fall-out from Brexit. Perhaps for that reason, NHS England aims to reduce growth by one percentage point.

NHS England roughly breaks the current three per cent growth trend down into two chunks: around half of it driven by demographic changes including population growth and age profiles, and the other half by ‘non-demographic drivers’, which include medical advancements, public and policy expectations (such as seven-day working) and quality.

The precise breakdown of these components is hard to pin down – some assessments of the drivers of health care activity (and therefore cost) attribute far more significance to the influence of ‘technological change’ and medical advancement than implied by NHS England’s neat break down. But the truth is these factors are hard to isolate when it comes to assessing past trends.

Turning down the volume

That makes the task of ‘moderating’ their influence in the future even trickier – like trying to turn down the treble on a graphic equaliser without knowing how loud it is at present, or even being able to find the right knob. Few would want to see ‘growth moderation’ achieved through curtailing medical and technological advancement, or quality improvement. Neither would they want to see tomorrow’s 80 year olds denied access to the same treatment received by today’s, which a crude attempt to hold back growth from demographic changes might entail.

As chief executive of the Care Quality Commission David Behan has pointed out, the de facto response at present appears to be holding quality relatively steady while cutting back on service access – a path well-worn by council adult social care services, and apparent now in the growing waiting times for NHS care. But in the view of the public and politicians, NHS waiting times themselves are a proxy for quality. And of course for patients waiting for diagnostic tests or critical procedures, the relationship between access and quality can be direct, with time delays playing the determining factor in their outcome or even survival. (Not to mention the fact that in order for waiting times to be used to hold back activity growth amid rising referrals, waiting times would need to be progressively extended ad infinitum).

A further method commissioners are pursuing is to create headroom for new activity growth by making absolute reductions in the level of activity of certain procedures deemed to be of low clinical benefit. But these approaches are controversial and seem unlikely to offer the potential to make the savings needed.

The holy grail in activity growth moderation, then, would be interventions that reduce the impact – whatever that is – of our ageing demographic on demand for health care, or that reduced the underlying level of ill health through public health improvement; what the NHS Five Year Forward View called closing the “health and well-being gap”.

But such interventions take time and cost money. Like the sound technician at the graphic equaliser, the changes need to be phased in and closely monitored; staff cannot just be diverted on day one to a new clinic designed to reduce demand for an ‘old’ service. The effects of the new clinic first need to be observed before the old can be turned down and shut off. In other words: double running costs need to be covered.

But is the money there to do it?

Last year, NHS England announced that approximately half of the ‘extra’ funding the NHS would receive above inflation between 2015-16 and 2020-21 was being ring-fenced to form a Sustainability and Transformation Fund (S&TF). With a total cash value of £15 billion over the five years from 2016-17 onwards, the first call on the fund would be to stabilise provider finances. After that, an increasing proportion of it would be available for investment in the transformation required to implement the vision in the Five Year Forward View.

That however, was back in the days when Whitehall still believed – or at least claimed to believe – the provider deficit for 2015-16 would come in at around £1.8 billion. The underlying deficit is now acknowledged to be around twice that.

Indeed, an underlying deficit of £1.8 billion is now the optimism-high goal for 2018-19.

As last month’s planning guidance made clear, the scale of provider deficits is such that over the next three years, at least £5.4 billion of the S&TF will need to be spent on shoring up hospital finances, with £1.8 billion being given to hospitals in each year to 2018-19.

The technical notes on that guidance could not be clearer on the implications of this for investment in transformation. The cash, the notes state, will “focus on supporting sustainability rather than transformation, aiming not to fund service enhancements but to sustain services”.

As our recent report, Feeling the crunchmade clear, NHS provider deficits have been driven by half a decade of real and cash term cuts to their income. The £1.8 billion a year payments, then, are welcome and needed.

But, where does that leave funding for transformation?

The value of the S&TF between now and 2018-19 is £8 billion. After provider sustainability funds have been paid, that leaves a total £2.5 billion spread over these next three years to invest in transformation: £12 million per clinical commissioning group; which translates to just £4 million a year each – or an extra 0.005 per cent on their budgets.

How much is enough?

Is that enough? It’s not clear anyone knows. It is the equivalent to the running costs of around four new GP practices in each CCG, which sounds like a lot of extra care for a lot of patients (although it is far from clear where the clinical staff for something like 800 new GP practices would come from).

But that care would need to be extremely targeted and successful. A one percentage point reduction in rate of growth in emergency and elective general and acute inpatient care alone (which is about the level of growth moderation NHS England say is needed) would imply preventing over 142,000 extra emergency and elective in-patient admissions this year – and not just holding them off until April 2017, but preventing them happening at all. If, for sake of illustration, that was attempted through opening four new GP practices in each CCG, that would require those practices to successfully prevent one inpatient admission for every 41 patients on their list.

But that would still only save around half of the £1 billion needed in year one. Over the three years to 2018-19, a 1 percentage point moderation in the growth rate would mean the £2.5 billion of available ‘transformation’ funds would need to be spent ensuring over £3 billion worth of activity was permanently removed from the activity baseline.

The risk, if it cannot, is the NHS starting the next decade with a recurrent overspend of more than £2 billion a year – even after the painful cost cuts providers are currently being asked to make to reduce their deficits.

A version of this blog first appeared in the HSJ. 

Suggested citation

Gainsbury S (2016) 'Not so fast: how to slow activity growth'. Nuffield Trust comment, 21 October 2016.