Exclusive: STF benefited trusts that 'needed it least'

A handful of providers, including all three specialist cancer trusts, have received large windfalls from the “sustainability and transformation fund” over the last two years, while some providers received nothing.

HSJ’s analysis shows trusts that started 2016-17, when the STF was introduced, with larger cash balances as a proportion of turnover have tended to receive more from the STF as a proportion of their original allocation (indicated by the trendline).

Chart plotting original cash balance and total STF received

The £1.8bn fund was designed to incentivise trusts to improve productivity; to ensure the sustainability of emergency and acute services; and to help the provider sector reach an overall breakeven position. It was devised between officials at the Treasury, Department of Health and Social Care, NHS England and NHS Improvement.

There has been limited success on these aims, and experts argued that the distribution of the fund has instead created a “gulf between the haves and the have nots”, and given larger shares to those providers that needed it the least.

The funding was earmarked to trusts according to volumes of emergency activity, but payments were only made if a provider met their surplus or deficit “control total”. Money originally allocated to trusts that missed their target was largely distributed as a bonus payment to those which bettered their target.

Several trusts have received payments more than five times higher than their original allocations, including the three specialist cancer providers. The Christie Foundation Trust received extra payments worth 11 times its original allocation, which were largely triggered by an insurance claim payment.

Royal Marsden FT’s (which has received more than six times its allocation) performance was predominently driven by income growth. The Clatterbridge Cancer Centre FT’s (five times allocation) performance driver was unclear.

Some other trusts such as Barnet, Enfield and Haringey Mental Health Trust (eight times allocation) and Cambridgeshire and Peterborough FT were able to trigger payments by completing land sales.

Chart plotting original allocation against STF received

Siva Anandaciva, chief analyst at The King’s Fund think tank, said: “The STF is contributing to considerable volatility in provider finances, and a gulf between the haves and the have nots.

“Some providers and parts of the country are increasingly cash rich… while others are plunging further into debt.”

While some trusts have triggered extra payments by making productivity savings, Mr Anandaciva said others have been able to grow their income, particularly in the specialist services sector.

He pointed out that supporting emergency services was one of the “founding principles” of the STF, but that many district general hospitals have missed out.

Trusts that missed STF payments often had to draw down loan support from the DHSC to maintain their payments to staff and suppliers. These loans have to be repaid with interest.

The STF, now named the “provider sustainability fund”, is continuing to be used in 2018-19. But a senior source at NHSI, who asked not to be named, told HSJ that ministers and Treasury officials should recognise that it has failed to clear the provider deficit and that a new system will be needed. The sector reported a deficit of £960m for 2017-18.

NHSI said in a statement: “The rules and allocations of the STF are applied consistently, ensuring every trust is dealt with in a fair manner.

“The STF process was designed to incentivise good financial performance and in some cases, the achievement of agreed performance standards. We will continue to support trusts that have faced challenges in meeting their control total target in 2018/19.

“Last year, 91 per cent of all providers that signed up to a control total were awarded STF.”

 The Treasury and the DHSC were approached for comment.

Sally Gainsbury, senior policy analyst at the Nuffield Trust, said: “It looks as though many trusts who had the least need for this money have ended up getting larger shares.

“The bottom line remains that as the STF is yet to be baselined into NHS spending and remains in effect non-recurrent, it has been impossible for it to be used in the way it was actually needed; to rebalance the 5 per cent structural gap between tariff prices and underlying provider costs.

“Instead, the STF (and now the PSF) is being used to cajole providers into closing the gap by further cutting their own costs, by awarding them STF cash which can then only be used to shore up cash balances or on capital investment, rather than day-to-day running costs.

“The stubbornness of the provider deficit – more or less static at around £4bn in underlying terms for the last three years – shows that providers have gone as far as they can go in cash-cutting their operating costs, in addition to absorbing inflation. It is time the Treasury acknowledged this.”

At the end of 2017-18, NHSI tweaked the rules around the payments once it became clear that many trusts would miss their control totals. The resulting distribution was similar to that in 2016-17.