The problem with annual planning
14/08/2017by Rob Findlay
The purchaser-provider split is a quarter-century old, and an exact tariff has been attached to each spell of care for over a dozen years. The English NHS should be at the top of its game when it comes to activity and financial planning.
Top of its game
So teams of shiny-faced analysts regularly study the variation of demand through the seasons, adjust for backlogs that need clearing, and develop activity plans that are genuinely based on the needs and wishes of patients. If something unexpected happens, new plans are produced within days to adapt to the changing situation.
Experienced operational managers scrutinise control charts covering beds, theatres and clinics, to identify where performance can be improved and variation reduced. They use that intelligence to turn those activity plans into capacity plans for safe and efficient care.
Expert accountants diligently transform those capacity plans into solid financial plans, targeting investment where it is most needed, while nurturing the stability of services.
And perceptive commissioners contribute wider intelligence from across the health economy, so that opportunities from outside the trust are brought into play.
Thus, with wisdom and foresight, the financial books are balanced.
Stop sniggering at the back, please. Yes, I know it isn’t really like that. Nevertheless the following description is a dreadful caricature and bears no resemblance to any NHS planning process, living or dead…
Instead of starting with the needs of patients and working through to finance, the NHS puts the cart before the horse and performs the entire planning process in reverse order.
The only thing that really matters is the financial bottom line, so naturally the finance department takes charge. And this is all about the coming financial year, so it only happens annually.
Anything that happened last financial year is irrelevant because those accounts are “closed”. So the only historical data that is allowed to inform the process comes from the current financial year to date – that’s from April, until before the planning process begins in the autumn. Which unfortunately means that winter, when the NHS is under the greatest pressure, is ignored.
Finance departments know a lot about money, but they also have data about activity. It’s been heavily adjusted and filtered through the financial payments process, and bears only a passing resemblance to the real patients who occupy wards and theatres in the hospital. But happily commissioners have the very same activity data, and that makes it alright.
Unfortunately neither commissioners nor the finance department have any waiting list data, which would be essential if they wanted to base their planning on demand instead of activity. But commissioners anyway tend to muddle up concepts like demand, activity, capacity and budget, and can be heard saying things like “but that can’t be your demand, we didn’t buy that much”.
When they all get down to it, “planning” involves making a lot of complicated adjustments to historical finance figures, until they add up to the commissioner’s budget for next year (which is only finalised at the last minute). It’s far too complicated to work out how that money relates to activity, so activity is done separately. And so, after much labour, the plan is born.
Having scrimped on the weekly shop, the NHS then tops up with takeaways.
Operational managers were involved in the early stages of the planning process, but they neither recognise nor believe in the final version. So when pressures duly pop up in A&E, cancer and elective waiting times, managers have to fire-fight them with short-notice extra capacity at high marginal cost.
Two steps to better planning
Perhaps that was an exaggeration, but there is clearly a massive gap between vision and reality. Despite this unpromising starting point, I suggest it may be possible to bridge it.
The vision differs from reality in two key respects.
Firstly, planning should be based on demand not activity. So let’s include the elective waiting list in the NHS’s financial accounts, to reflect any shortfall in activity relative to demand. The waiting list is work which has been ordered but not yet done, so the financial commitment has arguably been made and should be accounted for – as a liability (to commissioners) or an asset (to trusts).
Secondly, let’s break free of the financial year, and instead have rolling assessments of historical financial performance over the last four quarters, and plans for the next four quarters. That would make planning much more adaptive. This is not outlandish – the NHS has already replaced annual with two-year planning, and there is precedent for the Treasury allowing the necessary carry-forward across financial years.
The changes wouldn’t need to be ‘big bang’ either – a health economy could pilot them with the blessing of the centre. With rolling quarterly planning and the waiting list costed on the balance sheet, the NHS could quickly move closer to the adaptive, demand-led planning it needs.
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