iStockNHS Scotland could be forced to step in to sort out NHS Ayrshire & Arran’s finances if it continues to overspend its budget by more than £5m per month.
The service faces a mammoth shortfall of £66.4m if the overspending for the first three months of the year continues at the same rate.
It has already had to bring in experts to help identify cuts to reduce the gap.
And a report to Ayrshire & Arran Health Board warned that this could escalate further to a stage where a transformation team would report directly to NHS Scotland.
The board heard that it had overspent by £16.6m between April and June, with the costs driven by higher-than-expected pay rises, the use of unfunded beds due to delayed discharges and the increasing cost of medicines.
Director of finance, Derek Lindsay, told the board that it was still aiming for the projected deficit of £53.5m agreed in May, highlighting how vital the closure of unfunded acute beds will be towards hitting that target.
That figure is still far higher than that stipulated by the Scottish Government.
Up until now, the Scottish Government has provided “lifeline” brokerage loans that have allowed several Scottish health boards, including Ayrshire & Arran, to break even at the end of the financial year.
However, that is not to be the case in 2024/25, where it has set a cap of £27.7m for Ayrshire and Arran, a figure that could be topped just halfway through the year.
Anything over that figure would no longer be mitigated by the Scottish Government and would be accounted as a bona fide overspend.
Ayrshire & Arran already sits at level 3 of the “ladder of escalation” which allows for intervention from outside the health board.
This has resulted in the service hiring external consultants Viridian Associates to undertake “rapid analytical assessment and review of operational financial management, improvement plans and transformation”.
The report warns that failing to balance the books could see even greater intervention involving a transformation team reporting to the director general and chief executive of NHS Scotland.
The last resort would be ministerial intervention.
Much of the disruption and overspending in the first quarter of the year was down to Covid “compromising” 11 wards.
The report reveals:
- Acute Services are £8.2 million overspent (pay costs being £5.2m above budget, supply costs by £2.9m)
- £2m of the Acute pay overspend is directly attributable to additional and
unfunded beds to support unscheduled care and £1.4m to the additional
staffing costs at Crosshouse and Ayr Hospitals. - The New Medicines Fund is overspent by £1.8m and likely to
be £7.2m overspent by year-end
The new medicines approved by the Scottish Medicines Consortium have been more expensive than the funding specifically provided by the Scottish Government, Mr Lindsay stated in his report.
The board is also required by the Scottish Government to achieve savings totalling 3% of its revenue spent, in 2024/25. That is around £24m.
The report states: “£4.1m has been achieved as at June 30 and £19.5m is forecast to be achieved.”
A failure to meet the cuts and savings stipulated by the Scottish Government brings with it additional consequences over and above the pressure it places on balancing the books.
Mr Lindsay continued: “Failure to deliver sufficient efficiency savings to live within financial allocation may lead to an inability to balance the budget resulting in an adverse impact on the delivery of services and reputational damage to the NHS Board.
“This could result in the Board being moved from level 3 to level 4 on the ladder of escalation.”
The closure of additional beds, brought in during the pandemic, but no longer being funded by the Scottish Government, is one of the highest priorities.
This issue has been exacerbated by the number of delayed discharges from hospital as a result of a lack of the community support required for patients.
Work is also being done to reduce the length of stays for inpatients.
This additional capacity, together with vacancies and sickness, has required the health service to bring in more agency staff, with significant costs.
The number of unfunded beds in Ayrshire had dropped to 113 at the end of May, but had jumped back up 144 a month later.
These include one entire ward at Ayr Hospital and three at Crosshouse. However, Mr Lindsay admitted that it was unlikely that the planned closures, at Ward 4E at Crosshouse and Station 1 in Ayr, would happen this year.
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