NHS finances facing "nasty hangover" after bid to avert winter crisis

The NHS’s already precarious finances are facing a “nasty hangover” after hospitals cancelled tens of thousands of operations recently in a bid to avert a full-blown winter crisis, experts have said.

Handing large numbers of operations over to private providers and hiring extra staff to cope with extra demand during December and January has also dealt a big blow to NHS trusts’ efforts to balance their books, the King’s Fund said.

The backlog of patients needing non-urgent surgery as a result of the widespread postponement of procedures this winter will also force patients to wait even longer for their operation, Richard Murray, its director of policy, said.

“Increasing spending on agency staff, outsourcing work to the private sector and suspending planned treatment may have helped to relieve pressure in the short term but are likely to result in a nasty hangover as hospital finances take a hit and waiting times increase further,” said Murray.

The service’s finances are deteriorating so sharply there is a real risk the Department of Health could bust its budget for 2016-17, according to the thinktank’s new analysis of NHS performance.

Its latest quarterly monitoring report on how the NHS in England is faring predicts that it is facing several more years of finding it impossible to live within its budget, despite government orders to do so. Hospital trusts ran up a deficit of £2.45bn last year and are on course to overspend by over £1bn again this year.

For example, 53% of hospital trusts and 63% of NHS clinical commissioning groups (CCGs) that the King’s Fund surveyed are fairly or very pessimistic about ending 2017-18 in financial balance. And looking further ahead, 74% of trusts and 86% of CCGs doubt they will achieve the huge savings expected of them by 2020 under NHS England chief executive Simon Stevens’s Five Year Forward View (pdf).

The NHS is now overspending by so much that many hospital trusts plan to cut staff in order to try to put their finances back in order. “Financial pressures mean some trusts are reducing their workforce, with 29% of finance directors reporting that their organisations have plans to reduce permanent clinical headcount,” the King’s Fund’s analysis said.

However, it said doing so risked endangering patients’ quality of care, especially with demand for medical treatment rising so sharply because of the ageing and growing population. Almost two-thirds (63%) of hospital trusts and 56% of CCGs think patient care has worsened in their area over the last year, the study found.

“It will be very challenging to reduce the clinical workforce at a time when many NHS hospitals are routinely running at high bed-occupancy levels and demand continues to rise,” the report said.

The research also appears to refute Theresa May’s view that patients’ difficulty in accessing GP services is a key cause of A&E units becoming so busy. In January she was criticised by GPs when she made clear that surgeries should open for longer to help relieve the strain on hospitals.

Asked to identify the key reasons for hospital overload, 80% of trust personnel surveyed cited the severity of patients’ illnesses, 70% mentioned the inability to discharge patients who were fit to leave, 61% said rising demand, and just 20% highlighted access to general practice.

Dr Helen Stokes-Lampard, the chair of the Royal College of GPs, said: “We’re pleased this report shows, without any doubt, that the recent winter pressures that have been facing our colleagues in emergency departments have not been because GPs – or any other clinicians in the NHS – aren’t working hard enough, but that the resources and workforce to cope with escalating patient demand simply aren’t there.”

Overall, said Murray, the fund’s findings “are further evidence of a service buckling under the strain of trying to meet rising demand while maintaining current standards and should give the chancellor pause for thought ahead of next week’s budget”. While Philip Hammond is expected to use his first budget on 8 March to boost funding for social care, he is unlikely to increase spending on the NHS.

The Department of Health declined to comment. NHS England said: “NHS frontline services have come under real pressure this winter but it is a tribute to the professionalism and dedication of GPs, nurses and other staff in A&E who continued to see, treat, admit or discharge the vast majority of patients within four hours.”

NHS finances facing "nasty hangover" after bid to avert winter crisis

New Herbalife Convertible Struggling On Nasty Day: An Update

Some additional particulars on the large new Herbalife (NYSE:HLF) convertible I mentioned earlier today:

The convertible industry, which is nevertheless fairly hungry for new bargains even as stocks continue to get pounded, doesn’t especially care for the pricing. The deal is trading at a tiny price reduction to its greatest problem price tag in the “grey,” or “when-issued,” industry. The speak is a coupon of 1.five% to two%, with a conversion premium of 25% to 30%. Optically, as convertible bond experts like to say, the deal seems fairly attractive.  As minimal as that coupon variety may possibly sound, it’s in fact not negative in this day and age, and the conversion premium selection is on the lower side compared with most discounts. This is specially correct for a reasonably short-dated bond: five 1/two many years in this situation.

So why do not convertible pros like the deal? There are a number of motives.

1. Traders, not surprisingly, are not that comfortable with the credit. One firm cites the value quote on a Herbalife Herbalife two-year secured loan as rationale for grading the convertible, which is structurally subordinate (translation: it’s at the back of the creditor line in bankruptcy), rather harshly.


2. Potential purchasers concern that if Herbalife stock need to begin to plummet, the $ two billion in debt it will have soon after the convertible deal is done could turn out to be problematic.  While $ two billion is not an excessive volume for a company with a current market place capitalization of above $ 6 billion, it is large enough to fret traders, especially hedge money whose approach depends on the convertible bond’s ability to behave in creditworthy fashion even if the stock is acquiring pounded.  (In my guide Beating the Indexes: Investing in Convertible Bonds to Boost Efficiency and Minimize Chance, I advise convertible purchasers to focus on deals in which the market place capitalization is at least five times the the debt load, so that even if the stock falls by more than half the issuer can repay its debt by issuing new stock).


3. Traders also fear that quick sellers might try out to pile on if the stock trends lower, thus generating hedging the convertible even far more hard by raising the price of borrowing shares to promote short.

On that note, I was half-right, half-incorrect with some feedback this morning. Marketplace sources inform me Herbalife is in reality generating a “borrow facility” offered for half of the new convertible.  This suggests, as I guessed, that about half the deal will go to hedge money.  The hedge money will lower a side deal with the convertible’s underwriters, very likely aided by the business, by means of which the hedge money will get the financial equivalent of shorting Herbalife shares.  I was amazed by this, given that I had suspected that Herbalife would be even far more focused on possessing the influence of this deal be to make existence painful for brief sellers.  Evidently it would have been difficult to get the convertible issue accomplished with no this “enabling” side deal, which gives hedge funds a considerably less expensive hedge than the market would otherwise offer. A extensively-followed convertible observer warns that on the downside, convertible hedgers will become even much more dependent on this borrow facility (because only the bonds’ underwriters, rather of the complete convertible-dealer local community, will be ready to trade the bond with a hedge). This does not augur properly for how the bonds may behave if the stock does poorly.

Bottom line:  The Herbalife deal looks respectable to the naked eye, but beneath the surface, there is plenty of result in for concern.  It does not support that the deal was announced on a manic Monday on which both stocks and snow are falling.

New Herbalife Convertible Struggling On Nasty Day: An Update