Hospice Financing: an overview

Before the pandemic began the hospice sector was facing an uncertain financial future. Through our Hospice Accounts Report and our Hospice Financial Sustainability Index, we built up a detailed picture of the financial picture of hospices.

While hospices as a general rule were going into the pandemic with a reasonably strong level of reserves, the financial outlook was felt by most to be challenging. In 2020, for the first time in many years the hospice sector as a whole had made a deficit after taking into account investment losses.

This is important as without generating surpluses hospices cannot invest in new services or capital and IT spend. And the trend for future years was – and still does – look even more challenging.

Due to the additional government funding secured by Hospice UK that was provided across all four nations during the pandemic, and the generosity of the public who recognised the extraordinary efforts hospices were making, the hospice sector is in a much better financial shape now than it was two years ago.

We know that almost all hospices recorded a surplus in the year to 31 March 2021, and the most up-to-date information we have suggests the majority are on track to record another surplus in the year to 31 March 2022.

This has provided short term relief on the financial pressures hospices were facing but the sector cannot afford to waste the limited amount of breathing space it currently has.

The information we have received suggests that almost every hospice will be budgeting for a deficit – in most cases significant deficits – in the year ahead.

With ever increasing demand, and pressure on wages due to inflation, the need to keep pace with NHS pay rises and the increased national insurance rate, hospices face a never-ending struggle to balance the books.

Luckily, most are in a position where they can afford to do this next year and therefore the decisions around budgeting for 2022-23 have probably not been as challenging as they might have been.

Whilst the discussions around this year’s budget might have been relatively straightforward, the longer term forecast is much more challenging. 

Right now, most hospices are unable to balance their budgets, but have sufficient reserves to absorb this.

The problem is that it is unclear how this is going to change – and at some point hospices are going to start to run out of reserves, some more quickly than others.

The expenditure commitments on hospices are only going to grow: both as a result of rising demand on the sector and also due to inflationary pressure. However, it is hard to see where the additional income is going to come from.

The financial pressures on hospices are expected to grow over future years.

The biggest single reason for this is simple – the need for hospice services is expected to increase, due to our ageing populating, often dying over a longer period of time, with a complex range of conditions and symptoms. This is a long term trend and so we can expect cost pressures on hospices to continue for the foreseeable future.

In the shorter term hospices are also facing pressure from inflation – most notably salary inflation due to the need to keep pace with NHS pay rates, and national insurance and NHS pension increases.

Energy costs are also a significant worry right now, as they are for so many across the country.

We know that one of the strengths of the hospices movement is its independence, which enables innovation and responsiveness to local needs.

But a combination of cost pressures, and more importantly the need to work with other partners within the health and care system to deliver integrated care for patients are likely to drive much more collaborative working in the coming years.

"I’d encourage all hospices to be thinking about when and where they should be cooperating with other hospices, charities or NHS bodies."

Craig Duncan, Interim Chief Executive, Hospice UK

We know from our work analysing hospice finances over many years that it is becoming more and more challenging to raise the additional money.

Hospices are typically the most successful fundraiser in their location, which is testament to the difference they make to their local community, but can mean further growth is hard. Nevertheless, the data suggests that the return on fundraising in the sector remains competitive, which implies that additional investment in fundraising is likely on average to lead to positive returns. 

We have seen over the last few years that returns on retail are plateauing (again this was the case before the pandemic, although there are anecdotal signs of some bounce back post pandemic). On lotteries the trend is more positive, with the sector continuing to see positive returns. 

The biggest growth area in recent years – and also one that has almost not yet fully taken off – is in digital fundraising.

Online challenges, and use of Facebook, TikTok and other social media to generate sponsorship were growing rapidly even before the pandemic and show no signs of slowing down. Over recent years, again, as with so many things, this is a trend that existed anyway which has been rapidly exaggerated by the pandemic.

End of life care provision is currently delivered by a patchwork of providers and  funded by a mixture of public, private and charitable sources. In its current form, the system is inefficient and wouldn’t be tolerated in other areas, such as maternity services.

Public finances are clearly going to be tight for the foreseeable future, as the UK grapples with an uncertain situation, challenges with the world economy and record levels of government debt following the pandemic.

On the positive side, the value of hospices has never been more obvious:

"During the past two years, links between the hospice sector and the NHS across the UK have been strengthened, and hospices have shown themselves to be an integral part of the healthcare system."

Craig Duncan

To make the case for more funding, it’s not going to be enough to just make the moral case – even though we may feel it is clearly immoral that people in our communities need to bake cakes and run marathons in order to ensure that their loved one’s get the care they deserve at the end of their lives. 

Instead, we need to focus on why it is in the government and the NHS’s interest to provide more support to the sector.

We need to show how hospices can work in partnership with the NHS (It is of course tempting to ask why the NHS can’t make more effort to work more in partnership with us – but the reality is that as the smaller partner, the onus is on us to persuade them, whether we feel that is right or not).

And most importantly, we need to understand the priorities of the NHS, and make the case for how investing in hospices can help meet those priorities – whether that is reaching more hard to reach groups, reducing pressure on the acute sector or saving the NHS money.

Hospice UK will be working on all those three things, and on supporting hospices to make that case locally as a key priorities over the coming year.