Half of acute trusts in London are not viable, say MPs

BMJ 2011; 343 doi: (Published 15 December 2011) Cite this as: BMJ 2011;343:d8137
  1. Nigel Hawkes
  1. 1London

The financial and clinical viability of many NHS hospitals has deteriorated, making it “extremely difficult” for them all to become foundation trusts by April 2014, the House of Commons Public Accounts Committee has concluded.

London presents especially acute problems (BMJ 2011;343:d8130, 13 Dec, doi:10.1136/bmj.d8130). “We are particularly alarmed that the healthcare system in London has been allowed to deteriorate despite its problems having been known about for many years,” the committee’s report says. “At least half of the acute trusts in London are not viable in their current form.”

To become foundation trusts, hospitals need to have strong governance, long term financial viability, and a framework to deliver high quality services. Between 2004 and September 2011 139 acute care trusts in England satisfied these demands and became foundation trusts, and the government intends the remaining 113 to join them by April 2014. “It is already clear that this will be extremely difficult to achieve,” the report says.

The challenges facing the 113 are more severe than previously thought. Four in five face financial difficulties or need to tackle strategic issues, two thirds acknowledge performance and quality challenges, and nearly 40% say that they need better governance and leadership.

It is not clear that all these problems can be resolved, the committee says. Mergers may be needed to create viable organisations, but in London some trusts are in such a poor financial state that it is difficult to see why other organisations would want to take them on. The chief executive of the NHS, David Nicholson, told the committee that he was only “moderately confident” that London’s hospital system could be turned round.

The Labour MP Margaret Hodge, who chairs the committee, said that 20 trusts had declared that they would never make foundation status in their present circumstances. “Half of these are in London,” she said. “These trusts will be forced into reconfigurations or even mergers. This may deal with the financial challenges involved but could leave some deprived communities with unequal access to high quality healthcare when hospital departments are closed and services moved.

“London is in a particularly shocking state, and nobody has got a grip on longstanding problems. We remain to be convinced that combining struggling hospitals into larger trusts—as with South London [Healthcare NHS Trust]—will somehow produce viable organisations offering good quality, accessible healthcare.”

Some hospitals have been crippled by the cost of private finance initiative (PFI) schemes. The Department of Health has identified six trusts as unviable largely because of PFI charges. “The department faces a particular dilemma about how to manage the debts of these hospitals as their long-term financial commitments make reconfiguration more difficult,” the report says.

In evidence to the committee, Professor Nicholson said that £375m (€440m; $585m)—or “it might be slightly more”—could be loaned to some trusts by the Treasury to provide enough liquidity for them to pass the financial tests of foundation status. Trusts need 15 days’ operating money in the bank to qualify, so these loans would boost their balance sheets. Professor Nicholson declined to be drawn on how much more than £375m might be needed or whether such subsidies would offend against competition rules that seek to put all trusts on an equal footing.

The report warns that despite the severity of the problems, some trusts are still putting off difficult decisions about changes to services. Quality of leadership presented a particular problem, with trusts in trouble finding it hard to recruit good board members and clinical staff.


Cite this as: BMJ 2011;343:d8137