The experience of South London Healthcare NHS Trust highlights the inadequacies of existing approaches to dealing with failing healthcare providers.1 The trust, which was created from a merger between hospitals that had well known financial and quality challenges, had a deficit of £65m (€81m; $101m) in 2011-12, and a similar deficit is projected for the current financial year.

One of three remedies has usually been applied to NHS providers who face challenges in delivering care of an acceptable standard within budget. The first approach is often to appoint a new chief executive and senior team. The problem with this approach is that the causes of failure may not be a result of poor management or weak governance. The scale of the difficulties facing the most challenged providers today is without precedent, and even the most able leaders will struggle to overcome them. Only when the underlying causes are properly understood can appropriate interventions be developed.

The second approach is to merge challenged providers with organisations that are performing well. Although this may help in some situations, well performing organisations may find their own performance dragged down by the work involved in supporting providers with which they merge. The evidence on mergers suggests that caution is needed, …