Urgent action is needed to help debt ridden hospital trust to surviveBMJ 2012; 345 doi: http://dx.doi.org/10.1136/bmj.e8154 (Published 30 November 2012) Cite this as: BMJ 2012;345:e8154
A hospital trust with large debts that could threaten its future must be given help urgently by the government, local commissioners, and regulators to help it become financially secure again, concludes the public spending watchdog.
The National Audit Office has highlighted the financial crisis at Peterborough and Stamford Hospitals NHS Foundation Trust, which in 2011-12 had a debt of £46m—22% of its turnover and the worst in the NHS that year—and which is set to rise to more than £50m in 2012-13.
The watchdog published a report on 29 November in which it analysed the financial problems at the trust, which has struggled to maintain its finances since entering into a private finance initiative (PFI) scheme in 2007 to build a new hospital.1
The report says that the trust’s board failed to recognise that the PFI would place considerable strain on its finances for many years and that it compounded its decision to proceed with the “unaffordable” scheme by failing to monitor other changes affecting its income and costs between 2007 and 2011.
The level of healthcare undertaken by the trust was greater than that envisaged in the scheme’s business case, which assumed a 14% drop in outpatient activity, whereas this increased by 21%, said the authors.
In addition, NHS Peterborough, the trust’s main commissioner, had used national and local performance indicators to withhold payments for activity undertaken by the trust.
The authors said that blame also lay with the Department of Health, which evaluated the scheme at the time but was not sceptical enough about its affordability and ignored warnings made by Monitor, the regulator of foundation trusts, about the scheme’s affordability before approving the business case.
Monitor said that its statutory powers at the time to intervene to stop the trust proceeding with the scheme were limited and that their use would have been inappropriate.
However, Monitor is also criticised in the report, which says that the regulator missed several opportunities to intervene before finally placing the trust in breach of its terms in October 2011.
The report says that the trust’s long term financial sustainability depends on various factors, including:
Making major efficiency savings without jeopardising patients’ safety or the quality of care
Long term financial support, and
Developing new business opportunities to generate more income.
Amyas Morse, head of the National Audit Office, said, “The trust board’s poor financial management and procurement of an unaffordable PFI scheme have left the trust in a critical financial position.
“Irrespective of how far the PFI scheme contributed to the current deficit, the latter is now too great for the trust to balance its finances by managing its own resources. The trust, the Department [of Health], commissioners, and Monitor need to work together and take urgent action to help the trust get back on its feet.”
Margaret Hodge, chairwoman of the parliamentary Public Accounts Committee and Labour MP for Barking, said, “A catalogue of mismanagement, poor procurement, and inadequate external oversight has placed a stranglehold on the trust’s financial future, rendering it totally incapable of balancing its books.
“The department and local commissioning bodies desperately need to take decisive action to put the trust on a sustainable financial footing that does not come at the expense of patient care.”
Peter Reading, interim chief executive at the trust, said, “The board acknowledges these shortcomings and over the past year has put in new structures and systems to improve our financial forecasting.
“We are also on track to deliver £13.2m of cost savings in 2012-13. Our patients can be assured that we are working to our turnaround plan, which focuses on delivering savings and efficiencies while maintaining the consistently high standards of quality care.”
Cite this as: BMJ 2012;345:e8154