Tackling the problems of seriously challenged NHS providers

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, not least because of the time and effort requiredto bring together different cultures and realise the potential benefits in practice.2

A third solution involves franchising the management of challenged providers to the private sector. This is the approach adopted at Hinchingbrooke Hospital where Circle, a recently established private sector provider, has taken over the hospital’s management after a competitive procurement process. Although other challenged trusts may go down a similar route, it is not clear whether private companies will be more effective than NHS managers in turning around the performance of “failing” trusts, particularly where the reasons for failure go beyond poor management and inefficient operations.

The scale of the difficulties faced by the most seriously challenged NHS providers is such that none of these approaches is likely to be adequate. The merger that resulted in the South London Healthcare NHS Trust was a compromise that the chief executive of the strategic health authority acknowledged would be difficult to make work.3 The appointment of a new chief executive in 2009 to run the trust was an attempt to improve performance, but although quality of care has improved on some measures its finances remain problematic. A major reason for the continuing deficit is the cost of the private finance initiative hospitals run by the trust.

The UK government has recognised that the usual strategies haven’t worked and has invoked the unsustainable provider regime developed by the previous government in the case of South London. Andrew Lansley, the secretary of state for health, has written to the chief executive of the trust to indicate that he is considering using the regime to deal with its current problems.

If Lansley decides to go ahead in this way, a trust special administrator will be appointed to take over the running of the trust and the board’s directors will be suspended. The administrator will ensure continuity of patient care at the trust while he or she advises on options for dealing with its financial problems. A range of options is available to the administrator, including dissolving the organisation and transferring its services to other providers. It will be for the secretary of state to decide whether to take the administrator’s advice, whatever this may be, or to reject it in favour of taking some other action.

The government has already announced that it will provide additional help to a small number of NHS hospitals with private finance initiative liabilities that they cannot afford, but in the case of South London it seems that this will not be sufficient for the trust to survive in its current form. The size of the trust’s deficit means it may not be possible to maintain the full range of services currently provided, and a solution that entails a wider reconfiguration of services in the whole of south east London seems highly likely. This has the potential to bring about further improvements in the quality of care as well as dealing with the trust’s financial challenges.

Several other NHS trusts with serious challenges may find themselves subject to the unsustainable provider regime if other options for dealing with their difficulties, such as mergers, are not feasible. The same applies to NHS foundation trusts with deep seated problems, which are subject to a similar failure regime overseen by their regulator, Monitor. It might help that in future Monitor will be able to agree with commissioners that providers in areas where the costs of operating a clinically safe service are higher than the income they received under the payment by results tariff should receive additional payments.

The Health and Social Care Act 2012 places a requirement on Monitor to publish annually a list of providers about which there are concerns. It is vital that these providers are given enough time and support to deal with their problems and turn their performance around. As this happens, the NHS must find ways of rewarding and recognising experienced management teams for taking on providers in difficulty and resist the temptation to blame newly appointed leaders for not delivering quick results.

Before the problems of seriously challenged providers can be dealt with, the nature and scale of the problem must be recognised, its precise cause in individual trusts diagnosed, and the remedies matched to the diagnosis. The alternative is to collude in the mistaken belief that available solutions will be sufficient to deal with difficulties that usually have a long history and have defied the best efforts of a succession of leaders from different backgrounds. That the government has invoked the use of the unsustainable provider regime for the first time indicates a welcome recognition of the scale of current problems. It is far better to begin to implement new solutions now than to wait for another catastrophic failure.