30 Oct 2012

Report reveals risk of bankruptcy for NHS organisations

NHS organisations could go bankrupt under government health reforms, and ministers have failed to clarify what will happen if they do, a new report has warned.

NHS organisations could go bankrupt under Government health reforms

The House of Commons public accounts committee has accused the Department of Health of “inventing rules and processes on the hoof” to deal with hospital trusts in financial difficulty.

Commenting on the findings, Health Minister Lord Howe has revealed that the NHS will not “endlessly” support trusts with “historic financial problems”.

Ministers were unable to provide the committee with reassurance that financial problems will not impact on the quality of or access to care provided by troubled trusts, at a time when the service is struggling to find £20bn of cuts.

The report claims that while NHS bodies reported a surplus of £2.1bn in 2011-12, the healthy financial picture masks a “significant minority” of bodies which are in difficulties.

Ten NHS trusts, 21 foundation trusts and three primary care trusts have reported a combined deficit of £356m, £115m of which was accounted for by two London trusts.

Some hospitals face difficulties and need to radically change to make sure they are providing the highest quality of care
Lord Howe, Health Minister

A further 31 struggling NHS trusts and 11 foundation trusts would not have broken even if they had not received cash injections worth £1.1bn from the department.

There are question marks over how the “failure regime” will work under new arrangements and what circumstances could lead to it being applied to a struggling hospital.

The committee said it was “particularly surprised” that the department could not explain how the process will work for the South London Healthcare NHS Trust that has already been put into special administration.

Risk pools

Concerns were also raised over “risk pools” which could see money from all NHS bodies levied to provide support for failing trusts and “destabilise” healthy organisations.

Responding to the report, Lord Howe claimed the NHS is in “robust financial health”.

“We have invested an additional £12.5bn in the NHS and £1.6bn of surplus has been carried forward into 2012/13 to help deliver high quality, sustainable health services for patients,” Lord Howe stated.

“The NHS is performing well and is on track to meet its efficiency challenge – latest figures show it has already reported £7bn of savings over the last 15 months.”

“We have already stated that we are not going to endlessly support trusts with historic financial problems but we know that some hospitals face difficulties and need to radically change to make sure they are providing the highest quality of care to patients.”

Lord Howe went on to clarify that they were not “making these rules up” and the that he is working closely with Monitor, the NHS Trust Development Authority (NTDA) and health professionals to set out proposals on how foundation trusts and other healthcare providers can remain financially stable.

Commenting on the report committee chair Margaret Hodge said: “The Department of Health could not explain to us how it will deal with an NHS trust that goes bankrupt”.

“It is not clear how the department would ensure that essential services are protected if a trust fails.”