London Trust on the brink of going bust
pharmafile | June 26, 2012 | News story | Sales and Marketing | Lansley, NHS, South London Healthcare, reforms
For the first time in its history an NHS Trust is facing bankruptcy and could be dissolved by the government.
South London Healthcare, which makes up three merged Trusts, has debts of over £69 million and has required £150 million of bailouts in the past three years.
The group is now struggling to meet its re-payments and the government believes that patients may start to suffer as a result – because of this, ministers are now looking to dissolve the group and have others step in to run its services.
Much of the problem for South London stems from the Private Finance Initiative (PFI), which were first introduced by the Conservatives in the 1990s but later updated under the Labour government in 2009.
PFIs allow Trusts to borrow money from private firms who can then charge interest on the loans – Labour struck 103 PFI deals for the NHS by 2009 with a combined value of just over £11 billion.
But paying back the loans and the interest has become more problematic for many Trusts, and is made doubly difficult by the QIPP savings agenda.
South London Healthcare combined the Princess Royal University Hospital in Orpington, Queen Mary’s Hospital in Sidcup, and the Queen Elizabeth Hospital in Woolwich in 2009.
When the three hospitals became merged they used a PFI loan to create new buildings at Orpington and Woolwich, but has been unable to pay much of this back, leading to its high debt level.
If the government decides to take the Trust into administration, some services could be closed. A more likely scenario is that a successful NHS organisation – or possibly a private provider – could end up taking on some services from the broken up Trust.
In a letter to the Trust, health secretary Andrew Lansley said: “A central objective for all providers is to ensure they deliver high-quality services to patients that are clinically and financially sustainable for the long-term.
“I recognise that South London Healthcare NHS Trust faces deep and long-standing challenges, some of which are not of its own making. Nonetheless, there must be a point when these problems, however they have arisen, are tackled. I believe we are almost at this point.”
South London is not the only area of concern, with 22 other Trusts considered financially unsustainable in their current form.
Earlier this year Circle Healthcare sealed a deal to run a debt-ridden NHS hospital in Cambridgeshire.
Hinchingbrooke hospital has been struggling with £40 million of debt, and last year the Department of Health gave its financial status a high-risk ‘red’ rating, leaving it open to takeover bids, with Circle the eventual winner.
Taking the tough decisions
Mike Farrar, head of the NHS Confederation, which represents trusts and NHS managers, welcomed the decision, saying: “The NHS can’t go on with short-term fixes to financial problems. That might mean some tough decisions, but hopefully will deliver financial sustainability in the long term.”
Professor Chris Ham, chief executive of the King’s Fund think-tank, echoed Farrar, saying this kind of strategy by the government was the right thing for the NHS.
Prof Ham said: “For some of these hospitals, the usual solutions, such as appointing a new management team or merging with another provider, will not solve their problems. Governments have ducked these issues for too long so this announcement is an important signal of intent from ministers.
“It remains to be seen what action is taken in South London. While the initial priority in this and any other similar cases will be to ensure the continuity of essential services for patients, attention will have to turn quickly to how different, more sustainable, models of care can be provided.”
Ben Adams
Related Content
NHS accepts Pfizer’s tafamidis for ATTR-CM treatment
NHS England has announced that it has accepted Pfizer’s drug, tafamidis, for the treatment of …
NICE recommends migraine treatment for NHS use
The National Institute for Health and Care Excellence (NICE) has shared draft guidance recommending AbbVie’s …
Novo Nordisk launches Wegovy in the UK
Novo Nordisk has today announced that Wegovy (semaglutide injection) is now available in the UK …
