News / Administration looms for South London trust

By Seamus Ward

South London Healthcare NHS Trust expects to learn by the second week of July whether it will become the first trust to be put into administration as questions were raised about the affordability of private finance initiative schemes.

In late June, health secretary Andrew Lansley put in motion the ‘unsustainable providers’ process. He wrote to the trust and is  consulting with commissioners and NHS London.

The trust reported a £65m deficit at the end of 2011/12, with the costs of major PFI schemes at two of its hospitals a key contributor to its problems.

It is one of seven trusts eligible for additional support from the Department of Health that aims to keep the trusts viable in the face of significant PFI costs. However, reports suggest that up to 20 trusts face similar difficulties.

Focus on PFI costs has been further fuelled by a KPMG report for foundation trust regulator Monitor looking at the financial difficulties at Peterborough and Stamford Hospitals NHS Foundation Trust that are partly related to PFI. The trust is also one of the seven eligible for the additional payments.

The Monitor report said £22m of the forecast £46m deficit at the end of 2011/12 was caused by structural or PFI-related costs. It said that although Monitor warned the trust, the Department and the Treasury that affordability of the PFI was in doubt in 2007, it could not prevent the trust signing the deal and it committed to the scheme later that year.

The full extent of the problem only became apparent a year after the hospital opened with Monitor blaming a reliance on unrealistic assumptions submitted by Peterborough. The report said Monitor could have uncovered the emerging position at least a year earlier had it engaged with the trust on its financial assumptions. The regulator has since introduced a more rigorous challenge to its assessment of major investments.

In a letter to South London Healthcare NHS Trust, Mr Lansley said that despite the additional support, the trust needed further funds. ‘There must be a point when these problems, however they have arisen, are tackled. I believe we are almost at this point,’ he added.

The trust said it was in discussions with the Department of Health and NHS London to resolve its ‘longstanding and well-known’ financial issues.

‘Our staff have worked hard for patients and in spite of significant financial issues, we are extremely proud that we now have among the lowest mortality and infection rates in the country,’ it added.

It expects the discussions will conclude in the second week in July, when Mr Lansley will make a decision. If, as seems likely, he opts to put the trust into administration it will be the first time the measure has been used since it was established in 2009.

An administrator will be appointed to run the trust, replacing the board, and produce a report listing options for its future within 45 working days. The report must be laid before Parliament and a 30-day consultation will begin. Within three weeks of this ending, the final report must be presented to the health secretary, who then has four weeks to make a final decision. Based on this timetable, it is unlikely a final decision will be made before November.

NHS Confederation deputy chief executive David Stout said: ‘NHS leaders have made it clear that short term fixes for struggling trusts are no longer possible. More decisive action is going to be needed to help the NHS maintain services and stay in financial balance.’

King’s Fund chief executive Chris Ham said the trust was one of a small but significant number of hospitals facing serious financial challenges. ‘For some, the usual solutions, such as appointing a new management team or merging with another provider, will not solve their problems.'