News / Investment plans to lower FTs’ balances

Foundation trusts are forecasting a reduced surplus and cash balance by the end of the current financial year as they implement capital expenditure plans worth £1.4bn, Monitor has said.

The regulator’s Review of NHS foundation trusts’ annual plans 2008/09 said the 89 foundations authorised at 31 March this year forecast a combined surplus of £339m on total revenues of £18.7bn. The planned surplus is £221m less than that achieved in 2007/08. The planned earnings before interest, tax, depreciation and amortisation (EBITDA) margin is 6.9% - in 2007/08 the planned margin was 6.7% but the actual margin achieved was 8%.

Aggregate cash balances are expected to fall from £2.268bn in 2007/08 to £1.798bn by 31 March 2009.  The reduction of £470m is mainly due to an expected £330m working capital outflow. This will reflect the reversal of payments made in advance by primary care trusts during 2007/08, and the £1.4bn planned capital expenditure.

The review said plans reflected an anticipated increase in revenues of 1% but this was offset by costs increasing by an average 4.6%, mostly because of pay rises.

Monitor executive chairman William Moyes said the figures showed FTs were gearing up their response to the Darzi review. While some trusts planned to undertake major refurbishment projects, others would invest in the provision of services previously provided by PCTs.

‘Lord Darzi’s review set an agenda for improvement for foundation trusts to respond to. We have highlighted previously caution in committing to significant projects, reflecting the relatively short period since the first NHS foundation trusts were authorised and also an uncertain operating environment. But evidence emerging from several trusts suggests they are beginning to better understand risks and potential opportunities, and design increasingly ambitious plans,’ he added.

The review said the average financial risk rating (FRR) given to trusts based on their 2008/09 plans was four. One foundation, the Royal National Hospital for Rheumatic Diseases, has been given an FRR of one (there were none at this stage last year), while the remaining 88 foundations have FRRs of three, four or five (lowest risk) – 13 have been given an FRR of five, compared with three in 2007/08.

Mr Moyes added that boards should continue to focus on infection control, with targets on MRSA and C difficile being major risks in the delivery of service performance.