Designed to Fail

Currently all Foundation Trust hospitals are rated according to their financial and clinical governance. An FT must balance its books and the reason why a trust is made an FT is because the regulator, Monitor, regards the trust to be capable of doing this. (In fact, Monitor has more stringent rules than this, a hospital trust has to make a surplus of at least 1% of income to make them happy.)

This is good for the taxpayer because it means that hospitals will improve efficiency and are less likely to ask the Treasury to bail them out. While an FT is less likely to go into debt than a non-FT NHS Trust, it does not mean that they won't. The following is from Monitor's web site for the quarterly report for the three months up to June 2010 (the latest available). This mentions is the Financial Risk Rating for the current FTs (rating of 5 reflects the lowest risk and a rating of 1 the highest):

• 58 NHS foundation trusts (45%) have an FRR of 4 or 5 (63% at quarter four 2009-10);
• 63 NHS foundation trusts (48%) have an FRR of 3 (32% at quarter four 2009-10);
• six NHS foundation trusts (all acute trusts) have an FRR of 2: Blackpool Fylde and Wyre Hospitals; Medway; Northern Lincolnshire and Goole Hospitals; Poole Hospital; Royal National Hospital for Rheumatic Diseases; Royal Brompton & Harefield (five at quarter four 2009-10); and
• three NHS foundation trusts (all acute trusts) have an FRR of 1: Mid Staffordshire; Heatherwood & Wexham Park Hospitals; and Dorset County Hospitals (two at quarter four 2009-10).

Basically this says that three FTs have financial problems.

Mid Staffordshire in 2008/09 had a surplus of £0.759m, which is 0.5% of income; Heatherwood & Wexham Park Hospitals in 2009/10 had a deficit of £9.9m, which is -4% of income, and Dorset County Hospitals in 2009/10 had a deficit of £5m, which is -3.5% of income.

Heatherwood and Wexham Park Hospitals have recently been loaned £18m by the Department of Health to help them continue to provide healthcare while they sort out their finances. The announcement of this loan was met with some derision since Andrew Lansley announced that there would be "no more bail outs" for hospitals that go into debt.

The NHS white paper is explicit about the "no bail-outs" threat. This policy means that there is a possibility that if a hospital goes into debt it will have to cut staff, or services, or (ultimately) close. It is vital, therefore, that trusts are monitored carefully so that they do not go into debt. Currently Monitor receives quarterly reports and has the power to intervene in an FT if they think that the trust is in a serious risk of going into debt. The intervention can be as extreme as replacing the management team.

However, we now find that Monitor may only perform financial checks for just the first two years of Foundation Trust status. Health Service Journal reports:

The government is understood to have decided the current compliance regime run by Monitor and its tough intervention powers will, from April 2012, only apply to foundation trusts still within the first two years of their authorisation.

Before April this year there were 129 authorised foundation trusts. Under the new approach to regulation  nearly all would be freed from many checks in April 2012. The only exceptions would be those with very poor risk ratings at that point. They would remain subject to the foundation trust regulator’s intervention powers so it could take steps to stabilise them before they were also put outside the regulation regime.

Assuming the April 2014 “drop dead” date for all trusts to become foundations is met, the change means the Monitor compliance regime would cease altogether in April 2016, with finance and governance oversight ending for all state providers.

The excuse given is that Monitor will soon have the responsibility for ensuring competition between healthcare providers (including private healthcare) and so their financial oversight of FT hospitals (publicly owned - for the time being) would be a conflict of interest.

However, it does seem as if the Department of Health is designing a system where hospitals will fail.