Government steps in over failed NHS Trust

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Health Secretary Andrew Lansley has drafted in a crisis team to deal with the dire financial situation at the South London Healthcare NHS Trust.

The government is shortly expected to appoint an administrator or turnaround expert as part of a radical restructuring programme for the trust, which is reportedly losing more than £1m a week.

Lansley wrote to the board of the trust warning them he intends to trigger an "unsustainable providers regime" led by a special administrator with wide-ranging powers to cut costs.

The administrator will look at a range of options to take the return the trust to a commercially viable situation, including splitting its services and merging elements with other trusts.

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 appreciate that any decision to use these powers will be unsettling for staff, but I want to stress that the powers are being considered now so that patients in South-east London have hospital services that have a sustainable future."

Richard Fleming, UK head of restructuring at KPMG, said: “In the private sector, an administration is an important mechanism for making tough decisions to address a severely financially distressed company’s problems. We expect this to be true of health special administrations as well, where the regime seeks to safeguard patient care as a priority but also allows the special administrator to address the most difficult financial challenges.

It has been widely reported that debts at the South London trust rocketed due to two large PFI deals (Private Finance Initiative) that cost £61m in interest payments a year.

However Nick Prior, head of infrastructure and capital projects at Deloitte, told AccountingWEB that you can't blame the structure of PFI for this NHS Trust being overstretched financially.  

“I expect there are a number of issues at play here but as ever it is the now soft target of PFI contracts that take the blame. There were clearly strategic errors that were made when the building of these hospitals were committed to a number of years ago," he said.

“All of these PFIs would have been signed off not just by the NHS Trusts but also the Department of Health and quite probably the Treasury itself, so in terms of understanding where fault lies, if fault is appropriate, with respect to the build programme that was undertaken, there were a number of bodies that were involved.”

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About Robert Lovell

Business and finance journalist


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    By mjshort
    27th Jun 2012 16:13

    Hospital makes a profit?

    " the trust, which is reportedly losing more than £1m a week"

    How can a hospital make a profit- they do not seem to charge members of my family when they go their for treatment?

    If so how can they not make a loss?


    I bet the big boys will make a few million in management consulting fees by changing accounting policies!

    Thanks (1)
    By JC
    27th Jun 2012 16:58

    NAO - contractors rate of return is 70.6 per cent ....

    A few interesting bits & pieces

    '.. This costs the trust £61m a year, 14.4% of its income, and will last until 2029-2030 in the case of the Queen Elizabeth hospital Woolwich and 2031-2032 in the case of the Princess Royal hospital in Orpington ..'

    Good overview -

    Interesting little gem with PFI

    '.. In order to get banks and private companies to lend the money in the first place, the Treasury had to underwrite all the risk of the projects. So even if a PFI hospital closes the tax payer is still responsible for keeping up the payments ..'

    Few Government statistics -

    Seems there is more to this game than meets the eye - PFI Tax Dodging On NHS Cash (what price J Carr & K2?)

    '.. It is bad enough for taxpayers to have to pay rent for hospitals and schools but it is beyond belief that those making £100’s of millions from this appalling system can stick two fingers up to hard pressed UK families while they enjoy tax free profits from our pockets ..'

    Potentially far worse than K2

    Thanks (0)
    By plega
    28th Jun 2012 11:32

    losing more than £1m a week
    Have I missed something ? If they're losing at least £52m a year it's unlikely that the PFI costs (£61m a year) are to blame. Inflation may have increased the PFI costs, but on the figures given it sounds like something else has to be responsible for most of the losses.

    Thanks (0)