As part of the Government’s austerity programme, hospital trusts must now submit their budgets and plans to cut deficits to the NHS for approval under the National Health Service Improvement Plan (NHSI).
If a trust forecasts a deficit and its plans to control its budget are not approved, NHSI can offer advice, or in extreme cases step in and put the trust into financial special measures.
These can include effectively taking over the trust’s finances and parachuting in specialists and advisors from neighbouring trusts who are considered to be financially better performing.
Maidstone and Tunbridge Wells Trust is one of five in the country to be placed in special measures, but a further 13, including neighbouring East Surrey, have been warned they face similar sanctions unless they improve their finances.
In the last financial year the trust had an income of £400million, mainly from providing surgery and clinical services to health commissioning groups, other hospitals and the NHS as a whole.
But figures just released show the trust, which had originally forecast a deficit of £13.4million, actually incurred a loss of £23million. The black hole was in part blamed by the trust on the £6.6million cost of agency nurses and clinical staff, other increased staffing costs to meet demand, and an overspend of £8million on medicine.
In May, auditors Grant Thornton reported the Trust to the Secretary of State because it had breached its duty to break even in the three years ending March 2016, and qualifed the accounts saying the deficit of £23.5million was a ‘significant deterioration compared to its budgeted deficit, and its medium-term financial plan showed a continued deficit with a forecast deficit of £22.9million for 2016/2017. These issues are evidence of weakness in proper arrangements for planning finances effectively to support the sustainable delivery of strategic priorities and maintain statutory functions.’
The trust serves more than 500,000 people from the Medway towns across to Tonbridge and Tunbridge Wells and into East Sussex. With a staff of 5,600, its services include specialist cancer and children’s care units.
In 2011 it opened a new state-of-the-art 513-bed hospital at Pembury, seen as the first of a new generation of NHS flagship hospitals in which each patient has their own room with en-suite facilities.
The new hospital was built under the Private Finance Initiative, whereby the trust effectively borrowed the money from a consortium lead by John Laing Construction, who built the hospital, with the trust repaying the private investors over 30 years. John Laing subsequently transferred the project to the John Laing Infrastructure Fund, which is managed by John Laing Capital Management.
It was effectively a private mortgage, but PFI has been criticised nationally for its high interest rates and management charges.
In 2013 it was forecast that by the end of 30 years the original building cost of £237million would eventually cost the trust more than £600million.
Figures show the trust is currently paying more than £2million a month in PFI charges.
What’s next?
A spokesman for NHS Improvement (NHSI) said despite the relaxation of A&E, cancer treatment and operation targets, patients should not see any decline in care ‘in the short term’ and some improvement can be expected over the long run.
A team of NHSI experts with ‘working knowledge’ of the local area are set to be appointed in the coming days, headed by an improvement director.
This role will be given to someone with experience in running hospitals and trusts and with a track record for delivering results, who will also act as the ‘eyes and ears’ of NHSI.
Over the coming weeks, a ‘rapid recovery’ plan will be drawn up between the improvement director’s team and the members of the Maidstone and Tunbridge Wells NHS Trust board.
This plan, which will be tailored to the specific needs of the trust, will then be implemented over the following months and the spokesman said the NHSI expect to see some improvement ‘within that timeframe’.
To exit special measures the trust must generally have, as a minimum, a robust recovery plan setting out the key changes required to remedy the provider’s financial problems, approved by its board and by NHSI.
In addition to providing evidence of significant wins within two additional months of agreeing the initial recovery plan, NHS Improvement may require evidence of demonstrable progress in implementing more fundamental change.
The spokesman added: “The relaxation of targets is not about letting go of the reins. It is about being more realistic about what can be achieved and therefore relieving some of the pressure.”
- ‘Financial special measures only relate to issues of finance and therefore should not be confused with ‘special measures’, which relate to a failure in care.
What is PFI?
A private finance initiative (PFI) is a method of funding infrastructure projects such as schools and hospitals without the government incurring the upfront costs.
Once the desired building is completed, a lease of around 30 years is signed by the developer and the institution which occupies it obliges the school or hospital to begin reimbursing the developer through annual payments.
These payments incur interest, and often include management fees, which will inevitably deliver a profit for the developer in excess of the original price it took to provide the infrastructure.
The Tunbridge Wells Hospital was built by John Laing Group for £237million in 2012 on a 30-year contract with current PFI costs for the hospital running at £24million per year – approximately six per cent of the total budget.
