NHS failure regime: up to 92 trusts may be culled

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The Department of Health expects to cull up to six hospital trusts a year under its new failure regime, figures in its impact assessment reveal.

The document shows the DH expects to save £200m a year under the plans, which are out for consultation. It focuses on six trusts affected by long-term deficits and designated as "financially challenged" to model potential savings resulting from slashing the length of time they are in deficit by three years.

This would be achieved through reconfiguring services more rapidly and sacking failing trusts' boards, leaving them to be merged or run by more successful trusts.

The impact assessment does not assume the cull will stop at the six most troubled today. It estimates that 2.1 per cent of NHS and foundation trusts will fail every year: the equivalent of 5.6 organisations in the first year and 92 across the model's 20-year duration.

King's Fund chief economist John Appleby said: "They are anticipating a massive redistribution of NHS resources; they will get to a point where they create huge consolidation and monopoly."

The DH has attempted to downplay the significance of the 2.1 per cent figure, saying it is for "modelling" purposes only. But the document describes it as a "conservative estimate" based on the average rate at which trusts have fallen into sustained financial difficulty.

Challenged trusts

The failure regime will be triggered for trusts and foundations deemed as "challenged" which have not made significant improvement after a year. At that point foundations will be de-authorised and their debts transferred to the state.

A "special trust administrator" will draft a report on the organisation's future and a 30-day consultation will follow, overriding the duty to consult under the NHS Act 2006. The secretary of state will make a final decision within 35 days.

NHS Confederation policy director Nigel Edwards said the assumption that so many trusts would enter the system each year implied a lack of faith in other performance mechanisms, such as the DH's own performance framework published earlier this year and Monitor's regulatory work.

There was a risk the regime could be used to "subvert the democratic process" by imposing reconfiguration, he said. "You might find the [council] overview and scrutiny committees will want to send this to judicial review. There is a legal requirement to consult on substantial and significant changes and this shouldn't be used as a substitute for that."

Rapid action

But Kate Grimes, chief executive of Queen Mary's Sidcup trust, one of four London hospitals in deficit and deemed "financially challenged", said the regime would be a "good thing because it will enable more speedy action when things are difficult".

Together with two other local trusts, Queen Mary's has been in deficit for several years, but reconfiguration plans have been on hold because of local opposition.

Ms Grimes said she was confident the failure regime would have resulted in "the same answer" for the local trusts, only more quickly and with the possible additional efficiency of forcing a governance and management merger.

The assessment shows the DH is becoming concerned to ensure efficiency in the health service and assumes that growth in NHS expenditure will soon slow from 2.2 per cent above the rest of the economy to just 1-1.5 per cent.

A DH spokesperson said: "The existence of a robust, transparent, unsustainable provider regime will act as a spur to improve NHS performance.

"Consequently, we anticipate the rate at which this regime will be used will be less than 2.1 per cent."

PASS OR FAIL? VERDICTS ON THE FAILURE REGIME

Findlay Robertson, Lancashire Care foundation trust chief executive, said: "The proposals look sensible... However, if foundation trust debt is written off, what effect does that have on the system?"

Paula Clark, Burton Hospitals trust chief executive, said: "There is a very short time for the whole process to run, and it relies on the fact trusts have engaged all the stakeholders at an earlier stage. Where there may be several primary care trusts and strategic healthy authorities involved, that may not always have happened."

Bob Bell, Royal Brompton and Harefield trust chief executive, said: "Continuity of care and continued access to essential hospital services must be preserved; the state has a duty to protect patients, irrespective of how it chooses to deal with failing trust structures. NHS hospitals are not commercial enterprises - we can't just shut up shop due to financial bankruptcy."

Sir Robert Naylor, University College London Hospitals foundation trust chief executive, said: "The focus at the Department of Health should be on... converting NHS trusts into foundation trusts rather than worrying about the handful that will at some stage become insolvent."

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