• CEO calls for rebalancing of funding flows in Liverpool to help new acute trust out of deficit
  • Says the acute sector in Liverpool “carrying all the significant financial and operational risk”
  • Liverpool is unusual in having five standalone specialist trusts

The long-planned hospital merger in Liverpool is unlikely to create an NHS trust which is financially secure – so there will need to be a rebalancing of funding in the city to help it escape a structural deficit, according to an acute chief executive in the patch.

Steve Warburton, of Aintree University Hospitals Foundation Trust, said the merger with Royal Liverpool and Broadgreen University Hospitals Trust will deliver some economies of scale, and will be boosted by the imminent tariff uplift enabled by the government’s NHS spending boost.

But he believes the new organisation will still be left with a structural deficit, and said this meant negotiations will be needed with local NHS commissioners and providers to secure the new organisation’s financial position.

Liverpool is unusual in having five standalone specialist trusts. Between them, the two acute trusts are expecting a deficit of £70m in 2018-19, which would be the largest acute overspend in any major city besides London. Four of the city’s specialist trusts have consistently reported surpluses. Specialist services are typically more profitable than general acute care.

Mr Warburton told HSJ: “If you look at the wider Liverpool health system you see a very strong financial position especially among the specialist hospitals, and the clinical commissioning groups are in balance. It’s the Royal and Aintree carrying all the significant financial and operational risk at the moment which is not sustainable in the longer term.

“We’ll have to look at funding flows going forward and how the system control total operates. We’re entering into a new era of integrated care systems and this could be considered within this. The other option would be to agree a negotiated deficit for the adult acute sector.”

Mr Warburton accepted there were opportunities to make efficiency savings, but said the hospitals had large volumes of non-elective work and “very few profitable specialties”.

He added: “There will definitely be an income benefit to the merged trust [from the new tariff], and then there’ll also be a financial benefit of the merger which will be around taking out some of the duplication.

“But we’ve got to be realistic about what that number will be. if I’m being honest about this it’s not going to eliminate the full deficit. [The structural deficit] could be £10m, it could be £20m. I just don’t know at this stage.”

In a bid submission for capital funding last year, Aintree referenced a study by consultancy firm McKinsey & Company which suggested that merging and reconfiguring two acute trusts could potentially release savings in the range of 12 to 14 per cent of turnover.

Mr Warburton said the savings expected from the Liverpool merger would be “nowhere near” these levels, adding: “We put £45m in the outline business case which is about 5 per cent, but even that is now looking extremely challenging.”

The capital submission appears to refer to a McKinsey study published in 2012, which said consolidating services from three sites to two could deliver savings between 12 and 14 per cent. The merger between the Royal and Aintree will involve major reconfiguration of services, but there are no plans for any of their existing sites, such as Broadgreen Hospital, to close.

The specialist foundation trusts in Liverpool are: The Clatterbridge Cancer Centre, the Walton Centre, Liverpool Heart and Chest Hospital, Alder Hey Children’s Hospital, and Liverpool Women’s Hospital.

There is already a plan to merge Liverpool Women’s, which is also in deficit, into the new acute trust, but this is not expected to happen in the short term.

HSJ asked the four other specialist trusts if they envisioned being a distinct organisation in five years’ time, and whether they accepted that funding flows in the city would need to change. They all declined to comment.

Mr Warburton’s couterpart at The Royal, Aidan Kehoe, has taken a job in Qatar, which appears to leave him as the main candidate to lead the new trust.