Monitor has found significant financial and governance problems at Blackpool, Fylde and Wyre Hospitals Foundation Trust.
The trust recorded an unplanned £1.8m deficit at the end of June and has fallen behind on its cost improvement plans this year. It had planned to break even by the end of the first quarter.
Monitor interim chief executive David Bennett told HSJ the regulator was concerned the trust had reacted too slowly to these problems and had agreed “undeliverable” block contracts with its commissioners - placing too much risk on the provider.
In a letter sent to Blackpool chair Beverly Lester, the regulator said the trust was in significant breach of its terms of authorisation as a foundation, and criticised its board for failing to “provide appropriate leadership and manage resources efficiently”.
The foundation trust is due to acquire two community services providers before April.
Monitor warned there was a risk the foundation trust did not have “enough resource and skills capacity” to do this at the same time as delivering financial turnaround.
Blackpool’s chief executive Aidan Kehoe said: “We accept Monitor’s ruling and fully understand its implications. We are working very closely with Monitor and have action plans in place to return the trust to financial stability.”
In September, Heatherwood and Wexham Park Hospitals Foundation Trust had to borrow £18m from the Department of Health, following serious financial problems, and in July Poole Hospital Foundation Trust was told it was in significant breach of its authorisation for financial reasons.
Mr Bennett said that having reviewed the performance of the foundation trust sector during the July to September period, Monitor had found no systematic financial problem, but was concerned about how they would fare later in the year.
He told HSJ: “Over the first two [financial] quarters on aggregate, foundations are a bit behind on their cost improvement plans, but on the whole there are not yet signs of significant stress. However, it might just be the calm before the storm and the last two quarters will be more important.”
Mr Bennett said a growing number of primary care trusts may “have difficulty paying for activity”. Additionally, some foundations trusts, including Blackpool, were struggling with both large cost improvement plans and block contracts on which they could lose large sums if activity outstrips expectations.
Mr Bennett said: “If you look at that you have to say this looks like a challenging financial environment.”
On Wednesday, Monitor announced the authorisation of Ashford and St Peter’s Hospitals as a foundation trust, bringing the total number to 132.