The Department of Health has admitted it made a last minute reversal of its decision to stop providing “Project Diamond” funding for specialist hospitals in 2014-15, boosting the finances of up to 19 trusts.

  • Department of Health’s U-turn on specialist funding boosts the finances of up to 19 trusts
  • NHS England had told trusts the funding would be cut for 2014-15
  • DH’s move came to light after UCLH reported unexpected improvement in its finances

The U-turn came at the end of the last financial year, with an election imminent and some of England’s most prestigious hospitals warning the funding cut would cause steep deterioration in their finances.

It followed a protracted battle over Project Diamond – as it is known by its London based recipients – which had been raging since the DH’s decision to stop providing the funding at the end of 2013-14.

Richmond house

The DH made the U-turn at the end of the last financial year

The fund is to compensate teaching hospitals for the loss of training funds and higher costs of their specialist work. It was worth £62m to 16 organisations in 2013-14, with most of the money going to London trusts.

NHS England, which last year took on responsibility for the fund, told the trusts in June that it would cut it by half for 2014-15 and end it in 2015-16.

The DH’s late move came to light after University College London Hospitals Foundation Trust reported an unexpected improvement in its 2014-15 finances.

The FT had been forecasting a deficit of £16.5m for the past financial year, on the grounds that it had been offered just £5m of Project Diamond funding, down from £20m in 2013-14. However, its May board papers showed a £5.4m surplus for 2014-15 and said there had been a “year end settlement of Project Diamond funding in full”.

NHS England, however, then denied it had provided extra funding to UCLH above the FT’s share of £28.5m allocated last autumn. Following enquiries from HSJ, the DH confirmed it had made a late decision to make payments to Project Diamond trusts.

A DH spokesman said: “For a number of years we have given this extra funding to some specialist hospitals to meet the additional costs of treating complex patients. In recognition of this, we have given a final payment this year to cover costs, which were already in agreed budgets. No further payments will be made under this scheme.”

The department was unable to confirm the exact amount of funding given to the hospitals, on the grounds that it had to confirm they had met conditions for the funding. However, HSJ understands that 19 trusts stand to benefit.

Project Diamond trusts complained at the start of 2014-15 that they had been notified of the proposed cut too late to factor it into their budgets for the year.

But the DH insisted last May that it’s approach to research funding was “fair to all trusts across the country, so Project Diamond funding provided by [the DH] will end in 2014-15.”

In a separate development, NHS England confirmed that it made an additional £22m of extra payments to providers of specialist services at the end of 2014-15, but only for providers that had accepted NHS England’s pricing proposals for 2015-16 or “had agreed their specialised investment totals for 2015-16”.

This group did not include UCLH. Like almost all Project Diamond trusts, it rejected the pricing proposals for 2015-16. 

These proposals, known as the “enhanced tariff offer”, impose a marginal rate of 70 per cent on any increases in specialist activity.