Full scale of DH bailout of trusts revealed

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One in four hospital trusts received bailout funding from the Department of Health last year, with several receiving financial aid worth more than 10 per cent of their turnover, HSJ analysis has found.

Figures published alongside the DH accounts show the department paid out £605m in interim support to 35 trusts last year, as an escalating number of providers tipped into the red.

The bulk of the bailout funding - £509m - shored up revenue spending of trusts in deficit, while almost £100m was paid for urgent repairs to buildings and infrastructure, or new equipment.

HSJ analysis found six trusts received interim support amounting to more than 10 per cent of their reported turnover for 2013-14. Of these only Mid Staffordshire Foundation Trust was placed in the “failure regime” for financially unsustainable providers. The analysis excludes South London Healthcare Trust, which received £18m before it was dissolved in October.

The DH argued that its bailouts to non-FTs had increased because its 2012 health reforms have removed many of the opaque means previously used by local NHS commissioners to support financially challenged providers.

“In previous years, [primary care trusts] and [strategic health authorities] developed a variety of means to support financially challenged bodies,” its report on the 2013-14 payments states. “Often, this support was not visible.

Changes made under the Health and Social Care Act 2012 have moved commissioners to a more rules based system such that they can no longer provide the level of support that previously supported [these bodies]. The result of this has been a significant increase in the support given out by the department to the NHS trust sector (excluding FTs).”

The DH’s claim has been treated with scepticism by some NHS finance experts. The King’s Fund policy director Richard Murray told HSJ the idea “that in previous years commissioners were providing this support, and it’s not getting any worse” was an “overly optimistic play on the numbers” for several reasons.

“One is that there were more deficits in the system [in 2013-14] than in the previous year. The optimistic view might be that this is [down to] the same thing: commissioners not providing support. But if that’s all it was, there would have been a whopping surplus on the commissioner side, and there was no such thing.”

Nuffield Trust senior policy fellow Andy McKeon said that “some of the apparent increase” in bailouts was “possibly a function of [greater] transparency”.

But he added: “On the other hand, as Monitor has pointed out, it seems likely that local unofficial support [to trusts] is still being provided through non-tariff payments.

“The size of the [increase] together with the overall reduction in trust surpluses… still points to a fair chance of the NHS having a financial crisis this year, and a much greater chance in 2015-16.”

The DH accounts, published at the end of July, also report that the NHS provider sector overall posted a £108m deficit last year. Mr McKeon noted that once the department’s financial support was stripped out the deficit was “more like £600m or £700m”.

A DH spokeswoman told HSJ: “In some situations we provide interim financial support, dependent on trusts developing and sticking to a strong recovery plan, to make sure they continue to deliver safe and sustainable services within a balanced financial position.”

Sherwood Forest Hospitals FT, which received bailouts worth 10.1 per cent of turnover, said it had agreed plans for a “steady reduction in our deficit” but “due to high [private finance initiative] costs the deficit will remain significant in the medium term”.

Its spokesman added: “Ongoing revenue and capital support will therefore continue to be required by the trust.”

Other trusts in receipt of DH bailouts said they faced structural problems preventing them from removing their deficit through increased efficiency. University Hospitals of Morecambe Bay FT, which last year received £16m of DH deficit support, has revealed plans to bid for an increase of more than £17m in the “tariff” prices it is paid, to compensate for structurally higher costs.

The DH declined to give a figure for the total interim support provided to trusts in 2012-13, saying this came by a variety of routes and no comparative figures were available.