Many foundation trusts are falling behind on ambitious savings plans and could end up making damaging “salami slice” cuts by the end of the year, their regulator has warned.

Monitor’s report on foundation trust performance between April and June this year shows many trusts were behind on the cost reduction plans they were relying on to break even or make a surplus.

Where it is most serious trusts run the risk of [turning to] a set of hard measures at the end of the year

Foundation trusts saved £203m in the three months - 17 per cent less than the £244m planned. Eighty-one trusts, around two thirds, were behind on their plans.

Monitor said they may not be able to rely on treating more patients towards the end of the year to make up shortfalls, as they have done in the past, and could end up making unplanned cuts which risk patient safety.

Interim chief executive David Bennett told HSJ: “Where it is most serious trusts run the risk of [turning to] a set of hard measures at the end of the year.

He said trusts must avoid “salami slice savings” because they are “unlikely to achieve the desired result and are less likely to do it in a way that avoids risk to patients”.

Mr Bennett said Monitor is “looking closely” at a small number of trusts with very large savings to make this year.

He said: “The way to avoid it is to rethink how your hospitals are run and plan savings properly.”

Monitor’s review also revealed that the Department of Health’s marginal emergency tariff rule, under which acute trusts are paid only 30 per cent of the tariff value for emergency activity above 2008-09 levels, is causing foundation trusts significant problems.

Mr Bennett said the 30 per cent rate did not cover the costs of the activity yet foundations were generally powerless to reduce the flow of patients themselves. They could not “decline to treat emergency patients”, he said.

Monitor has raised the issue with the DH.

Mr Bennett said: “We have to be very careful because this does cause problems. We are talking about [the DH’s] options for [managing demand] and trying to make sure there are not unsustainable risks for FTs.”

Separately, Mr Bennett told HSJ the future of Monitor’s role in the regulation of foundation trusts’ finance and governance was “very much up in the air”.

NHS chief executive Sir David Nicholson said in a letter published by the DH earlier this month that Monitor, which will become an all-system economic regulator, would lose its power to intervene in foundations, remove board members and approve their decisions.

But Mr Bennett said: “[Sir David’s letter] certainly put the issue on the table. There was nothing new but it does highlight the fact it [FT regulation] is up for grabs. It is not decided.”

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