More than half of foundation trusts missed their savings plan targets, according to Monitor’s review of last financial year.
The regulator said the main reason for the slippage was pay costs in the hospital sector.
“Anecdotal evidence suggests that demand for acute services has not dropped in line with commissioners’ intentions, potentially constraining trusts’ ability to implement staff reduction plans,” said Monitor’s report, released last week.
Pay accounts for approximately 70 per cent of trusts’ costs. Across the foundation trust sector it totalled £22.6bn in 2011-12, £576m above plan.
Monitor said agency staff costs accounted for £427m of the overspend, and permanent staff £149m.
Meanwhile, previously unpublished results of a separate HSJ survey reveal that acute foundation trusts aimed to shave more than £500m off their pay bill in 2012-13.
Figures obtained from 73 of the 79 acute non-specialist foundation trusts show them targeting for a total of £1.2bn in savings, including £374m in non-pay costs, £154m in income and £173m not yet worked out.
Monitor said hitting savings targets was an important part of achieving financial balance, and said 15 trusts had ended 2012-13 in deficit.
The regulator’s report said: “Failure to deliver appropriate levels of cost savings now is likely to mean more pressure to deliver savings over the next few years. This will become increasingly difficult to achieve.
“Cost improvement programme delivery is more likely to be achieved if foundations work with local stakeholders, especially commissioners, to identify and deliver CIPs. It will become more difficult for trusts to deliver efficiency savings on their own.
“We expect the CIP challenge for foundations to be greater in future years.”
The aggregate deficit for the 15 trusts was £105m, with Peterborough and Stamford Hospitals Foundation Trust accounting for £43.5m of it, other acute trusts £54.2m and mental health trusts the remaining £7.3m.
Speaking at the NHS Confederation conference last month, Monitor policy director Toby Lambert said that most of the 15 had small deficits that were within the boundaries of sustainable long-term financial planning.
However, he added: “There are at least four [foundation trusts] about which we have serious questions about ongoing long term financial viability.”
HSJ understands that these four trusts are Mid Staffordshire, Heatherwood and Wexham Park Hospitals, Peterborough and Stamford Hospitals, and the Royal National Hospital for Rheumatic Diseases in Bath.
The report showed a declining rate of earnings before interest, tax, depreciation and amortisation (EBITDA) across the foundation trust sector.
The fall in margin from 6.7 per cent in 2010-11 to 6.1 per cent in 2011-12 “partly reflects the addition of lower-margin community services and partly a decline in actual performance”, Monitor said.
The EBITDA data shows variation between the largest and smallest trusts. Those with a turnover of more than £400m had an EBITDA of 6.8 per cent, those with a turnover of £200m-£400m had one of 5.9 per cent and those with a turnover of under £200m had a rate of 5 per cent.
The report said the figures “might indicate a problem with [the smallest trusts’] sustainability in the longer term”.
“This level of profitability represents a break-point in Monitor’s financial risk rating framework, below which higher financial risk is indicated,” it said.
“Larger acute foundations generate higher margin, we believe through a variety of factors, including: having a higher proportion of non-tariff services that tend to generate higher margins; and having greater bargaining power with commissioners.”