PFI 'barriers' to FT status affecting fewer than 10 trusts

The Department of Health has commissioned consultancy McKinsey to work with 22 trusts whose PFIs could be an obstacle to their being authorised by April 2014.

A leaked copy of the tender document for the work said the 22 trusts, which include Dartford and Gravesham, St Helens and Knowsley, Barts and the London, Walsall Hospitals and West Middlesex, had “either cited PFI as a barrier to them becoming a foundation trust, or have a PFI scheme of a size that could be a significant issue”.

However, the senior source told HSJ “the number of places that might be left with an unaffordable PFI” was likely to be less than 10.

Of the 22 trusts on the McKinsey list, eight are scheduled to make average unitary payments to developers on their PFI that are 10 per cent or more of their annual turnover before 2014.

Four have unitary payments of less than 5 per cent in this period.

McKinsey will assess for each trust whether their issue can be solved through “transitional relief, restructure[d] asset utilisation” (local bailouts or service reconfiguration) or whether they required “national financial support e.g. central adjustments” (government bailouts).

A report from the King’s Fund in February recommended varying the capital component of tariff payment to trusts based on their specific capital costs, rather than the average.

It said this could mean: “Increased funding for trusts with higher than average capital charges, and reduced funding for those with lower than average capital charges, would reduce deficits in the former and surpluses in the latter – at no net cost to the NHS.”

Healthcare Financial Management Association spokesman Chris Calkin agreed that testing the unitary payment against turnover was a helpful rule of thumb but said it was important to recognise the differing scope of PFI contracts, for example, the level of medical equipment or facilities management included in the contract.

He said: “PFI hospitals will face a challenge in the future with potentially reducing revenues but largely fixed unitary payments to meet. Asset utilisation will be key to maintaining financial viability and organisations will have to look for innovative ways of using the space in PFI hospitals to generate an income stream by looking at activity other than traditional acute hospital work.”

McKinsey’s report is due back at the DH in a month.

A DH spokeswoman said: “We know that there is a lot of work to do for some organisations to become foundation trusts. We are working to understand the barriers that have prevented organisations from becoming FTs, looking at a whole range of issues, not just PFI.

“Unitary payments are useful to consider, but they cannot be used as a standalone indicator or to diagnose the problem. That’s why we’re undertaking an independent assessment – to look at a range of factors and to inform the next stages of work.”