• Change in regulations days later would have altered treatment of windfall
  • PSF boost has also helped trusts’ bottom line
  • Both trusts plan to spend money on major improvements

Two hospitals have significantly boosted their headline financial performance by completing a £43m land sale just days before new regulations would have prevented this.

Surrey and Borders Partnership Foundation Trust and Ashford and St Peter’s Hospitals Foundation Trust sold land at St Peter’s, Chertsey, at the end of March for £42.75m.

The land was sold to Cala Homes, which will build 212 houses, 155 retirement apartments and 147 affordable and keyworker apartments.

The trusts are thought to have made a significant “profit on disposal” – the difference between the asset’s sale price and the value stated in their balance sheets. They said they could not yet provide details of this, but their income and expenditure run-rates in the first three-quarters of the year suggested they would benefit from significant one-off transactions in the last quarter, to bridge a combined gap of up to £20m.

In December last year, HSJ reported SABP’s expected profit on the site had increased by £7m, allowing the trust to raise its control total by £7m and benefit from extra incentive funding from NHS Improvement. 

ASPH’s latest board papers showed it had a £21m surplus for the first 10 months of 2018-19 and added “this includes £14.1m of additional accrual incentive PSF income”.

As previously reported by HSJ, there has been controversy over the accounting treatment around these types of transactions, because there is a perceived unfairness that some trusts can use land sales to meet their control totals and trigger large incentive payments.

It also means a greater proportion of the sale proceeds are used to boost the overall NHS revenue position, as opposed to the already depleted national capital account. This has happened to an increasing degree, despite a government commitment for the proceeds to be reinvested into new estates’ projects.

In January 2019, NHSI said providers would be banned from using land sale proceeds to meet their control totals from 2019-20.

SABP and ASPH avoided this ban by completing their sale in March. It means they will both benefit from additional incentive payments from the “provider sustainability fund”, as sanctioned by NHSI.

Both trusts said they have earmarked the cash proceeds for substantial new developments. ASPH wants to build new urgent and emergency care facilities, a new multistorey car park and a redeveloped main entrance. SABP says it will improve facilities at the Abraham Cowley Unit at St Peter’s and increase bed numbers.

In a joint statement, they said the transaction did not mean capital funding was being used to support the revenue position.

However, the trusts’ ability to spend the cash may be constrained by new rules which are expected to make FTs subject to capital spending limits at a national level.

The accounting treatment, which results in more of the sale proceeds being booked as profit, means more of the benefit is diverted into the national revenue account, rather than increasing the amount of capital spending that is permitted nationally.