A large acute foundation trust has said it is likely to miss its control total by £10m because of fines imposed by commissioners for emergency readmissions and the resulting loss of central funding.

Without the fines, Heart of England Foundation Trust would have been on target to hit its control total having cut its deficit by over £30m in a year – from £46.8m in 2015-16 to a projected £13.6m in 2016-17.

Birmingham Heartlands Hospital

Birmingham Heartlands Hospital

The trust applied for a £17m short term bailout from the Department of Health

However, trust board papers say fines for emergency readmissions were not included in a wider suspension of fines and penalties “as had originally been understood”.

The fines worsen the trust’s position by £5.4m. Because those fines will cause the trust to miss its control total, it will also miss out on £5.8m of sustainability and transformation funding – resulting in a forecast deficit of £24.8m.

The trust has also applied for a £16.6m short term bailout from the Department of Health amid fears it will run out of cash this month.

Heart of England applied for “distressed finance” support in November, board documents show.

The trust has been discussing its need for extra cash with NHS Improvement for several months, the documents said, “and they have agreed to support the trust’s application for distressed financing”.

The trust has been approached for comment but has not confirmed whether or not it received the bailout.

The trust is in the process of merging with University Hospitals Birmingham FT. Leadership of the trust was taken over by UHB’s chief executive Dame Julie Moore and chair Jacqui Smith last autumn, amid a spiralling deficit and care quality concerns.

The board paper said Heart of England could be overdrawn for two days last week. However, this could be averted via “reduced supplier payment during the early part of [December]”, and the need for interim revenue support “can be pushed back to the beginning of 2017”.

“Cash forecasting shows that the trust will move into an overdraft towards the end of December with a more sustained overdraft requirement beginning on 4 January 2017,” it said.

Without the bailout, the trust was forecasting overdrafts in each of the next three months, peaking at £13.6m overdrawn in February.

The £16.6m bailout is designed to cover that overdraft and add a “buffer” of £3m – the minimum the trust is expected to hold.

The DH loan would be repaid at a rate of 3.5 per cent per year, costing the trust £600,000 a year.

The trust’s risk register said the cash position is the consequence of running a deficit “for a sustained period”.

Separately, the DH has agreed to release £3.1m to the trust to pay for the development of a full business case for a new ambulatory care and diagnostics centre.

“The DH and Treasury have indicated their support for the overall ACAD project of circa £70.5m”, the board papers said, but this depends on the development and approval of the business case.