Privately run Hinchingbrooke Health Care Trust has warned that its deficit could exceed £12m this year, and has applied for a government bailout of nearly £10m.

The trust’s latest finance report, to be discussed at its board meeting on Thursday, states that even an “optimistic” forecast shows Hinchingbrooke finishing £7.7m in the red. Its “pessimistic” forecast shows a deficit of £12.2m.

Hinchingbrooke Hospital

Even an ‘optimistic’ forecast puts the Hinchingbrooke trust finishing the year £7.7m in the red

Hinchingbrooke has applied to the NHS Trust Development Authority for £9.6m of public dividend capital funding, and expects in the meantime to be able to make use of a “TDA temporary borrowing facility”, the report shows.

The news follows last month’s announcement by Circle, the private company which has been running the trust, that it was withdrawing from the franchise, as the deal was “no longer sustainable under current terms”.

The trust was also placed in special measures last month after Care Quality Commission inspectors raised concerns about the trust’s care quality, management and culture, as exclusively revealed by HSJ in September. Circle is contesting the judgment.  

The trust’s February finance report said: “At the end of [December] the deficit stood at £7.5m. It is not expected that this position will improve by the end of March. The current [investment and expenditure] forecast is for a £9.6m deficit for the full year 2014-15. It is therefore anticipated that the application of this test will trigger a franchise support payment.”

Under the terms of the franchise, Circle is obliged to make support payments of up to £5m to cover deficits at Hinchingbrooke. However, the company has already made payments of more than £4.8m under this condition.

The paper, by the trust’s interim finance director Richard Eley, said discussions have already taken place with TDA staff at various levels and that “these indicate that the TDA is willing to make funding available to the trust to ensure the revenue position does not result in a cash shortfall”.

“A formal application for [public dividend capital] funding has been [made] to the TDA for decision in February. In the meantime a TDA temporary borrowing facility is expected to be utilised from January,” the report said.

The report said the trust’s income performance has been affected by the following three main factors: the outcome of the initial contract negotiations; activity performance in year; and additional levels of contract deductions.

It continued: “The main outcome of the contract negotiations for 2014-15 is that a number of local prices were reduced. This impact is estimated at £3.3m across [the intensive therapy unit], [chemotherapy] drugs and maternity for the full year 2014-15. This price deflation is in addition to the 4 per cent deflator that is applied to the national tariff prices. Throughout the year the trust has experienced higher levels of non-elective activity than plan.”