The NHS has undergone a 'cultural shift', with nearly all organisations now meeting standards on financial management after years of poor performance and spiralling deficits.

But despite the overall improvements, annual assessments by the Audit Commission found only around 5 per cent of NHS trusts and primary care trusts were performing strongly, and there were "pockets of real concern". The assessment, known as the auditors' local evaluation, feeds into the annual health check ratings via the "use of resources" score.

Audit Commission chair Michael O'Higgins said: "Financial management is now being taken seriously. There has been a big cultural shift over the past three years. The level of improvement is impressive."

But he warned managers not to "take their eyes off the ball" amid tightening budgets and a focus on quality in the next stage review.

Poor financial performance was likely to impact on patient services, he said.

The right approach

The commission's managing director for health, Andy McKeon, said the four trusts that failed to meet minimum standards across all categories in 2005-06 and 2006-07 had all improved: "The message from the bottom is that it is possible to change with the right approach."

The ratings show 93 per cent of NHS trusts and PCTs met or exceeded minimum standards for finance in 2007-08 - 35 per cent higher than last year.

Out of 150 trusts and 152 PCTs, 177 improved their score from the previous year. The most common score was a level three, which means "performing well".

Despite the improvements, 118 scores stayed the same as last year and, in six cases, they deteriorated. Most movement was among organisations going from level one to two.

And 20 organisations are failing to meet minimum standards, of which 12 have been ordered to take "immediate action" after scoring one out of four for the third year running.

One of them, Queen Mary's Sidcup trust, blamed a greater investment in community services by Bexley care trust. Added to the loss in accident and emergency income caused by a new urgent care centre, the hospital is predicting a reduction in income of£4.3m this financial year but says it cannot reduce its costs by the same amount.

Robust service

PCT Network director David Stout said: "It's not in PCTs' interests to financially destabilise their providers because it's not good for service continuity, but we need to be in a position where the service has enough robustness to allow the transfer of services and patient choice."

The most common reason for not meeting standards was a failure to honour break even duties and recovery plans.

PCTs have overcome the difficulties caused by reorganisations two years ago and now have similar results to trusts, with slightly more classed as strong and 4 per cent weak, compared with 9 per cent of NHS trusts. However, more than half of reconfigured PCTs are only rated "adequate". There are no strong performers, compared with 14 per cent of unchanged PCTs.

Only 4 per cent of trusts and 5 per cent of PCTs were awarded four out of four, meaning they are well above minimum requirements and performing strongly. However, 30 of the top-performing trusts in last year's assessment have since gained foundation status so are no longer included in the audit.

Regional variations

The scores reveal large regional variations, for example the North West achieved the highest average score, while neighbouring Yorkshire and the Humber got the lowest - but this also has many foundations.

NHS London had both the highest proportion of NHS organisations failing to meet minimum standards and the highest proportion of bodies performing strongly of any SHA. Finance and performance director Paul Bauman said the SHA had a clear action plan in place for each organisation with "serious financial legacies".

He said it would work closely with challenged trusts "to ensure that they are not left behind".

A report accompanying the figures urges organisations to use surpluses to improve services.

TWELVE THAT FAILED TO MAKE THE GRADE

Trusts told to take "immediate action" after scoring one out of four:

  • Barking, Havering and Redbridge Hospitals trust

  • Bromley Hospitals trust

  • Hinchingbrooke Health Care trust

  • Hounslow PCT

  • North West London Hospitals trust

  • Queen Elizabeth Hospital trust

  • Queen Mary's Sidcup trust

  • Royal National Orthopaedic Hospital trust

  • Scarborough and North East Yorkshire Healthcare trust

  • Trafford Healthcare trust

  • Whipps Cross University Hospital trust

  • Worcestershire Mental Health Partnership trust

See Andy McKeon on the good news about NHS finances