Published: 10/02/2005, Volume II5, No. 5942 Page 14 15

Papers released last week tell how Bradford Teaching Hospitals foundation trust was the first to fall foul of the regulator. Last week, HSJ reported on the events between April and November. Here, Helen Mooney looks in detail at how a bad situation got worse

A lot of foundation trust managers are eager to learn from what has happened in the Bradford health community over the last nine months. And many of them must be holding their breath, wondering if, when and where the Monitor axe will fall next.

Last week, observers got their first insight into what actually took place at Bradford Teaching Hospitals foundation trust when Monitor, the independent foundation regulator, released an account of the history of the financial crisis leading up to the sacking of chair John Ryan in December (news, page 6).

Released under the Freedom of Information Act, the documents catalogue a chequered and tumultuous relationship between the trust's senior management team and Monitor's board.

Memos sent to the trust's board by chief executive David Jackson and then finance director Paul Earp almost immediately after the trust had been granted foundation status last April show that the financial situation was already beginning to get out of control. Mr Jackson warned that local primary care trusts 'will challenge our invoices and will resist paying for additional work', and Mr Earp warned of a situation which, in a 'worst-case scenario', would see the trust with a deficit of more than£10m at the end of 2004-05.

But Monitor was not made aware of the trouble unfolding until August.

Between then and the middle of December the regulator met the trust's board nine times, eventually resulting in Mr Ryan's removal.

The sequence of frequent meetings between the two management teams from late November to mid December reveal the true scale of the problem and Monitor's ebbing confidence in whether it could be tackled.

This is how events unfolded:

18 November

At the first of a series of 'special meetings' between the trust's senior management team and Monitor's board, the regulator was told by the trust's non-executive directors that they did not feel engaged by the trust's management team, and they admitted that they had failed in their roles from 'a governance perspective'.

21 November

At the second meeting, the trust board gave its opinion on the financial report carried out by US independent auditors Alvarez and Marsal, who had been brought to the trust in October by the regulator to analyse the financial situation.

Mr Jackson told Monitor that the trust 'accepted Alvarez and Marsal's conclusions but disputed their analysis' about who was to blame. He also 'accepted that the trust was likely to lose£11m in 2004-05'.

Mr Ryan informed Monitor that the trust board had 'nearunanimously rejected' any further involvement by Alvarez and Marsal.

The independent auditors had suggested that they install their own chief financial officer and a financial controller at the trust.

Minutes from this meeting also show that the regulator had met the external accountancy team at PriceWaterhouseCoopers, which had signed off the trust's working capacity and financial reporting procedures in March. Monitor chair Bill Moyes also requested a meeting with PriceWaterhouseCoopers's senior UK partner.

However, at this point Monitor also noted that the trust 'still had no strategy for dealing with the PCTs [to resolve disputes over unpaid work under payment by results].'

30 November

Alvarez and Marsal presented the findings of its report on Bradford to Monitor. At the same meeting, the Bradford trust board presented a response to the report and a proposed financial recovery plan (see box), eight months after initial concerns had been raised about the potential scale of the problem.

The external auditors described the trust's financial systems as 'antiquated', and added: 'Alvarez and Marsal's view is that the lack of adequate financial controls at the trust meant that it is potentially vulnerable to fraud.' The report was also critical of the adversarial relationship between the acute trust and its three commissioning PCTs: Bradford City teaching, North Bradford and Bradford South and West. It recommended that the 'negotiations between the trust and the PCTs needed to revert solely to hard facts and proper analysis'.

In response to the external report, the trust's interim finance director John Rushfirth told Monitor that he believed the financial risks had been 'adequately managed at the time and that it had been a 'complete waste of time' to have to deal with the issues raised by Monitor and Alvarez and Marsal over the past two months'.

The trust board told Monitor that, in order to address its fiscal problems, it would become a 'smaller, hotter' hospital.

8 December Monitor's board was told of the outcome of a meeting between Monitor and the Bradford PCT chief executives the previous day.

The PCTs had not withdrawn their coding queries from the acute trust, nor had they seen the trust's recovery plan. According to the minutes from the meeting, 'it was apparent that the relations between the trust and the PCTs were not as good as had been suggested by the trust when they met the Monitor board on 30 November'.

10 December Bill Moyes had spoken to Andrew Cash, chair of the Foundation Trust Network and Sheffield Teaching Hospitals foundation trust chief executive, the previous evening.

Mr Cash told Mr Moyes he had met Bradford chief executive David Jackson (who had since gone on holiday) and said Mr Jackson had suggested there should be a 'cooling-off period' between the trust and Monitor, 'during which the relationship... should be negotiated, with possible mediation though the Department of Health'. This proposal was categorically rejected by Monitor, 'given its independent regulatory role'.

Monitor's board also heard from a letter sent by Mr Ryan, who asked for more time to set out a chronology of what he believed he had achieved as trust chair. He told Monitor he did not understand why it was only proposing to take action against him.

Mr Moyes agreed to further representations by the trust, 'but in view of the deteriorating financial position [it was continuing to lose£15,000 a day] they would have to reach Monitor by midday on 13 December'.

Monitor also said it understood that Mr Jackson had been offered 'some possible investment' by the local PCTs but that he had 'dismissed [it] on the basis that it was not in his view sufficient'.

Mr Moyes also told that board that health minister John Hutton had met local MPs on 7 December and understood that the minister had made it clear to them that it was up to Monitor to decide what action to take.

At a Monitor meeting Mr Moyes told Mr Ryan the regulator did not consider the trust's recovery plan to be credible and that its response to the Alvarez and Marsal report was 'superficial'.

Monitor said it believed that even if Bradford managed to reconcile its problems with the local PCTs and was paid for the work it had carried out, 'other factors could take the deficit beyond£11m'. The board 'therefore remained concerned that the trust's financial position could further deteriorate'.

Monitor rebutted the trust's assertions that the financial situation could be remedied and reiterated and that the trust 'should have made Monitor aware that, in reality, it was facing a seriously deteriorating position' much earlier than August.

The trust's response to its problems 'did not appear to be either timely or appropriate, not least since the board did not produce a recovery plan until November 2004'.

Monitor told the trust that it 'did not find the trust's responses [to the conclusions of the Alvarez and Marsal report] either convincing or demonstrative of a proper appreciation of the seriousness and urgency of its financial predicament'.

The board repeated that there was concern by the 'apparent failure of the trust's senior resolve disputes involving some key points of principle with the relevant PCTs'. Some of the cost-cutting measures would simply postpone the cash-flow problems to the next financial year and this could result in a 'detriment to clinical care and standards'.

Mr Moyes told Mr Ryan that the role of a chair was to 'ensure effective financial stewardship through value for money, financial control and financial planning and strategy'.

Monitor issued a section 23 notice to Mr Ryan, removing him from his position at the trust, and new chair Peter Garland was put in post.

And now?

As HSJ went to press, the trust had still not agreed a formal recovery plan with Monitor and continued to predict a£11.3m debt to March 2005.

The trust has also failed to reach an agreement on the coding queries raised by the PCTs and has not been paid for any of this work. However, sources close to the talks are indicating that an agreement is 'tantalisingly close'.

A Monitor spokesman said it expected the trust management board to present a revised recovery plan by the end of February. 'We continue to assess the situation at the trust and we do want to see something that moves beyond that to a financially sustainable position, ' he said, adding that Monitor wanted to see a plan that had systems in place for the next three years.

A trust spokesperson said it had developed a plan and would be having discussions with 'key stakeholders' over the next few weeks.

The trust is also relying on a working capital facility from the DoH to cover some of the debt. This will only be awarded when the trust agrees its plan with Monitor.



The trust proposed a freeze on recruitment, overtime and the use of agency staff, which it said had already been implemented.

The trust board said that it would cut 230 jobs, resulting in a 5 per cent reduction in the wage bill.

Job cuts would be made through natural wastage and the biggest impact would be on support service functions.

Cuts in hospital sites

The trust had worked on two sites at Bradford Royal Infirmary and St Luke's Hospital for the past 12 years.

It suggested closing four operating theatres and the elderly care unit at St Luke's, as well as creating a rehabilitation facility to reduce patients' length of stay.

Reduction in supply and non-pay costs

A 10 per cent reduction in all areas of the trust, including suppliers and agency costs.

Cash return West Yorkshire strategic health authority agreed to return a£4.2m 'cash brokerage' the trust would have received had it not gained foundation status.

Reduced overspend

The trust highlighted that the overspend for October was£500,000, compared to£1m for September.

It predicted that if this progress was maintained the predicted level of deficit would reduced from£11.3m to£8m by the end of the year.