NEWS - FINANCE TURNAROUND Government urged to support closure of hospitals and services

Published: 08/12/2005 Volume 115 No. 5985 Page 5

The government has been urged to introduce its financial failure regime in order to allow trusts to close hospitals and services to get their finances on track.

Commentators made the plea after saying the government must also find new ways of tackling historic debt - by restructuring balance sheets or refinancing trusts with the most ingrained problems.

Last week the Department of Health announced that 'turnaround teams' would be sent in to 52 acute and primary care trusts predicting debt of£5m by financial year-end.

But many are calling for the government to support hospitals in taking more radical measures.

NHS Confederation policy director Nigel Edwards said he was 'slightly perplexed' by the introduction of turnaround teams - saying more radical interventions were required to overcome 'fundamental problems' behind the deficits.

'In a significant number of cases they appear to be related to a number of unresolved strategic issues, ' he said.

'We have known for at least a decade that there are too many hospitals in places like Surrey and Sussex and Hertfordshire. The issue is dealing with that problem. It is not clear for that category of deficit that a turnaround team would be effective.' Mr Edwards said diagnostic work had to be carried out in many areas to establish the best configuration of services. 'If you can sort that out many of these, [financial] issues will go away', he said. He warned politicians they 'would be wise' not to avoid tough decisions about restructuring over the next three or four years. 'There may well have to be closures, ' Mr Edwards said.

In a hard-hitting report this week, the King's Fund also argued that hospital services needed major reconfiguration to avoid worse financial problems in the future.

Keith Palmer, author of How Should We Deal With Hospital Failure? , said deficits would increase as a result of reforms like payment by results and patient choice. 'We urgently need a financial distress regime to address the causes of deficits and reduce the likelihood of failure occurring; and a more effective failure regime, ' he said.

Trusts at risk of failing should be required to implement a restructuring plan to restore medium-term balance - and given every assistance to help them succeed. But trusts deemed to be failing should be brought under the control of an independent NHS administrator, argued Mr Palmer.

The health secretary is currently considering proposals on market failure.

Bill Moyes, chair of foundation trust regulator Monitor, has said onethird of trusts would need to close hospitals or services to become credible candidates for foundation status.

He said that there were a number of ways the government could help the further third of trusts with historic deficits. He told HSJ: 'While we would not support a general write-off there are other options.' One was to 'reschedule' a trust's debt so that it is paid off over a longer timescale than originally agreed.

Another involved 'refinancing' so that the government would take over the debt but trusts would still have to pay it back over an agreed time.

'None of these options are painfree but they might be things that the DoH want to look at, ' he said.

This week Thames Valley strategic health authority followed Hampshire and the Isle of Wight in temporarily 'modifying' operation of payment by results in a bid to get a grip on debt in the local economy.

Surrey and Sussex SHA has suspended payment by results for its troubled acute trust, guaranteeing funding levels for this financial year.

The trust is forecasting a deficit of£41m, a third of its turnover.