Finance fears killed Nuffield foundation bid

Nuffield Orthopaedic Centre trust was refused foundation status because it would make losses under the payment by results system.

According to chief executive Ed Macalister-Smith, its application was turned down last week because the foundation trust regulator decided the fifth year of the trust's future financial plan was not strong enough.

'Based on our current activity we will be making losses in years four and five (under payment by results), ' Mr Macalister-Smith told HSJ.

Mr Macalister-Smith said reference costs under the proposed system are not an exact match of the specialist work the trust currently carries out.

He said the Audit Commission had also identified this as a problem with payment by results in its recently published guide to the system.

Under the current system the trust would be£5.5m in debt in the fifth year if it had become a foundation trust; it was the first potential foundation trust that had above-average reference costs.

'We hope to apply for foundation status again; the earliest we can now do this will be in 18 months, ' said Mr Macalister-Smith.

Independent foundation trusts regulator chair Bill Moyes said it was his job to make sure that foundation trusts were financially viable.He said the Nuffield's plans were based in the long term on the premise that 'everything had to go absolutely right for them'.

'This included [ongoing] Department of Health discussions [on payment by results], which had to work out perfectly. In the end it was too big a risk, ' he said.

The regulator is expected to receive a list of successful applicants to be considered for foundation trust status from the DoH by the end of July.

However, one of the trusts on the initial second-wave list, known as wave 1A, last week deferred its application.

Winchester and Eastleigh Healthcare trust made the decision to defer 'based on the need for further progress against the savings plan and uncertainty as to whether the trust will maintain its three stars this year which is needed to stay in the running for foundation trust status'.

Wave 1A trusts will find out if they have achieved foundation status in the autumn, or early next year.