Foundation trusts are out-performing NHS trusts on a number of key indicators and have a greater than expected surplus for the first quarter of 2006-7, according to Monitor.

Foundation trusts are out-performing NHS trusts on a number of key indicators and have a greater than expected surplus for the first quarter of 2006-7, according to Monitor.

NHS foundation trusts have made a strong start to the financial year, producing a surplus of£17m for April-June, which is£19m above their planned position, says the regulator.

Seven foundation trusts have the best financial risk rating of 5, up from one trust in May. Monitor says 25 trusts are showing a net surplus, although four trusts show deficits in excess of£1m.

However, 27 are rated amber for governance reflecting concerns over meeting healthcare targets and standards, it says.

And several trusts, which are not named, are planning cost improvement plans in excess of 5 per cent.

This is due to several factors, including the need to reduce costs to meet payments under private finance initiative schemes; poor financial performance requiring cost reductions as part of a recovery plan; unfavourable outcomes from the 2006-07 tariff; and a requirement to address inefficiencies as reflected in a high reference-cost index.

The report concludes that the main challenges for trusts are meeting the 62-day cancer wait and achieving a year-on-year reduction in MRSA infection levels.

Monitor says that foundations have set themselves 'demanding' targets for financial improvements in 2006-07. The aggregate forecast surplus for 2006-07 of£13m for 40 foundation trusts reflects what it calls 'ambitious targets' in some cases.

Monitor chair Bill Moyes warned: 'A crucial requirement for many foundation trusts in the year ahead is improving communication with their commissioners and solving problems in a commercial manner as and when they arise.'

Four foundation trusts are currently subject to monthly monitoring based on their financial risk ratings: University College London Hospitals; City Hospitals Sunderland; Homerton University Hospital; and Countess of Chester Hospital.