Our article ('Time to strip the beds,' pages 30-33, 27 November) sought to show a range of issues which were not properly dealt with by University Hospital Birmingham trust's consultation.

The trust's chief executive, Jonathan Michael, has answered none of these questions, and the credibility of its plans is further undermined by the details in his letter (18 December).

His throughput figure of 61 is derived from a planning model which assumes a constant length of stay and inpatient growth of 10 per cent over seven years 1996/97 -2003/04, with an overall reduction of 7 per cent in acute beds. But the trust's financial appraisal states that it 'assumes no growth in caseload from 1997-98 contracted levels'. Under this alternative model, bed reductions of 13, 21 and 27 per cent will result (with a throughput figure of 65 for the 21 per cent reduction). Both planning models are cited in our report. Dr Michael appears to be unclear which forms the basis for the trust's plans. The trust's own financial appraisal is based on building a smaller hospital with 13 to 27 per cent fewer beds, but the 18 September document to the trust board (now confirmed by Dr Michael's letter) also includes plans to build a bigger hospital based on trend growth. These plans do not appear to have been subject to financial evaluation nor been part of the option appraisal. The report to the trust board is riddled with such contradictions.

Dr Michael states that future trust plans are based on 85 per cent bed occupancy. The recently published bed availability and occupancy data for England (1996-97) shows that Birmingham's acute trusts had a general and acute bed occupancy in excess of 90 per cent compared with 80.7 per cent for England as a whole. This data and the empirical evidence of difficulties in accommodating patients show that Birmingham's acute services are already severely stretched. What evidence is there to support his view that the trust can reduce bed occupancy from 91 per cent currently to 85 per cent, especially in the face of significant bed reductions?

The logic of the net present value technique requires that any expenditure that must be made - eg for health and safety reasons - without which the organisation could no longer function, must be treated as a sunk cost and excluded from the calculations. It is in this sense that the pounds70m apparently required, but not detailed, is a sunk cost. As every first- year accounting and finance student knows, if the trust is arguing that it has to be spent, then it should be excluded from the option appraisal.

Dr Michael claims that rather than spending the money patching up the estate, the trust should look at how it could provide the best facilities: but nowhere does he list the expenditure and revenues and compare the facilities to be provided under the various options. Only the 'bottom line' is given.

Our article sought to point out the contradictions and ambiguities in the trust's plans and Birmingham health authority's proposals. Neither Michael Waterland (Letters, 11 December) nor Jonathan Michael have addressed any of the questions raised by our article.

The trust plans must be placed in the public domain. A detailed scrutiny of its financial appraisal and planning assumptions are long overdue.

Allyson M Pollock, Jean Shaoul,

Matthew Dunnigan,

St George's Hospital Medical School.