Three primary care trusts are disputing the validity of a massive increase in activity at a flagship London hospital.

Camden, Westminster and Islington PCTs are working together to challenge increases in activity at University College London Hospitals foundation trust. Camden and Islington have both withheld payment to the value of queried activity for the first three months of the financial year.

The information was contained in the PCTs' commissioning performance reports from their last meetings in November. It has been confirmed that the problems have not been resolved.

Islington's November board papers state: 'The over-performance at UCLH continues to grow at the same rate and is therefore the most significant risk to the PCT, and the biggest single obstacle to achieving financial balance in 2006-07.'

The paper says UCLH is showing an 'over-performance of£1.5m' compared with PCT forecasts, and that 'strong challenges have been made to the validity of much of the increase in activity'.

It gives as an example changes to the coding of endoscopies, plus the inclusion of activity that was not previously chargeable in this year's bills. An analysis by the trust provided to the PCT showed£160,000-worth of activity which was not chargeable last year was carried out in the first three months of this financial year.

The minutes state: 'It is our assertion that changes for ratios in first to follow-up appointments in outpatients can also be attributed to changes in the way the activity is being coded and recorded.

'The PCT is coming to the view that it may need to bring in external help to try to pin down the extent that coding changes have occurred at the trust.'

A spokesman for Islington PCT said November's finance figures showed 'a total forecast over-
performance of£4.6m for 2006-07 on our main acute contracts'. The papers say nine London trusts are showing over-performance worth£100k or more.

Westminster PCT's November board report states: 'Our most significant financial risks sit with our acute hospital contracts and unplanned high-cost specialised packages of care.' It predicts that over performance will cost them around£3.2m by year-end.

Financial over-performance at UCLH in September was recorded at£475,000. Westminster also recorded the costs of over-performance at other major London hospitals:£411,000 at Hammersmith Hospitals trust,£285,000 at Chelsea and Westminster Healthcare trust and£514,000 at Royal Free Hampstead trust.

Robert Creighton, chief executive of Ealing PCT and chair of the London PCT policy forum, said: 'DoH guidance spells out the mutual responsibility for commissioners and providers to manage within the budget for the health economy.

'However, the systems incentives tend to encourage acute trusts to use their capacity to the full so there are inevitable tensions between commissioners and providers which are coming to the fore now.

'PCTs are rigorously reviewing all the information to understand why activity is rising and are strongly challenging any inappropriate growth, such as changes in coding, and are taking all reasonable action to bring activity down by the end of the year.'

This problem is aggravated by the fact that it is normal practice across the NHS for individual PCTs to host accident and emergency departments - paying for all attendances whether the patients are from the host area or not.

Camden PCT hosts both the Royal Free and University College A&E departments. In September's finance report it states that the UCLH year-end projected out-turn has worsened by£950k.

Last year it spent£11m on A&E services but figures for 2005-06 show that just 33 per cent of UCLH patients and 34 per cent of Royal Free patients came from the borough.

Camden PCT chief executive Rob Larkman said: 'The current weighted capitation system is distorted - in our allocation the money doesn't relate to the rise in Camden's population due to commuters.

'Not only has there been a rise in attendance, the case-mix is more expensive. At A&E a simple test such as a urine sample will push the cost up to a medium tariff.'

Under the three-tier tariff for A&E activity, a minor injury attendance is currently priced at£35, a standard attendance at£61 and a high-cost attendance at£93. Next year the tariffs rise to£55,£73 and£101 respectively.

Mr Larkman added: 'Hosting means that there is no incentive for PCTs and GPs outside Camden to work on making patients not come to Camden hospitals as it doesn't affect their budgets. Therefore it is not in line with the idea of practice-based commissioning.

'We have written to the DoH to try and change the system as it doesn't fit with payment by results or national priorities - it harks back to historical arrangements - it's anachronistic.'

If the A&E departments were de-hosted the cost could be mapped back to each PCT.

Mr Larkman acknowledged that transaction costs would be greater and hospitals would need to get better at recording details.

He said the PbR tariff - which gives acute trusts full tariff for 'over-performance', while only reimbursing PCTs with 20 per cent of the costs when planned levels are not reached - exacerbated pressures on PCTs.

A UCLH spokesman said: 'Although there were some contract payment issues raised earlier in the financial year, we have more recently had very constructive discussions and are very confident that a satisfactory outcome can be achieved.'