NEWS - FINANCE TURNAROUND Trusts with minor overspends could face censure under new rules

Published: 08/12/2005 Volume 115 No. 5985 Page 6

The Healthcare Commission is considering tightening up the rules so trusts with small deficits will not be able to escape censure.

The Department of Health is understood to be concerned that trusts with deficits smaller than 0.5 per cent of their turnover are able to overspend by this amount before being penalised. The small deficits add up to almost 20 per cent of the overall NHS deficit.

Commission chief executive Anna Walker said it was deciding whether trusts should have to break even completely to avoid penalties. 'We are absolutely clear that a trust that performs poorly in financial standing will not perform well overall, ' she said. 'Financial management is not only important for its own sake, but because it will determine consistently good quality of care.' NHS chief executive Sir Nigel Crisp told HSJ that NHS organisations needed to get a grip on their finances. 'It would be easy to get into a culture where deficits are accepted, and that is why we are being so tough, ' he said.

The DoH said 24 per cent of trusts are now recording a deficit, down from 27 per cent at the end of 200405. However, 37 trusts account for two-thirds of the gross total deficit of£948m - a concentration compared to the 48 trusts which accounted for the same proportion of a smaller gross deficit at the end of last year.

Sir Nigel said he accepted 'the criticism that we collectively did not pay as much attention to finance' as other reform issues.

Ms Walker blamed the previous star-ratings for the financial problems facing the NHS, saying good financial management was undermined by waiting time targets.

She said incentives in the now defunct system meant trusts that failed the single financial target could still be awarded three stars if they achieved the other targets, most of which related to waiting times.

But the new annual health check will devote a whole section to trusts' use of resources where 'good financial management is going to weigh much more significantly than in previous years, ' said Ms Walker.

She added: 'The incentive for good financial management was undermined in the way we carried out our ratings.

'We reached that conclusion because it was striking that the most consistently missed target was financial management. If that was the only national target you failed it was, in principle, possible to get three stars.'