Regulatory authorities, health commissioners and the government will have to take urgent action to stop trusts from becoming financially unstable, the NHS Confederation has warned.

The NHS professional body is pushing the prospective regulator, Monitor, and the service as a whole to collaborate to make sure that insolvency is seen as an emergency measure rather than an unavoidable result of economic strife.

The body argues that if economic collapse is to be averted, it is vital that an action plan is organised to help strengthen NHS finances as soon as possible.

A reformed licensing system for the majority of NHS-funded services is set to be launched from spring next year. As part of the new system, Monitor will be obliged to call for patient-focussed services which are inexpensive, proficient and reliable. Its responsibilities will also include supervision of the wind-down of trusts which are declared insolvent.

However the NHS Confederation argues that trusts should be given assistance before this is allowed to happen. It has listed three aims which should be taken into account to help avoid failure.

It says the approaches should:

  • Maximise every penny available to improve services for patients and offer value for money for taxpayers
  • Encourage and support commissioners and providers in their attempts to transform local services
  • Provide investment in a transparent, accountable way.

Mike Farrar, NHS Confederation chief executive, said: “Our members have told us the financial problems they face are very rarely confined to the management of their trust. Very often their problems are compounded by the way the wider local health economy works, or as a result of sustained efficiency targets which have impacted on some trusts yet failed to produce the incentives for health system transformation.

“The government is aiming to have as many trusts as possible reach foundation trust status by 2014. We cannot afford to set ourselves up for failure by creating a system that throws good money after bad. We need financial investment that acts as a long-term incentive to create sustainable services in the right place for patients, not a short-term bail out that is seen as the easy way out.

“The wider solution lies in planning change, and developing a system that rewards trusts for successfully helping to manage demand in primary and community services. But we need to find the resources to fund this and make them available on a shared gain basis within each system.

“We are concerned that the closer we get to the next general election, the more difficult it will be for NHS organisations to make vital changes to local services. David Nicholson has said he believes trusts have a narrow window to begin reconfiguration projects next year before ministers become reluctant to defend or explain clinically justified cases.

“NHS organisations need the freedom to act in the best interests of patients and taxpayers. It will be essential they can work openly and honestly with local politicians and the public to bring about change that is in everyone’s best interests.

“Monitor’s role will be crucial in allowing trusts to make the necessary changes to ensure they remain viable. We must make sure it is set up to be fleet of foot to support and guide trusts through significant financial challenges. It is absolutely right that it oversees a fully transparent and accountable process.”