Published: 14/04/2005, Volume II5, No. 5951 Page 6
Lancashire Teaching Hospitals trust was given foundation status this month despite debts of£3m.
The trust was awarded foundation status on 1 April, along with five other trusts, even though it is in the red.
The other five in the most recent group to win foundation status were all financially balanced or in credit by the end of the financial year.
Lancashire Teaching Hospitals is the first trust to be authorised as a foundation trust by independent regulator Monitor despite having a significant debt. The move could add weight to critics' arguments that the policy will create a two-tier system.
Non-foundation trusts have to ensure they meet financial balance in order to win three-star status from the Healthcare Commission - to date, three-star status has been a condition of application for foundation status.
Lancashire Teaching Hospitals was given three stars before it went into the red.
However, being in debt does not automatically bar trusts from being granted foundation status if they can demonstrate they are 'financially viable and sustainable', a Monitor spokesman said.
He added that Lancashire Teaching Hospitals trust management had submitted a business plan for the next five years demonstrating 'that they have plans in place to tackle the deficit'.
'Foundation trusts can incur a deficit and they need to have flexibility in their planning, ' he said.
Lancashire Teaching Hospitals foundation trust finance director Beverly Peacock admitted the trust had financial problems. These included implementing the consultant contract and the provision of tertiary services for cancer, orthopaedics, renal services and plastics.
'These services were not fully recognised under the non-foundation trust regime but payment by results will address this, ' Ms Peacock said.
Liberal Democrat health spokesman Paul Burstow said: 'This demonstrates just how absurd the government's foundation trust policy is.' He added: 'It is right that hospitals go through a rigorous process of assessing their financial status but there should be a level playing field so that hospitals are judged on the same standards.'