Hospitals working hard to address historic deficits have been given a reprieve by the Audit Commission: they will no longer automatically score 'inadequate' in the resources element of the health check.

Last month, 18 hospital trusts scored the minimum inadequate rating, purely because they had failed in their statutory duty to break even over a three-year period. This meant they were automatically categorised as weak in the 'use of resources' element of the Healthcare Commission's annual health check.

But the Audit Commission has now published revised criteria for next year's health check, which will allow trusts to move out of the inadequate category even if they have a long-running deficit.

Andy McKeon, managing director of health at the Audit Commission, said that as long as trusts broke even 'in year' (keeping annual expenditure within income), kept to the financial recovery plans agreed with the strategic health authority and were up to date with loan repayments, they would still be able to score adequate for use of resources, even if they had historic deficits.

He said both commissions had wanted 'to make sure we didn't penalise those who were making good progress'.

Trusts welcomed the move. York Hospitals trust, which recently achieved foundation status, was rated inadequate on use of resources for 2006-07 after deliberately going into debt to bail out struggling North Yorkshire and York primary care trust. 'We reported a deficit for the first time through a managed negotiation with the PCT,' said interim chief executive Patrick Crowley.

'Our underlying financial position was strong so I found it extremely frustrating that by definition that was going to result in us getting a weak. In the circumstances such swingeing punishment doesn't seem appropriate.'

Southport and Ormskirk Hospital trust also got the lowest score for use of resources because it was in deficit, despite the fact it got the good scores on all other finance indicators including financial management and value for money.

Finance director Colin Throp said that the inadequate rating had not been fair. 'It's a good thing they're changing it - but it's a bit late for us as we're now predicting a surplus,' he said.

www.audit-commission.gov.uk