The financial performance of the NHS in Wales is continuing to deteriorate, with its underlying cumulative deficit set to rise to £80m by the end of the current financial year, according to the National Audit Office.

NAO head Sir John Bourn said he remained 'seriously concerned' at the worsening deficits being incurred within Wales and called for the NHS directorate of the Welsh Assembly to 'urgently address' the problem with 'robust' recovery plans. The report says no such plans have been agreed by several health authorities and trusts.

The NAO's report on the summarised accounts of the NHS in Wales for 1998-99 show the underlying cumulative deficit rose by£21. 8m during the year to£53. 9m.

Deficits are forecast for this year by two out of the five HAs, with their total net deficit for 1999-2000 estimated at£8. 9m. Deficits are also being predicted by 10 of the 16 trusts, giving a total of£17. 3m.

Swansea trust chief executive David Williams said the biggest problem was the 'negative incentive' that if organisations managed to balance their books they were expected to start paying back historical deficits. He said balancing the books would be easier if there was 'an appropriate incentive' with regard to historical debt - such as writing it off.

Gwent health authority chief executive Graham Coomber said another issue was that Wales had 'a lot of sick people and they use primary care services more than in England'. The financial squeeze meant Wales could not 'sustain the pattern of services we have'. Mr Coomber said 'rising waiting lists are the main problem'.

He also agreed there was a real problem with historical debt, and said the Welsh Assembly had to make difficult decisions on it.

The report says the cost of clinical negligence rose markedly during 1998-99, with the total maximum payout for known cases rising from£145m to£214m.

The figure for outstanding provisions, where there is a reasonable expectation of payment, rose from£81. 4m to£98. 4m.

In addition, contingent liabilities, where there is the possibility of future payments, rose from£63m to£116m.

The report says that 'due to resource constraints' the Assembly has not established a central body to detect and prevent fraud in the NHS in Wales.

The report also highlights the sharply rising cost of primary care drugs in Wales. Assembly health and social services secretary Jane Hutt has set up a group - due to report in June - to look at improving the efficiency and effectiveness of prescribing.

Hard road to recovery Dyfed Powys health authority, which has the largest deficit in Wales, has announced plans to invest£6m in all 10 community hospitals in its area, removing the threat of closure. The HA says the money will come from removing the division between GP and consultant wards, sharing premises with social services and the voluntary sector, and reducing management and administration costs.

But up to 90 beds will be cut.

The HA's 1996 plans to reduce the number of community hospitals faced opposition, but revised plans said a£19. 1m deficit could be eliminated if savings at five home trusts were recurring and the HA only had to repay historical debt after eliminating other shortfalls.