First ever tariff hike agreed for troubled trust

It is the first time the regulator has used its statutory powers to change the national prices paid to a trust by local commissioners.

The variation, called a “local price modification”, reflects the “increased costs associated with this trust running health services across multiple sites in rural locations”.

The trust had initially tried to strike a deal with its local commissioners, but when this was unsuccessful it took its case to Monitor.

Only a small number of trusts have sought local price modifications, with all the applications being refused until now.

The agreement, which Monitor said is likely to result in additional income of £20m to £25m for the FT, will apply to accident and emergency, surgery, trauma and orthopaedics, paediatrics, women’s health, and non-elective medical conditions.

The trust has a turnover of £274m and ended 2014-15 with a deficit of £27m.

Once the price modification has been accounted for, the trust will still have a forecast deficit of £23m for 2015-16.

A report to the trust board in June, said it expected the local price modification to bring additional income of £28m: “The trust’s financial plan is to incur a revenue deficit of some £23m after receiving a local price modification of £28m and delivering [cost improvement programmes] of £10m.

“The deficit will be supported by loans of £23m from the Department of Health.”

The change to the tariff will have implications for the FT’s local clinical commissioning groups.

Alex Gaw, clinical chair of North Lancashire CCG, said: “We’ll have to discuss the effects of this with NHS England. This was a direct application to Monitor and it’s not clear at the moment how it will work.

“It’s certainly not the case that we’ve got £10m that we didn’t know what to do with.”

A Cumbria CCG spokesman said: “Both CCGs are studying the decision and intend to have further discussions with NHS England.”

North Lancashire CCG posted a surplus of £2m last year, while Cumbria CCG reported a £5m surplus.

Aaron Cummins, UHMB’s director of finance and deputy chief executive, said: “We welcome the announcement by Monitor about the modification to our tariff.

“We particularly welcome the recognition from Monitor that we face a unique challenge in this area – providing healthcare across five sites to a population size which often, in more urban areas, is served by fewer hospitals.

“The price modifications for this year are really good news and shows that there is national recognition and confidence in our plans for the future.

“Our longer term strategy seeks to address the structural issues, meaning the requirements for the local price modification will reduce over time.”

Monitor chief executive David Bennett said: “It is the first time we have used our powers in this way and the new deal will help the trust continue to provide a range of essential services for patients including A&E and surgery.

“There are finite funds available for the NHS and this adjustment will help to share the burden more fairly across the local health economy. However, commissioners and providers need to do more to solve all the financial challenges in the local area.”