As reported by HSJ earlier this week Mark Davies has now been confirmed as interim chief executive at Imperial College Healthcare Trust.

The current head of provider development at NHS London is due to take over on May 16.

HSJ understands the trust is due to declare it cannot submit a balanced operating plan for this financial year. 

Imperial, which has an annual turnover of £910m, saw two directors and chief executive Steve Smith announce their departure last week.

Professor Smith is due to step down in September.

Mr Davies was part of the team that created Imperial in 2007, merging Hammersmith Hospitals and St Mary’s Hospital Trust with the faculty of medicine of Imperial College London.

He was at one point the youngest NHS chief executive in the country and was also a senior responsible officer of the merger of three trusts to form South London Healthcare Trust in 2009.

HSJ has been told that senior clinicians at Imperial had pressed for Mr Davies’ appointment.

In a statement released on Wednesday he said: “I am really looking forward to re-joining Imperial College Healthcare NHS Trust and to leading the organisation through this time of change. The Trust has developed at great pace under Professor Smith’s leadership and I will relish the opportunity of working with staff to take the trust into its next phase of development.”

As a consultant with Coalescence Consulting and a competitive endurance rider he took clinicians from Imperial on the company’s “Horse Leadership Programme” during the creation of the Academic Health Science Centre, which uses “horses to hone communication and leadership skills, balanced with focused meeting time.”

Imperial’s chair Lord Tugendhat said: “Mark Davies has already contributed a great deal to the early days of Imperial College Healthcare NHS Trust from his involvement in the merger of two predecessor trusts. Therefore, I am delighted to welcome him back to the Trust. The detailed organisational knowledge and his thorough understanding of all levels in the NHS will prove invaluable in enabling him to pick up the reins quickly in his new leadership role”.

The trust is facing a £40m gap between income and expenditure. Since last Tuesday it has seen the resignation of chief executive Steve Smith and chief financial officer Tony Graff, while chief information officer Alistair Shearin announced his retirement. The posts of commercial and strategy directors remain vacant.

The trust had to enter mediation with its main commissioners in north west London over service level agreements for 2011-12.

In his most recent chief executive’s report to the board, Professor Smith said the trust faced losing £40m from its service level agreement “due to tariff, volume and funding withdrawals”, but planned to reduce this shortfall by £6.8m through increasing volume in some treatment areas.

HSJ understands consultancy Ernst & Young has been brought in to help the trust tackle its problems.

Cymbeline Moore, head of public relations at Imperial, said: “The financial environment faced by acute trusts is extremely tough. The size and scale of cost reduction plans that large research-based trusts are being asked to make is very challenging. As with many of our counterparts, we are in ongoing constructive discussions with NHS London regarding our financial plans. We can confirm we are not in turnaround nor classed as a challenged trust.”

The significant problems faced by Imperial will raise questions about the ability of trusts in financial difficulty to achieve the government’s 2014 deadline for gaining foundation status.

Last November the trust wrote to health secretary Andrew Lansley about its progress towards foundation status, telling him it hoped authorisation would be achieved in December 2011, to come into effect in April 2012. But this month it pushed back the probable authorisation date to April 2013.

The trust’s tripartite formal agreement document, which outlines its foundation trust status bid, says current financial pressures will add to an underlying deficit brought forward to 2011-12. The trust also has a cost improvement programme target of 15 per cent of controllable costs. The document states that: “A maximum of £70m is potentially achievable [from the savings programme], leaving an unidentified gap of £40m”.

A spokesman for NHS London said: “There are always robust discussions at this time of year regarding hospital budgets.  NHS trusts must agree their budgets and we are working closely with commissioners and providers of NHS care in London to make sure that their plans are credible and can be delivered.

“Imperial, like the whole of the NHS, is committed to managing constrained levels of funding, and using its budget more efficiently to meet demand for better services. The NHS in London is working hard to do this, while at the same time radically slimming down its management structures and managing the process of fundamental reform of the system.”

The executive departures will create further difficulties for the governance of the trust and its bid for foundation trust status as most of its non-executive directors’ terms of office expire during the period of preparation for the bid. The board paper said the August 2012 date to apply for foundation trust status was “provisional”.

The document also said the Department of Health should consider “alternative organisational form options” for the trust.

HSJ understands plans have been discussed to merge Imperial with the Royal Brompton and Harefield Foundation Trust and also possibly with Chelsea and Westminster Foundation Trust, something RBHFT deny.

A trust spokeswoman said;”While Imperial College is our closest academic associate and Imperial NHS Trust remains our key academic health science system partner, at no stage have discussions taken place about a merger of our two trusts. “

The trust has hospitals on five sites: Charing Cross Hospital, Hammersmith Hospital, Queen Charlotte’s & Chelsea Hospital, St Mary’s Hospital and the Western Eye Hospital. It was formed in October 2007 by the merger of Mary’s NHS Trust, Hammersmith Hospitals NHS Trust and the faculty of medicine at Imperial College London.

The problems at Imperial will raise questions about the viability of services in London, particularly after Mr Lansley last year halted a major service reconfiguration sparked by Lord Darzi’s Healthcare for London review. Lord Darzi is head of the surgery division at Imperial College London.

Professor Smith last month reported “high-level” talks had already taken place with RBH and senior sources in London said any deal to bail out Imperial must include a plan to consolidate Imperial’s estate.

The Independent Reconfiguration Panel today reported it had offered informal advice on reconfiguration in west London but gave no further information.

The trust formed one of the first academic health science centres in 2009, aimed at promoting and researching world-class healthcare, and has championed clinical leadership.

The trust is awaiting to hear whether the Department of Health will renew a contract that funds the academic health science centre’s biomedical research centre. If it fails to renew its contract, the trust stands to lose £225m in addition to “significant reputational damage” to the academic health science centre, according to November papers. The DH is due to announce its decision in July.

In performance terms Imperial hit its accident and emergency targets for 2010-11 but was having to put a recovery plan in place for trauma and orthopaedics procedures which have seen large backlogs.

The trust reported underperformance against the 18-weeks target and was sending new oral surgical patients to Barts and the London Trust in east London.

The chief executive’s report added the trust was “currently in discussion with north west London trusts to take breaching patients. Due to the backlog volumes it is likely that the trust will continue to under-perform against the 18 week target in these areas until the recovery plans achieve impact.”

The MRSA target of 13 or less has also been breached for 2010/11, with the trust reporting 18 cases to its March board meeting.