• NHSI presents plans for “transaction funding” to encourage acquisition of “most challenged provider[s]”
  • Number of trusts thought to be targets for acquisition but their legacy debt puts potential suitors off
  • Papers from private meeting in January will not be released until the spring

NHS Improvement and the Treasury have discussed proposals for “transaction funding” to support a new wave of takeovers of underperforming trusts by other organisations, HSJ can reveal.

Agenda papers for the joint finance committee of NHS Improvement, NHS England, the Treasury and the Department of Health and Social Care, released under the Freedom of Information Act, revealed an item presented to the meeting on 22 January.

The paper, titled “proposals for transaction funding to support most challenged provider acquisitions”, was presented by NHS Improvement’s director of mergers and acquisitions Miranda Carter.

NHS Improvement would not give details on which trusts were discussed or how much NHS Improvement was asking for to encourage acquisitions.

The paper indicates that the regulator is looking to embolden another wave of organisational consolidation as trusts face deepening performance and finance problems. 

Central bodies have offered significant cash support to trusts previously to take over smaller neighbours.

HSJ reported last month that Manchester University Foundation Trust is in line for £125m of loans from the DHSC to implement an electronic patient record and reconfigure its emergency departments. The money, which would come via an Independent Trust Financing Facility Loan repayable over 15 years, will also cover some backlog maintenance work and provide liquidity support.

A package of £328m was agreed for Frimley Park Hospital FT in exchange for taking on Heatherwood and Wexham Park Hospitals FT three years ago. The money was intended to cover improvements to the latter’s estate, particularly for emergency and maternity care, £14m in “transaction costs” and £12m for the “working capital normalisation of [Heatherwood’s] balance sheet”.

The DHSC, Monitor and the NHS Trust Development Authority have also previously agreed significant payments to foundation trusts for acquiring all or part of Barnet and Chase Farm Hospitals Trust, South London Healthcare Trust, and Mid Staffordshire FT.

While the takeover of Scarborough and North East Yorkshire Trust by York Teaching Hospital FT was taking place in 2012, York chief executive Patrick Crowley told HSJ the DH had recognised there was a need to mitigated “legacy issues” relating to Scarborough.

HSJ understands there are currently a number of trusts that other organisations will not consider acquiring if they were to become responsible for their historic debts.

A spokeswoman for NHS Improvement said the paper referred to in the agenda would be released in the spring. She added that the Treasury and DHSC officials were not at the meeting, although they were aware of the paper presented.

The NHS has made slow progress in consolidating smaller trusts into larger organisations that central bodies consider more sustainable.

In December 2010 HSJ reported that there were 16 trusts that had no date set for when they would become independent foundation trusts. The FT pipeline project was managed for the Department of Health by Ian Dalton, now chief executive of NHS Improvement.

Of these, only five have been taken over by other organisations. None of the remainder have yet achieved foundation trust status.