Robert Greene and Paul Ray on foundation finances

Patient choice presents particular challenges for foundation trusts, so good revenue forecasting is needed, say Robert Greene and Paul Ray

Patient choice is upon us and for foundation trusts its implications are huge as they are engaged in a battle to attract patients and revenues. Trusts and external advisers must learn to marry the continuing complexities of NHS financing with new commercial thinking.

Although foundation trusts can borrow from banks, the facilities to date have mainly consisted of overdraft arrangements, with limited long-term borrowing for projects largely due to the absence of a clear insolvency regime for foundations.

Banks can provide standard facilities, such as property loans, but more innovative arrangements are likely to prove compelling. Examples include:

• Bridging facilities for relocation - a foundation trust in a residential area might look to sell the land for its redevelopment value and move to a greenfield or brownfield site.
• Car parks - could be sold to a bank for a period of five years (with an option to sell back to the trust) in return for an upfront capital payment. The bank would then employ a car-park operator.
• Finance leasing - instead of equipment items funded wholly from a trust's cash resources at purchase, payments can be phased over the item's lifetime.
• If money follows the patient, it is vital to understand the rationale for any particular revenue forecast - what predictions of future patient levels are based on. If you are competing with other trusts and their predicted demands, what are you competing on? It will not be price. Quality, speed, convenience and customer care might all play a part, but it is important to know what others are competing on. What are their-long term strengths?

There is a lot of talk about building brands. In reality, few organisations - mostly specialist trusts such as Moorfields Eye Hospital foundation trust and Great Ormond Street Hospital for Children trust - have national brands, but there can be strong local reputations. An organisation's brand is important to patients making decisions with little clinical understanding.

Take an example from the retail sector. Even there, few high-street customers know anything about making clothes or what quality criteria might be. They look to brands they have confidence in.

Brands are important, but it can be misleading to think of the relationship as a direct one with a customer. The NHS has a huge range of other organisations that broker information for patients, most of which are charities.

If all the trusts in a particular area are basing forecasts on increasing their market share, it stands to reason that some will fall short. How much do you know about the strategic plans of other organisations and how they gel with, or disrupt, yours?

There is sometimes a rather stereotypical view of competition in the commercial world. However, competition does not prevent companies from talking to each other; they tend to put a lot of effort into exchanging information and sometimes working towards common goals.

One of the major challenges for NHS organisations will be adopting a mature attitude to the balance between competition and collaboration.

Robert Greene is head of public sector at Royal Bank of Scotland and Paul Ray is finance partner at law firm Browne Jacobson. The companies are sponsors of the HSJ Masterclass scheduled for Masy 2007, a training seminar for improving board performance aimed at executive and non-executive directors.