FINANCE: Shrewsbury and Telford Hospital Trust risks a £5m deficit unless it overperforms on contracted activity, treats more private patients and reduces pay costs.

The trust has recently signed the contract for the 2011-12 financial year with its two local primary care trusts. In doing so this contract allows for increased activity to deliver improved waiting list performance and reduce the numbers of patients awaiting treatment. The PCTs estimate the value of this activity to be worth £3m.

The trust believes that the level that will actually be delivered in the year amounts to £5.7m. Agreement has been reached with the PCTs that funding amounting to £1.5m will be made available in respect of the PCTs’ estimated activity levels and that full tariff will be paid for activity that exceeds those levels.

The trust expects to receive income in the 2011-12 in respect of waiting list activity amounting to £4.2m.

The marginal cost of the activity performed is estimated to amount to £1.974m. This then enables the trust to receive excess funds amounting to £2.2m, to support the cost of increased capacity that has been introduced within the trust to address waiting list problems.

If it does not deliver sufficient activity or increase private patient income by £250,000, income will be reduced. Added to failures to reduce pay spend, this carries a “worst case” risk of a £5.2m overspend by the end of 2011-12.