Bailout delays force trusts to take out extra loans

HSJ has learned of further uncertainty over the timing of payments from the £1.8bn sustainability and transformation fund, which could leave more hospitals struggling to pay suppliers and relying on alternative loan support from the Department of Health.

Many acute trusts are in financial deficit and have reported cash flow problems during 2016-17. In some cases this has led to external suppliers refusing to provide goods or services.

Allocations from the STF, which was introduced to try and bring the provider sector out of deficit this financial year, are paid in four stages to trusts that meet their financial and access targets.

Trusts were originally told that all four STF payments, if earned, would be made before the end of March 2017. However, HSJ has learned that the payment relating to the fourth quarter of 2016-17 will not be made until the next financial year.

An email to one trust, seen by HSJ, said it should not assume the payment relating to the third quarter would be made by the end of year.

This means more trusts will have to seek short term “working capital” from the DH, which typically start with an interest rate of 3.5 per cent. These loan facilities are already being used by trusts with the deepest deficits.

Chris Hopson, chief executive of NHS Providers, said trusts were “told very clearly that quarter three and quarter four STF payments would be made by the end of March”.

He added: “For some, the cash position is sufficiently tight and STF payments sufficiently large that clarity on the detailed STF payment date is vital.

“Trusts tell us that because the DH is unable to guarantee the STF payment date, for the second time this year, trusts are now being told they have to take out loans to cover the possibility that STF payment won’t be paid on time.

“This cannot make sense, incurs unnecessary extra cost and is an unnecessary extra administrative burden.

“Trusts need help and support from the Department of Health and NHS Improvement to deliver a very difficult financial position. This is a great example of where the task is being made more difficult not easier.”

It is unclear exactly how many providers will need these loans as a result of the STF delays. Around 150 are running underlying deficits this year, excluding STF, and a significant proportion of these are likely to require alternative support to pay staff and suppliers.

The size of the quarterly STF payments depends on the size of the trust, but they can be as much as £10m for the largest organisations.

Trusts have been told the loans will be repayable upon receipt of the STF payments.

Another concern for trusts will be the restrictions that have been introduced to limit access to working capital loans, with trusts told in November they could be refused cash even if suppliers are refusing to deal with them due to late payments.

One high profile example was at Shrewsbury and Telford Hospital Trust, where its sandwich supplier withdrew its products.

A DH spokesman said: “We expect the quarter three STF to be paid to providers this financial year. NHS Improvement told providers in February that the quarter four STF would be paid after the year end.

“It has always been very important to have a strong assurance process for STF payments and this has involved requiring all payments to be cleared by the chief executives of NHS England, NHS Improvement, senior officials at the DH and Treasury ministers.”