News / Financially challenged trusts agree debt settlements

04 June 2008

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The 17 trusts were identified by the Department of Health following the abolition of resource accounting and budgeting for trusts in March 2007 (initially there were 18 but Good Hope Hospital NHS Trust was acquired by Heart of England NHS Foundation Trust).

Under the old system, trusts in deficit were offered brokerage from other parts of the system, but this has been replaced with a system of loans from the Department. However, 17 trusts were labelled ‘financially-challenged’ as they could not be given a loan because they could not meet the repayments or they could only repay the loan over an excessively long period of time.

The Department ordered the trusts’ strategic health authorities to find solutions without compromising patient care and it is understood the Department has now signed off agreements in the South West, West Midlands and South East Coast. In many cases the repayments will be made largely with funds provided by parts of the local health economy, with the balance to be repaid from surpluses generated by the financially-challenged trusts over the next three to five years.

NHS South West has resolved the issues at four financially-challenged trusts. The solutions vary from trust to trust, but it is understood that in general primary care trusts will provide the trusts with additional non payment by results income, while the trusts will generate surpluses through greater efficiency. The funds raised will be used to pay off debt.

The Royal Cornwall Hospitals NHS Trust will pay off its £56m debt over the next five years, with 1% of its £776m budget in 2008/09 earmarked for repayments. The trust, which made a £1.3m surplus in 2007/08, will top up the repayments from efficiency savings.

SHA director of finance Bill Shields was delighted with the news. ‘Achieving this balance frees NHS organisations from the chains of historic and inherited debt to focus on delivering top quality healthcare to patients, while using their new financial freedoms and responsibilities to drive forward improvements in areas that matter most to patients, like cleanliness and shorter waiting times,’ he said.

Surrey and Sussex Healthcare NHS Trust will repay its long-term loan of £56m (which was due to be repaid over 25 years) within three years, using surpluses and £34m from the local health economy.

London, where there are seven financially-challenged trusts, has the biggest group of trusts still to find an agreement. An NHS London spokesman said: ‘All the trusts have submitted plans to us on how they will repay their historic debt and we are going through those now to ensure they can be repaid without having to cut services.’

It is understood discussions are ongoing to resolve the issues at Hinchingbrooke Health Care and Mid Yorkshire Hospitals trusts.

The Department of Health said it did not know how many deals had been struck, as the work had been delegated to SHAs. However, a spokesman added more financially-challenged trusts could soon be named. ‘We are currently collecting the information through the financial returns. We will know within weeks and will make an announcement in due course.’