News / Report queries FT impact

The university’s Centre for Health Economics examined the level of surpluses and the reference cost index of 25 trusts that became foundations during 2004/05 (waves 1 to 3) and compared them with non-foundations.

The researchers would have expected the trusts to have higher retained surpluses and lower reference costs once they became a foundation, but said this was not always the case. They argued that financial management had not improved following the award of foundation status.

‘The evidence on the extent to which the potential benefits of foundation trusts have been achieved in practice is not, so far, particularly promising,’ the report said, although it accepted it was early days..

The trusts had a track record of generating surpluses and cost efficiency before they became foundations. ‘Our research suggests that, rather than the foundation trust policy suddenly having brought about a change in behaviour, there seem to be longstanding differential trends between these different groups of trusts [foundations and non-foundations]. The foundation trust policy per se has not made a significant difference to their financial management.’

The report said foundations in the first three waves had produced higher surpluses than non-foundations in the years up to 2004/05 but, like most other trusts, they experienced a decline in their financial fortunes in 2004/05.

Wave 1 foundations’ financial position was worse than the non-foundations, with deficits of 0.2% of total expenditure compared with about 0.14% in all non-foundations. Wave 2 foundations had deficits of 0.05% of their expenditure, while wave 3 were in balance.

Monitor said foundations continued to show improved financial performance. It added the York report had used limited data and looked only at financial performance in 2004/05.