Hospitals are bankrupt

Auditors sound alarm bells in Surrey and Sussex cash crisis- the government must hand over millions of pounds to crisis-stricken Surrey and Sussex Healthcare trust to prevent effective bankruptcy, according to its auditors PricewaterhouseCoopers.
The auditors have told the Department of Health that unless the trust receives 'substantial further financial support'- via the DoH and Surrey and Sussex strategic health authority- it will fail to meet its statutory duty to balance the books at the end of its three- year break- even period in March 2006.
The zero- starred trust is over £30m in the red after its spectacular failure to deliver on its financial recovery plan for 2004-05. PwC describes its cash position as 'extremely serious' and warns that 'considering the scale of the financial challenge we do not believe that the trust is capable of achieving break-even by the end of 2005-06 without substantial further financial support.'
The report adds that 'if the trust was to meet all of its obligations up to 31 March 2005 without further support it would have a cash deficit of £36m'.
The auditors' comments were made as part of its public interest report on the trust. Its decision to make the report - which is sent to the health secretary and the SHA as well as the trust board - is a rare step which auditors would only take in dire financial circumstances.
The report reveals that in January the trust board considered delaying staff salary payments to April and withholding 'major sums' owed to the government in the form of pay-as-you-earn, national insurance and superannuation contributions in order to shave off £7.2m from the debt.
The drastic measures were only avoided through a last-minute deal with local primary care trusts, who provided a loan of £4m, and another loan for an undisclosed amount from the SHA.
PwC lists a catalogue of serious errors made by the trust's finance department - including failure to include deficit repayments or adjust assumptions on funding for the consultant contract. This led to board reports that showed the trust had millions of pounds more at its disposal than it actually had in the bank.
The report said the credibility of the trust's financial team and its board as a whole has been damaged, and echoes the recommendations of an earlier independent report commissioned by the SHA by calling for an overhaul of the trust's financial governance. Both chief executive Ken Cunningham and chair Aidan Brown left in February.
Financial troubleshooters Quo Health were sent in by the SHA in February and the company's co-director, Anthony McKeever, is running the trust as acting chief executive.
Mr McKeever told HSJ that he is 'consulting with colleagues on a full financial recovery plan' for 2005-06, which will be presented to the board in May.
He added that he has submitted interim budgets to each department in the meantime, allowing staff to 'focus on working within the realities of the money they've got.'
He said that the trust was recruiting to three senior financial positions to ensure the trust's financial governance is quickly improved.
'I need to get in a set of firm figures that tell me the full scale of the out-turn deficit, and I need firm figures relating to this year's local delivery plan, including the commissioning intention of all the PCTs we work for before I can then take stock of the trust's position and put in measures to improve it' Mr McKeever said. He expects proposals to improve the trust's financial position to be drawn up by the end of the month.
He added that the trust had 'no realistic prospect of breaking even' without additional support by next year, and would be looking to other parts of the health economy to work with the trust on identifying a fix. He said this could include 'selling off property, non-recurrent support or a loan'. He declined to reveal how his proposals would impact on frontline services.

http://www.hsj.co.uk/nav?page=hsj.news.story&resource=2217967