Health chiefs agree to clear £327m debts

Improvements to London’s health services will be delayed and some hospital services reshaped as the NHS tries to resolve long standing financial problems.

Under a plan agreed by the capital’s 31 primary care trust [PCT] chief executives, though not yet by their boards, about £327m ($481m) of debt would be wiped from 10 of the capital’s 38 acute trusts that are in severe financial trouble.

To get the money, the hospitals, which include four of the six big trusts in the south east of the capital and two in the north east, will have to demonstrate that they can at least break even in future, according to the London strategic health authority.

This is likely to require big changes to services – potentially even the closure of an accident and emergency department.

The decision to clear the deficits will be seen by some as rewarding failure. It also demonstrates the difficulty in allowing big hospitals with accident and emergency services to fail, in spite of the more market like mechanisms that the government is using in the NHS.

A health authority spokesman said because hospitals were paid according to the numbers of patients they took, some had found themselves “locked in a vicious circle”. If they cut back on services to pay off the accumulated deficits, they then lose money as fewer patients come through the door.

Ann Radmore, chief executive of Wandsworth PCT, who is leading the bail-out proposal, said ensuring that all the capital’s hospitals were financially stable and debt-free was “essential” for the capital’s health services.

The health authority conceded that trusts in surplus would have to put off planned improvements to fund the bail-out. But Paul Baumann, finance director for NHS London, said without action, services in London would suffer. Once the whole capital was financially stable, trusts would have greater leverage to demand better performance from their providers, he said.

Without urgent and dramatic action, the accumulated debt held by the troubled hospitals and one primary care trust was poised to rise from £327m to £579m by 2010-11, the health authority said.

To clear the debts, the PCTs have agreed to forgo 1.3 per cent of their planned 5 per cent budget increases over the next two years and a £304m surplus that was earlier taken from their allowances.

John Appleby, chief economist at the King’s Fund health think-tank, said it was vital that the root causes of the financial problems were tackled if this “once-in-a-lifetime opportunity” was to work.


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