Hospitals must cut services to stay afloat, watchdog quango warns

Hospitals will have to reduce services, sell off buildings and move into smaller premises to cope with financial pressures in the next few years, the head of the foundation trusts’ regulatory body has warned.

Accident and emergency departments treating only a few serious cases may be downgraded to minor injury units

William Moyes, who steps down from his role as executive chairman of Monitor after six years told The Times that too many hospitals were not grasping the economic challenges ahead.

While political parties have promised to protect NHS funding and avoid service cuts, Mr Moyes said it was inevitable that some hospitals would have to reduce services and sell off assets to keep afloat.

Any hospital department that was treating too few patients to cover its costs risked compromising the quality of care, he said. Some maternity and paediatric units, which are very costly to run, might be merged or relocated, while A&E; departments could be downgraded to minor injury units if they had a small number of serious cases that could be sent elsewhere.

“People need to know where they are making money or losing money. If you find a service where the income can’t cover the cost, you may eventually have to question whether the income is ever going to be sufficient, and whether this is in fact the wrong activity for the hospital.

“In quite a lot of places the number of births is too small to support the cost of giving a high-quality service. You have three choices: increase the flow of patients, move the service elsewhere or stay as you are and risk compromising the care.”

Mr Moyes, who oversees the regulation of finances and governance of England’s 125 flagship foundation trusts, said that as well as focusing on core departments, trusts would need to consider stripping out “uneconomic” facilities such as pathology laboratories and scanning units in some hospitals that were being used for very small numbers of patients.

“There may be surplus assets — buildings, land, equipment, stuff they think they might need in years to come under their development plans — and in some cases working in a much smaller physical space and disposing of all the hospital penumbra that can be brought into the main building.”

Mr Moyes said he had requested that foundation trust chief executives resubmit a “downside assessment” — stripping back their budgets — to get a more realistic grasp of the funding pressures they faced. He said that he was disappointed when, on being asked to revise their financial predictions in September, a number of trusts had resubmitted even more rosetinted forecasts of growth.

“You can’t assume everything will go well and if a problem arises the Department of Health will bail you out,” he said.

His warnings were echoed yesterday by Sir David Nicholson, the chief executive of the NHS, who described the coming years as “extremely challenging”. Giving evidence to the Commons Health Select Committee, Sir David warned of pay cuts and service reorganisation. “It is going to be very tough,” he said, adding that tighter budgets would mean the 1 per cent pay cap demanded by the Treasury would be treated by NHS managers as a maximum rise, not an entitlement. His comments came a day after inflation hit 2.9 per cent when unions are already angry over a pay freeze on council workers.

“There is essentially a trade-off between pay and numbers of jobs,” he told the committee. “In a cash-limited system, that is the big unknown for us. We need to talk through with the trade unions and staff associations about what that trade-off is.”

Sir David has previously warned that the NHS would have to find productivity and efficiency savings of between £15 billion and £20 billion over the three years 2011-12 to 2013-14.

The head of the Audit Commission added to the debate, saying that political pledges to safeguard spending on health and education were “insane”.

Steve Bundred told the Commons public administration committee that billions would have to be saved. “It seems to me absurd to imagine that the only services where no efficiencies can be found are those that have been the most generously funded for ten years,” he said.

Mr Moyes said he thought that an “unintended benefit” of future economic turbulence would be to heighten hospitals’ understanding that they had to operate with a robust business model.

“A lot of hospitals, even the very good ones, are at the stage of learning how to think long-term,” he said. “We are good at strong visions, big pictures, but we need to learn to be very good at pessimism and what will happen if things are not going to turn out well.”

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