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Hospital trust sector deficit could breach £750m this year

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The NHS acute sector is expecting to record a net deficit in excess of £750m for the current financial year, exclusive research carried out by LGC’s sister title Health Service Journal shows.

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The findings are based on the latest available figures from all but six of England’s 140 hospital trusts. They have prompted warnings that financial problems facing the sector are no longer confined to a few poor performers, instead appearing to be “systemic”.

Nearly half the sector (66 trusts) is currently planning or forecasting a deficit for 2014-15. The gross deficit projected by those organisations is £940m. In contrast, the gross surplus projected by the 68 trusts planning to finish the year in the black is just £167m.

This would mean an overall deficit of £773m for the acute sector - a steep decline on the already grim financial circumstances of the last financial year, in which the sector recorded a net deficit of £421m.

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Financial problems are spread across the country’s hospital trusts, with an overall deficit expected in a large majority of health economies.

This analysis provides the most comprehensive picture to date of the scale of the financial challenge facing the NHS this year.

It comes after HSJ reported signs the commissioning system is also under increasing strain, with NHS England unable to confirm plans to balance its £97bn budget until three months into the financial year.

NHS finance experts said the latest figures add weight to the prospect that the health service will need a bailout in 2014-15.

Health Foundation chief economist Anita Charlesworth said last year’s drive to increase nursing staff in the wake of the Francis report was a major driver of declining acute trust finances. She told HSJ: “We are seeing a rapid deterioration of finances as a result of fundamental underlying factors.

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“Many trusts started recruiting more nurses last autumn so they are going to see the full year costs for the first time in 2014-15. The concern is that the [national] strategy has been focused on a small number of providers and there is no plan from the [NHS Trust Development Authority] and Monitor [for] the whole sector having a generalised financial problem.”

Ms Charlesworth added that the sector was seeing a shift to “a more systemic problem” and that it was “looking more and more likely by the day” that the NHS would need additional funding this financial year.

King’s Fund policy director Richard Murray agreed it was “increasingly likely that the NHS will need more money in the year 2014-15” and the problem now looked “systemic” rather than “a few badly managed trusts”.

He said: “The remaining ray of hope will be for some big underspends in mental and community trusts or from commissioners. But commissioners’ position deteriorated in 2013-14 too and the pressure on mental health is well known. Without a large underspend somewhere else in the NHS, we are in bailout territory.”

Barts Health Trust in London is expecting the largest cash terms deficit in 2014-15 of £44.8m, which would be a slight improvement on the £48m deficit it posted last year.

However, some trusts among those projecting the largest deficits (see table, below) expect their financial positions to substantially worsen. Two - Leeds Teaching Hospitals Trust and South Tees Hospitals Foundation Trust - expect their bottom line to deteriorate by more than £40m this year.

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Trusts forecasting the biggest deficits cited a number of reasons including the recruitment of extra nurses, agency staffing costs, work undertaken without full remuneration from commissioners, and - in some cases - the costs of hospitals built under the private finance initiative.

Imperial College Healthcare Trust is forecasting a surplus of £11.2m, the largest across the sector, although this is £3.9m lower than the £15.1m surplus it recorded in 2013-14.

The TDA said it would publish official financial projections for the non-FT sector next month, and anticipated fewer trusts would be in deficit this year compared to 2013-14.

A Monitor spokesman said the FT sector overall expected to deliver a small surplus in 2014-15, with 41 FTs planning deficits compared to 40 in deficit last year. He added: “The overall number of [FTs] in deficit is not as significant for the financial health of the sector as the trend for increasing numbers of [FTs] to deliver [decreasing] small surpluses. This means they have less to reinvest in further improving patient care.”

A Department of Health spokeswoman said it understood “some trusts are facing challenges because of increasing demand” but “they must have a tight financial grip and ensure they live within their means”.

Labour shadow public health minister Luciana Berger said: “These figures are confirmation that the Government has lost control of NHS finances.

“When the NHS should have been focused on the financial challenge, it was distracted by a pointless reorganisation which… put finances on a knife-edge.”


Deficit trust responses

University Hospitals of Leicester Trust chief executive John Adler said: “[Our deficit] was caused by two principal factors - not receiving some anticipated income from commissioners and increases in costs. The single largest cost increase was additional nurses in order to ensure safe staffing levels on our wards.”

North Bristol Trust chief executive Andrea Young said: “Our private finance initiative repayments remain seven percent of our annual turnover. This is affordable and represents good value for money.
“Unfortunately the deficit is higher than expected mainly due to costs associated with the move into the new hospital and the loss of income as a result of service transfers across the Bristol health community.
“We are confident that we will be able to identify the savings required to return us back to an annual surplus.”

A Leeds Teaching Hospitals Trust spokesman said: “We are currently forecasting a deficit of £42m but continue to seek an improvement to that position during the year. The NHS Trust Development Authority is working with us on our recovery plan to ensure the trust’s finances and performance are put on a sustainable long-term footing.

“Last year we achieved financial balance based on significant amounts of non-recurrent income and savings.”

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