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Failure regime looms as trust faces bankruptcy


Health secretary Andrew Lansley has begun the process of placing an NHS trust in administration for the first time, which would effectively declare it bankrupt.

He has begun the legal process of applying a “failure regime” to South London Healthcare Trust – the first time the power has been used by the Department of Health.

This would see all board directors suspended and a “trust special administrator” sent in.

Once the administrator has made their report on South London Healthcare Trust, the health secretary can consult on dissolving the organisation and transferring staff to other bodies, or closing services.

The process could see a decision made and presented to Parliament in October.

The three-site acute trust recorded a £65m deficit in 2011-12, partially as a result of a private finance initiative used to rebuild two of its hospitals. Its chief executive Chris Streather announced his departure two weeks ago.

The trust was formed in 2009 through a merger of the Princess Royal University Hospital in Orpington, Queen Mary’s Hospital in Sidcup, and the Queen Elizabeth Hospital in Woolwich.

This is the first time a health secretary has begun the process of using the DH’s failure regime powers (see below for details of the process).

The letter to Dr Streather from Mr Lansley said he recognised that not all of the trust‘s problems were of its own making.

Mr Lansley added: “Nonetheless, there must be a point when these problems, however they have arisen, are tackled. I believe we are almost at this point.

“I have sought to provide NHS organisations with the help and support they need to provide high-quality, sustainable services to their patients, which South London Healthcare Trust stands to benefit from.

“However, even after this support has been provided, your organisation still expects to be in need of significant financial resources from other parts of the NHS and I cannot permit this to continue. That is why I am considering using these powers.

“I appreciate that any decision to use these powers will be unsettling for staff, but I want to stress that the powers are being considered now so that patients in south east London have hospital services that have a sustainable future.”

A DH source said the move would be a “difficult and controversial process”, but should signal to other trusts “that they cannot continue to provide poor services or rely on bailouts from other parts of the NHS”.

Royal College of Nursing chief executive and general secretary Peter Carter said: “The current situation presents a worrying state of affairs for both patients and staff at South London Healthcare Trust. The trust has been facing financial challenges for quite some time under the burden of PFI contracts. Despite this, staff have continued to do their best for patients, providing high levels of care.

“Nevertheless, the current issues must be addressed as a matter of urgency as the trust simply cannot continue to run at such a large deficit. If alternative methods of service delivery are to be considered, it is essential that patients, staff and the public are closely involved in the consultation process and that high levels of care continue to be maintained.”

Unison called on the government to ensure the trust was given the means to re-negotiate or end its PFI deal, warning that other trusts were facing similar financial difficulties.

Christina McAnea, the union’s head of health, said: “South London Healthcare Trust is not the first and won’t be the last to be burdened with rip-off PFI deals. Instead of putting the trust into ‘administration’ the government should prioritise renegotiating or ending this PFI deal.”

The failure regime process

After consulting the trust, strategic health authority and commissioners - which Andrew Lansley did on Monday tonight - he can make an order appointing the trust special administrator.

This has to be laid before Parliament before it breaks up for the summer. The administrator will take up their post within five days of the order.

Within 45 working days the administrator must produce and publish a report for the minister to lay before Parliament.

There is then a month-long consultation before the final report is presented to the minister and Parliament.

Within 20 days of that the minister must make a decision and publish it.


Readers' comments (17)

  • tinkerbell

    this may also fit in very nicely with selling off 5.2 billion of NHS land being proposed by this unelected government.

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  • Will this open up the floodgates to futher rationing of healthcare?

    or will it provide greater efficiency in the financial management of the NHS to the benefit of providing all patients with high quality care to meet all their clinical needs.

    “Six other NHS trusts at risk of 'bankruptcy'
    Six other NHS trusts face joining South London Healthcare in "administration" as they have taken on projects viewed by ministers as "unsustainable", it has emerged.

    Now it has emerged that up to 22 NHS trusts are facing serious financial difficulties because of expensive PFI schemes, with six thought to have taken on projects viewed by ministers as "unsustainable". Photo: GETTY

    By Richard Alleyne
    10:26AM BST 26 Jun 2012”

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  • Let us brace ourselves for the final nail in the coffin of Queen Mary's Hospital, Sidcup. This has been on the agenda since the beginning of the 'discussions' about its future, and the removal of the greater part of its services. As 'tinkerbell' points out in the first comment, no doubt the enviable position adjacent to the park gives the land an attractive price tag.! However many people who have visited the hospital for any reason in the last couple of years will tell you how friendly, kind and helpful the staff are, and what a pleasant, clean and efficiently run hospital it is. What a terrible shame!

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  • A pilot scheme for dismantling a trust, another interesting concept to consider for the future of the NHS. They will hire or sell to the private sector and use it for negotiations as a template for other trusts.

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  • Please get real and realise that no business can continually run at a loss and expect to remain. This would apply equally to public or private services and the 'rip off PFI scheme' referred to by the Union rep. was presumably legally agreed by those running the trust. Again you are all looking to blame the private sector, rather than poor hospital management.

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  • bet the tosser lansley is rubbing his hands with glee!!!

    see he says to the public "the nhs is crumbling but its ok I am privatising it so my rich friends can make some more money"

    the private companies will be circling like vultures

    first of many just what this con-unelected govt want all public services privatised esp the nhs...tip of the iceberg...all you who work for the nhs and voted in these morons, hope you can sleep at night!!!!

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  • I feel very sad. The Queen Elizabeth replaced the Brook Hospital, Woolwich,where I trained from 1975-1978. I totally despair on what has happened to the Health Service. I remember nursing being fun, enjoyable and fulfilling.No longer I think. The burn-out rate must be phenomenal now for young recruits. At 56, i have decided to take my pension and run. Still working in the private sector, with no pay rise. Now on the other side of the fence, I have no sympathy at all with the doctors' plea for better pension

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  • PFI deals were a rip off, effectively the trusts were taking out mortgages at ridiculous repayment rates (£61 million a year); however they didn't have to take part. They were bad management decisions based on misleading information from the government of the day, who offered them as a panacea for all of the NHS ills.

    They need to move away from the business model being currently touted in all NHS trusts, they are not 'for profit' organisations, break even is the best they can hope for.

    A private company has to make a profit to provide it's shareholders with their dividend, for an NHS trust they need to provide a good service for their shareholders, the general public. I would even go as far as to say whatever the cost. If we can pay millions to bail out Greece and other countries, pay out millions for capital boats and ships for the Royal Navy, then I am sure we can afford to support the NHS.

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  • If staff are made redundant will they get any redundancy pay?

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  • There will be more of this in the future - the PFI deals where always a financial disaster in the making.

    its only a matter of time before staff will be required to sell a kidney as part of their contract of employment in an effort to keep these hospitals financially viable.

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