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, largely 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.