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Thursday, 24 July 2014

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Will hospitals takeover solve the cash crisis?

In the words of their own chief executive, North Cumbria’s hospitals are in the midst of a ‘financial crisis’. The realisation that they are £1.3m short of October’s projections is the latest shock – prompting a raft of urgent cost-cutting measures.

Dr Neil Goodwin, who runs the Cumberland Infirmary and West Cumberland Hospital, admits they are now looking at closing wards, reducing temporary staff and management costs, as well as making operating theatres more efficient and cost-effective.

This news comes against a backdrop of long-running financial problems for the North Cumbria University Hospitals NHS Trust, which this year alone is struggling to make the £15.2m savings it needs to meet national targets and take a chunk out of its historic debt.

Its only hope now seems to be a much-hyped takeover by another NHS organisation. The two trusts in the bidding both promise a bright future for healthcare in Carlisle and Whitehaven, insisting they can get it right where others have failed.

But recent comments by Dr Goodwin, who was appointed interim chief executive to lead the trust through the complex takeover process, suggest he has his own reservations about whether this acquisition will truly resolve the problems in North Cumbria.

Whoever takes over is ultimately going to be left with the same scenario – running two acute general hospitals an hour apart within ever-tightening budget constraints.

Warning of deeper problems within the local health service, Dr Goodwin has said he is “not convinced the trust can provide services within NHS tariff prices for two sites 40 miles apart”. Add to that the fact one of those hospitals – Carlisle’s flagship PFI infirmary building – comes with hefty annual mortgage repayments and you hear further alarm bells sounding.

With those two constants in mind, the question of whether a takeover will really solve the area’s wider financial problems appears to be a valid one. But before we can even start to answer that we first need to explore the true scale of the crisis, and how it came about.

The trust’s current financial position is that it must find a total of £15.2m savings – 7.3 per cent of its annual turnover – this financial year to achieve its target £1m surplus.

This combines the Government’s required four per cent efficiency savings (£8.3m), plus extra to help offset wider funding pressures and get it in better shape for the future.

Debt-wise, the trust has to pay back three Department of Health loans totalling £9.4m at a rate of about £1m a year – hence its need to generate a surplus.

It also has issues with income. Due to wider changes in the way health is provided in Cumbria – everything from reduced length of stay due to medical advances in areas such as cataract and joint replacement surgery to developments that are seeing more people treated in their local community or at home, rather than in hospital – the amount paid to the trust from the county’s allocated NHS pot is gradually reducing year-on-year.

The hospitals therefore have to learn to live within their new means, but exactly how much that should be has been an issue. Disagreements between how much trust bosses think the hospitals should be paid for the services they provide and how much NHS Cumbria feels it should be shelling out have caused ructions in recent years, with regional health bosses having to step in to mediate at stages.

This financial year the contract is worth £162.9m, reducing from £172.7m in 2010/11. But to help the trust offset this initial impact, it is also getting extra funding support from the regional Strategic Health Authority (SHA) to ensure it still breaks even. This additional cash was £20.6m last year, reducing to £17.4m this year.

However after this bedding-in period, the trust must be ready to go it alone – hence its need for savings above the national requirement. But finding this level of savings is proving the real challenge. Last year the trust only managed to deliver £13m of a £21m savings plan and this year it is again overspent against projected budgets.

Before standing down in June, former chief executive Carole Heatly announced that because of spiralling financial pressures North Cumbria would not meet Government criteria to become a Foundation Trust by the 2014 deadline. Instead it would have to be taken over by an existing FT.

She cited the additional costs of running two hospitals, including one PFI, in a low-populated rural area, growing national pressures and reducing incomes as the reasons.

But her successor Dr Goodwin has blamed the failings of previous regimes, saying they did not take the steps needed to avoid the current crisis. If they had acted faster he believes acquisition could have been avoided. “If the trust had got its financial act together two years ago and begun to address these financial inefficiencies it could have been a standalone foundation trust.”

However, is a new leader blaming previous management surprising? Ms Heatly had always insisted that they were heading in the right direction, just not quickly enough for the Government. She also said repeatedly that she would not put patient care under threat for the sake of cost-cutting – something hospital campaigners fear is now a real risk.

Whatever the reasons for the current scenario, it now looks as though acquisition is the only option and those doing the bidding – Northumbria Healthcare on one hand and an alliance between the Cumbria Partnership and Newcastle Hospitals on the other – have slightly different ideas about how they can bring financial calm to North Cumbria.

Northumbria’s Jim Mackey says his trust is already adept at providing hospital services across a wide rural area, while at the same time balancing the books. He believes North Cumbria is natural extension of their existing patch, and says that being part of a much bigger trust will bring many savings to hospitals in Carlisle and Whitehaven.

Stephen Dalton at the Cumbria Partnership has a different approach. Already responsible for the county’s community healthcare, he says this is a “once in a lifetime” chance to bring all of north Cumbria’s health services under the same umbrella. By doing this, it will help rid the area of what he calls “perverse financial incentives” that see different trusts fighting against each other for money instead of putting patients first. His trust’s partnership with Newcastle adds an extra dimension in terms of expertise, but decisions would be made in county.

But for either bidder to be successful, Carlisle’s MP John Stevenson believes the Department of Health needs to wipe the slate clean in order to give them a fighting chance. “I have previously gone on record saying that the outstanding debt should be written off by the SHA. We need to give North Cumbria the best possible chance of a bright future. That will be down to the new trust and how it manages our resources – but they need the best possible start.”

The Conservative MP believes that much like in business, being part of a larger organisation will help make backroom and management savings not currently possible.

But Copeland’s Labour MP, Jamie Reed, has a slightly different idea. Yes he wants a Government bail out, but is not keen on the idea of a permanent takeover.

Instead he would like to see the current trust partnered with one of the bidders for a few years to learn best practice, then be allowed to push on to become a FT in its own right.

He says this already happens to a lesser degree – citing breast screening services, now overseen by experts in Newcastle – as an example. “The trust has made the fundamentally wrong decision in asking to be taken over, although this was done in indecent haste because of the deadlines within the government’s new NHS Bill,” he adds.

But with the takeover process already underway, why are the current board are so intent on pushing through savings now? Will it not be up to the new trust to find solutions?

Apparently not. In order for the bidders to want to acquire the hospitals, they must be in as good a financial shape as possible. One NHS manager said it’s a bit like buying an expensive house – no matter how good the property looks, you wouldn’t buy it without carrying out a detailed survey to determine what work needs done. They need to minimise risk.

It is for that reason that the recent £1.3m overspend has caused such alarm. Bosses are now looking at how to make further urgent savings, while the trust is one of four nationally that the Government plans to help tackle spiralling PFI costs.

Sean Gibson, of health union Unison, believes there are ways for the current trust to become more efficient without hitting patient care or making people redundant – but accuses current and past bosses of failing to listen to the ideas of staff and unions.

“Bail-out is a short-term solution, what it needs to be followed up with is a long-term economic strategy, drawn up in partnership with the unions.

“We have repeatedly come up with ideas but it’s almost as if when it comes from the unions, it’s dismissed out of hand. We don’t want a sticking plaster, we want a real solution,” he says.

He also warned that by inviting acquisition, the trust is also opening itself up to a potential private takeover. Mr Gibson cites Hinchingbrooke – which last week became the first NHS hospital to be taken over by a private firm – as a warning bell. “Sometimes you need to be careful what you wish for, it could come true,” he adds.

Is that scenario possible? In short yes, though currently very unlikely. As a bigger trust, north Cumbria is a far more attractive option to NHS bidders than Hinchingbrooke. However, were both of the current bidders to pull out or be rejected, the trust would have to again weigh up its options. That is when a private bidder could potentially emerge.

But Caroline Griffiths, the trust’s director of acquisition, stresses that this is not something they anticipate.

“If a preferred acquirer is not identified there could be a number of options available to us. However, I am confident that we will be in a position to move forward as the trust provides a wide range of excellent services.

“In other areas where an NHS acquirer has not been identified, the trust concerned has had to open up the process to non-NHS organisations but I am hopeful that we won’t need to consider this option in Cumbria.”



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