Hospitals could have to make savings of up to 50 percent higher than initially outlined by the government in order to meet guidelines under the NHS reform programme.
Monitor, the independent foundation trust regulator, wrote to health officials around the country to warn them that they might face a “substantial challenge” in trying to meet the coalition’s drive for efficiency.
The regulator suggested hospitals could have to make savings of up to 7 per cent a year to be granted foundation trust status compared to the four percent previously outlined by the Department of Health (DoH).
The government is trying to convert all hospital trusts into foundation trusts by 2014, meaning they would be free from central control. It wants to cut £20bn across the NHS by 2015 and reduce administrative costs in non-front line organisations by 33 percent over the same time period.
There are currently 137 foundation trusts and approximately 85 more NHS hospitals and mental health trusts that will need to make savings in order to be granted the status by the government’s deadline.
David Stout, deputy chief executive of the NHS Confederation, said: “Seven percent in one year would be hard for anyone and the majority of health service costs are based on staffing. With the best will in the world, to take seven per cent out of a cost-base whether you are a hospital, a local authority, or a private company, year-on-year would be challenging.”
While he said that the level of savings required would vary depending on the location of the trust, he said those based in areas that were already struggling would be worst hit by increased calls for efficiency. “It’s not easy and it does mean they will have to provide care in different ways. It is likely to mean changes in the way they provide clinical services – which takes time – and it is likely to mean changes in the way you see services being delivered.”
In the letter, Monitor said it had revised its figures upwards based on the Government’s spending review, inflation expectations set out by the Office of Budget Responsibility and new operating rules within the NHS.
A spokeswoman said: “The changes to the economic environment mean all trusts will need to plan accordingly and some savings will be required. However, we should be clear that these assumptions are a reflection of the risks in the external environment; they are not a directive to make cuts.”
She added: “It is going to be challenging definitely. We are working up a number of options for other trusts that may not be able to meet the deadline and one thing we are considering is merging them with foundation trusts already out there.”
While she said that Monitor would govern quality of care with just as much vigour as they would to hospital’s finances, she said the estimated cut of 7 percent was not the worst case scenario.”In some areas, things could get worse,” she said.
There are approximately 20 trusts around the country that would find it “extremely difficult” to become foundation trusts if they stayed as they are, according to Stout.
Epsom and St Helier University Hospitals NHS Trust, covering hospitals in Suffolk and south London, is one of them. A spokesman for the trust said it would have had to face annual cuts of up to 12.7 percent, or £39.9m off its yearly £313m budget to become a foundation trust in its current form.
“We just couldn’t meet the financial standard being put forward by Monitor,” he said. “We are looking at alternatives for the hospitals, which might mean a demerger and then a remerger with other organisations.”
A spokeswoman for the DoH said: ” Monitor’s assessment of 6-7 per cent is its ‘downside case’, meaning it’s more pessimistic. But it is right that Monitor’s assessments are challenging – we want all hospitals to be able to meet Monitor’s standards and show that they can provide sustainable, high quality and efficient services for their patients.”
A shorter version of this article appeared here in The Independent.
Sarah Morrison 