The regulator of NHS foundation trusts is urging them to start delivering hospital cost savings earlier in the year in order to reduce their exposure to financial risk.
The advice comes in Monitor's latest quarterly report on the health of the foundation trust sector, which now comprises two-thirds of all NHS secondary care providers running about 1,000 hospitals.
Regular returns to Monitor from 144 foundation trusts in England indicate that 25% were in deficit for the first three months of the financial year 2012-13, compared with only one in 10 in the last quarter of the previous year, 2011-12.
Unlike NHS trusts, which are expected to break even every year, foundation trusts have more freedom to run their own affairs. Monitor assesses their financial health on their performance in the medium term and they are allowed to run a short-term deficit which, from a business perspective, can be an acceptable method of managing their finances, the regulator notes.
However, it adds, the latest report suggests that the current aggregate deficit in the first three months of 2012-13 - of £62 million, which is £10 million more than during the same period last year - reflects poor financial planning by some foundation trusts. If trusts do not plan early enough, they run up an early deficit, only to clear it later in the year when savings plans begin to bite, says Monitor, and it is urging trust boards to take a closer look at the issue and make sure cost savings are delivered earlier in the year.
In its latest review of foundation trusts' annual plans, Monitor finds an increasing number of trusts which are likely to be placed in significant breach of their terms of authorisation for financial reasons over the next few years.
It also highlights a number of small tests with relatively large deficits, and reports that those at the greatest financial risk are among those which are: - based on the traditional district general hospital model; - having to adapt to changing local health economy pressures; and - struggling with unaffordable private finance initiatives (PFIs).
"The sector as a whole continues to demonstrate considerable resilience, but we cannot expect foundation trusts to be immune from the financial pressure spacing all NHS organisations," said Stephen Hay, Monitor's chief operating officer."Small acute trusts are particularly vulnerable, as they are less able to adapt to the current situation and will have to work out how to deliver challenges such as reconfiguration if they are to continue to deliver services efficiently and effectively," he said.
Mr Hay also pointed out that as planned cost savings will remove one-fifth of the sector's cost base by 2015, it is likely that there will need to be a fundamental change in the way services are organised for patients to continue to access the quality care they need.
"Decreasing margins driven by the current economic climate and a focus on cost-saving and efficiency now should give trusts the impetus to explore and drive new ways for reconfiguring services to continue to deliver high-quality healthcare in future," he suggests.
- Meantime, the NHS Confederation has launched a new Hospitals Forum, to provide "a thoughtful, strong and authoritative" voice on the issues facing hospitals and acute services in the immediate and long term.
