A vital component of a successful health service is that everybody wherever they live should have ready access to a high standard of care through a network of acute hospitals that are subject to strong clinical and financial governance. The Department of Health (the Department) sees self-governing foundation status as necessary if hospitals are to succeed in a financially demanding environment. Becoming a foundation trust requires strong governance, long-term financial viability, and a framework to secure delivery of quality services. NHS foundation trusts were first created in 2004 and, between then and the end of September 2011, 139 NHS trusts attained foundation status. The Government intends that the majority of the remaining 113 NHS trusts will become foundation trusts by April 2014. It is already clear that this will be extremely difficult to achieve.
The challenges facing those hospitals which have still to attain foundation status are more severe than previously thought. Four out of five now face financial difficulties; 78% say they have to tackle strategic issues; two thirds acknowledge they have performance and quality challenges and nearly 40% say they need to strengthen their governance and their leadership.
Creating a national network of hospital trusts which are autonomous and financially viable presents hugely difficult challenges. It remains unclear whether all the problems trusts have highlighted can be resolved. Making all trusts viable will involve reconfiguration of some services, including through mergers. It is critical that local communities are consulted on these decisions and benefit from them. Where changes are proposed, trusts will need to demonstrate how merging organisations will create healthcare benefits to local communities while addressing the root causes of the financial problems that exist. Many of these trusts are in deprived areas and solutions should not reduce access to services for vulnerable people, thereby exacerbating health inequalities.
We are particularly alarmed that the healthcare system in London has been allowed to deteriorate despite its problems having been known about for many years. At least half of the acute trusts in London are not viable in their current form. The Department reassured us that none of trusts' current plans involve closing hospitals, but some trusts are in such a poor financial state it is difficult to see why other organisations would want to take them on. The Chief Executive of the NHS is only "moderately confident" that London's hospital system can be turned round, and acknowledged the unique challenges and obstacles to be overcome.
Strong leadership is urgently needed if those trusts facing clinical and financial difficulties are to meet the challenge of achieving foundation status. The flow of trusts through the 'pipeline' towards foundation trust status is already behind schedule. Decisions about changes to services, need to be taken promptly but wisely, and some trusts are still putting off difficult decisions. A particular problem is the quality of leadership, but prolonged uncertainty makes it harder to recruit good board members and clinical staff. The Department has made an explicit commitment to intervene if trusts fail to tackle problems on their own.
The cost of private finance schemes is an additional challenge for a limited number of hospitals. Analysis commissioned by the Department has identified six trusts that are unviable largely because of their PFI charges. Long term Private Finance Initiatives (PFI) deals reduce the Department's ability to establish a level playing field of financially sustainable, autonomous trusts. In many cases efficiency savings alone will not be enough to make unviable trusts financially sustainable. The Department faces a particular dilemma about how to manage the debt of these hospitals as their long term financial commitments make reconfiguration more difficult.
On the basis of a report by the Comptroller and Auditor General, we took evidence from the Department of Health and the Chief Executive of the NHS, and from the Chief Executives of Ealing Hospital NHS Trust, North Middlesex University Hospital NHS Trust, and Winchester and Eastleigh Healthcare NHS Trust, about the responsibility for dealing with this huge challenge, and what is being done to protect taxpayers and patients when trusts need external help.