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Achievement of Foundation Trust status by NHS hospital trusts

Many NHS trusts need to tackle a range of financial, quality and governance issues if they are to meet the standards required of them to become self-governing foundation trusts by 2014, according to the National Audit Office. The Department of Health and the NHS will now have to decide how they will deal with those facing the most severe problems.

The processes the Department has put in place to help NHS trusts achieve foundation status have brought matters to a head, by highlighting the challenges many trusts face in proving their long term viability.

For some trusts the pathway to foundation trust status will be relatively straightforward. However, at least 20 trusts face such substantial problems that they have recognised they are not financially or clinically viable in their current form. These problems are often deep-seated and long-standing. Size and location can cause problems, including a mismatch between hospital capacity and local demand for services from commissioners. In some cases the Department will need to be involved in decisions about and support for reconfigurations of local hospital services.

Other trusts may have less severe problems, but will still have to improve their financial and, in some cases, clinical performance if they are to be sustainable in the long term and become foundation trusts. A number of these trusts, will need additional support from the Department, such as helping them to strengthen their management and governance arrangements.

The most common challenges are financial. In July 2011, the Department’s assessment was that 48 out of the 113 candidate trusts were unlikely to meet the regulator Monitor’s tests of trusts’ financial viability. An initial review of 22 trusts with major PFI schemes has identified up to six trusts for which the scale of debt repayments, together with other financial problems, means that they are not currently viable.

The difficulty of achieving foundation trust status is magnified by the challenge trusts face in making year-on-year cost savings of at least four per cent. Many trusts will have to achieve even greater savings than this to show that they are financially viable.

"The Department of Health has made a concerted effort to identify the challenges faced by the 113 NHS trusts seeking foundation status. Many of their problems stem from longstanding issues around financial viability, underlying performance and clinical quality. The Department will have to tackle these issues head on if high quality and affordable health services are to be available to all."

Amyas Morse, head of the National Audit Office

Notes for Editors

  • NHS foundation trusts have more financial and operational freedom than other NHS trusts. They remain within the NHS and their financial performance is regulated by Monitor, while their healthcare services are regulated by the Care Quality Commission.

  • When the Department of Health first created foundation trusts in 2004, it announced that all acute and specialist hospitals should be in a position to apply for this status by 2008. By 1 October 2011, there were 139 NHS foundation trusts and 113 NHS trusts at various stages in the ‘pipeline’ towards foundation trust status. The Department now requires trusts to achieve foundation trust status by April 2014, although it has allowed for ‘exceptional cases’ to extend the 2014 deadline.
  • The regional distribution of trusts on the way to foundation status is very uneven. By September 2011 all but one trust in the North East has become a foundation trust. By contrast, in London, only one third of trusts have achieved foundation status. At least half of the 18 non-specialist acute trusts in London seeking foundation trust status are unlikely to be financially viable in their current form.
  • Press notices and reports are available from the date of publication on the NAO website, which is at https://www.nao.org.uk/. Hard copies can be obtained from The Stationery Office on 0845 702 3474.

  • The Comptroller and Auditor General, Amyas Morse, is the head of the National Audit Office which employs some 880 staff. He and the NAO are totally independent of Government. He certifies the accounts of all Government departments and a wide range of other public sector bodies; and he has statutory authority to report to Parliament on the economy, efficiency and effectiveness with which departments and other bodies have used their resources.

PN: 55/11