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Government plan to prop up hospitals in financial trouble

Government to underwrite assets to prevent hospitals going bust

OnMedica Staff

Wednesday, 03 September 2008

The government is to underwrite hospital trusts' assets to prevent them going bust and ending up in court.

The Department of Health is to issue a consultation paper this month that rules out insolvency for trusts that are failing financially, according to a report in the Health Service Journal.

The proposal is part of a package of last resort measures that would be put in place if a foundation trust or an NHS acute trust was seriously financially underperforming or failing to meet minimum clinical or quality standards. The government intends to legislate on the changes in the NHS Reform Bill next year.

NHS chief executive David Nicholson will take control of organisations that fall foul of expectations. Once this regime is triggered there will be a legal obligation to ensure services are not disrupted while the trust is turned around. This could mean some services will be provided at a loss.

He says the government is keen to send a message that hospitals will not be closed as a result of going bankrupt.

The move will answer the question of what would happen if foundation trusts, which have additional freedoms and are able to borrow money, ran into financial difficulties.

The proposals would mean that for foundation trusts, Monitor would decide whether to trigger the failure regime. If it did, the trust would be deregistered as a foundation.

For non-foundation trusts, the NHS chief executive will decide whether to take control. In practice, strategic health authorities are expected to do most of the direct administration.

The DH is expected to publish a list of the trusts it believes are falling below minimum standards later in the autumn. This is expected to be fewer than the 22 trusts given a double weak rating in the last annual health check.

A DH spokeswoman said: "Developing the NHS Performance Regime set out the department's plans for tackling underperformance in the NHS. We are shortly due to publish a consultation which sets this out in more detail, while protecting services for patients."

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