Bailout Support Subjected to New Challenges and Scrutiny

The reliance of NHS trusts on support offered via bailouts will be seriously tested by new rules.

Tighter controls will be put in place, according to a leaked email.

Those trusts requiring financial bailouts will be subjected to increased financial scrutiny under the new regulations.

The email outlines the new process in detail.

“Due to the increased level of revenue financing being required by providers, and the increased level of scrutiny from HM Treasury and the DH, applications will be subject to increased challenge and scrutiny going forward.”

And the way that trusts will apply for bailouts is also explained.

All providers will now be required to provide an analysis of cash draws to show the level of cash required to fund any: year to date deficit requirement; revenue loan repayments; cash in advance of sustainability and transformation funding; or cash required for exceptional working capital/liquidity reasons; ie contractual payments.”

The reliance on bailout has increased in recent years, particularly after the poor financial results that trusts accrued during the previous financial year.

And the provider sector had an underlying deficit of £3.7 billion in 2015-16.

However, despite concerns from NHS trusts, it remains extremely unlikely that the Department of Health would ever allow an individual trust’s funds to run completely dry.

What is more likely as the result of these regulations is a more rigid control of cash management and distribution.

This initiative is ultimately intended to encourage greater focus on reducing trusts’ operating costs.

Sally Gainsbury, senior policy analyst at the Nuffield Trust, indicated his concern about the present financial health of the NHS.

“This looks like the NHS as a whole is experiencing a cashflow crisis, which is the inevitable consequence of providers’ expenses running at 5 per cent above their income. This is really worrying stuff, but if you run deficits year after year then you will start to have cashflow problems. One way providers could manage their cashflow would be paying invoices at the latest possible date, but that wouldn’t be a desirable solution. Not least because a large chunk of those invoices will be to other parts of the NHS.”

The email adds that as part of the “December draw process”, the DH has requested that “all foundation trusts who have had revenue financing support in 2016/17 provide a breakdown of what this cash has been used for”.

And further support may be restricted by the DH and Treasury if this analysis is not provided.

NHS trusts accumulated a collective deficit of approximately £2.5 billion in the most recent financial year.

 

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