NHS inspectors reveal hole in foundation finances

Four of the government's flagship foundation hospitals are projecting deficits of more than ?3m, according to research published today.

Bradford, Chester, Peterborough and Devon and Exeter foundation trusts are under serious financial pressure due to the cost of bringing in new funding arrangements and staff contracts, warned NHS inspectorate the Healthcare Commission.

The commission revealed that the foundation trusts were hard hit by last year's introduction of the payment-by-results system. Under this scheme their NHS funding depends on the number of patients treated, with hospitals receiving a set sum for each treatment.

The trusts had also underestimated the cost of the new consultant contract, which led to significant pay increases for senior doctors.

Unlike other NHS trusts, foundation trusts cannot be bailed out by the Department of Health when they are in financial difficulty.

Foundation trusts are given greater financial freedom from Whitehall and have the ability to set their own priorities and decide how best to spend their money. Every NHS trust will have to achieve foundation status by 2009.

In January, Monitor, the body set up to oversee foundation trusts, admitted there were three or four with financial deficits other than Bradford. But this is the first time they have been named and the extent of the debt revealed.

The payment-by-results system was blamed for the financial crisis at Bradford teaching hospitals foundation trust, which was predicting an ?11.3m deficit last December. Its then chairman, Bill Moyes, was sacked by the foundation hospitals regulator. The trust has since managed to reduce its overspend.

Health thinktank the King's Fund said the financial problems raised in the report were a "major concern".

The thinktank's chief executive, Niall Dickson, said: "While most foundation hospitals appear to have sound financial management, it is already clear that a minority have significant projected deficits."

Mr Dickson added it was clear that the new financial arrangements were "clearly putting even the best-performing hospitals under demonstrable pressure".

He said: "To keep foundation status, foundation hospitals will need to demonstrate that they are going concerns, and for some this will be difficult."

The health secretary, Patricia Hewitt, said the government would "consider fully" the review's findings during the further development of foundation trusts.