South London Healthcare edges towards administration

 South London Healthcare may become the first NHS hospital trust to be declared bankrupt after accumulating debts of £69m.

Health Secretary Andrew Lansley has warned the trust that an administrator may be brought in to sort out its finances. The trust could also be dissolved and certain services closed as a result.

Mr Lansley said in a letter that he realises not all of the debts are the trust’s fault. However, he added that problems must be “tackled” and that “we are almost at this point”.

The trust merged three London hospitals in 2009: Princess Royal University Hospital in Orpington, Queen Mary’s Hospital in Sidcup, and the Queen Elizabeth Hospital in Woolwich.

When the three joined to form one organisation, the trust inherited a large debt through a private finance initiative (PFI) that had been used for the buildings at Orpington and Woolwich.

If the Health Secretary decides to disband the trust, it would not necessarily mean that all services would close as another NHS organisation or a private provider could take over responsibilities.

Government ministers are thought to be considering a deal which would see taxpayers taking over responsibility for the £2.5bn PFI contract.

But the option of emergency funding to reduce the deficit is not being considered in a move which ministers believe would allow other trusts to assume similar bailouts.

Mike Farrar, Chief Executive at the NHS Confederation, welcomed the move by the Health Secretary. “The NHS can’t go on with short-term fixes to financial problems,” he said. “That might mean some tough decisions, but hopefully will deliver financial sustainability in the long term.”

Chris Streather, Chief Executive of South London Healthcare, said talks were now ongoing with the Department of Health and NHS London to decide the “best future” for the trust.

“The most important thing is that the health needs of the local population are sorted out,” he said. “Over the last three and a half years since we have merged we have made an enormous amount of progress on quality of care.

“There is a huge gap in our financial plan in order for us to become viable in the long term and this intervention if it solves that problem which it is designed to do is absolutely welcome and will be helpful.”

A decision is expected on the future of South London Healthcare in the middle of July.