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Monday, July 20, 1998 Published at 23:33 GMT 00:33 UK


Mounting NHS debts could eat up extra cash

The NAO says health authorities are moving in the right direction

People's expectations of what the extra 18bn for England's NHS can buy may have to be tempered because of the problems of past underfunding and growing legal bills, according to health managers.

A report by the National Audit Office (NAO) shows that nearly half of the 100 health authorities in England experienced "serious financial difficulties" in 1996/7. Their combined deficit was 238m. This was in addition to a 553 deficit carried over from previous years.

The number in serious problems dropped to 28 in the first three quarters of 1997/8, but the difficulties appear to have been passed on to NHS trusts, the bodies which run hospitals.

Sir John Bourn, the Comptroller and Auditor General, found that more than 12% of health trusts - the management bodies that run hospitals - were in serious financial difficulties in 1996/7, rising to 17% by the third quarter of 1997/8.

Many others have had to make cuts in services to keep their books balanced.

Also, the last quarter - which includes the winter months - is often the most costly, although the government poured in extra cash this year to deal with the winter crisis.


[ image: Stephen Thornton: the deficit will take up some of the extra NHS cash]
Stephen Thornton: the deficit will take up some of the extra NHS cash
Stephen Thornton, chief executive of the NHS Confederation, said the figures showed that a significant amount of the NHS' extra 18bn for England announced by the government last week would have to go into meeting past funding deficits.

"This is yet another indication of how difficult it is going to be for us to manage people's expectations about the new money," he said.

"The first call on the money will be to put right the historic deficit funding which date back to before the last election."

Three of the hospital trusts had deficits totalling around 10% of their annual budget. They included the Royal United Hospital in Bath, which has a 7.5m deficit, and South Warwickshire General Hospitals, which has a 4.3m deficit.

Top of the list was the Liverpool Women's Hospital, with a deficit totalling 13.2% of its budget. It said the NAO had got the figures wrong and that the 'deficit' was merely negative equity and not real money.

West Surrey health authority headed the list of health authority deficits with a 40.5m funding gap, some 10.7% of its budget.

Effective monitoring

Sir John says the NHS Executive has taken steps to ensure a "more consistent and effective approach to the monitoring of the financial position of health authorities and NHS trusts".

[ image: Health trusts' problems get worse, while health authorities' stabilise]
Health trusts' problems get worse, while health authorities' stabilise
He adds that the regional offices of the NHS Executive are working with the authorities and trusts to try to return them to a sound financial footing.

The report also says the National Health Service is likely to face a bill of 2.3bn for claims by patients who sue doctors when their treatment goes wrong.

Sir John says health authorities and trusts still need to make better provision for the cost of negligence incidents which have already occurred but which have not yet led to a claim.


Stephen Thornton said he was surprised by the amount of medical negligence liability. "2.3bn is a staggering amount and will be yet another pressure on budgets as more and more people seek redress through the courts," he said.

He predicted the figure would rise as Britain becomes more like America, but he said the government's emphasis on quality and steps taken by the NHS to handle clinical negligence cases would take the edge off the increase.

However, he said it would be difficult to tackle the deficits and clinical negligence without investing in management. He called the government's pledge to reduce management costs by 1bn "absolute nonsense".

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