There is real concern that NHS organisations will go bankrupt under the new arrangements being brought in by the Government's health reforms but ministers have failed to make clear what they will do if it happens, a parliamentary report has warned.
The House of Commons Public Accounts Committee said it appeared the Department of Health was "inventing rules and processes on the hoof" to deal with hospital trusts which get into financial difficulties, rather than establishing a robust protocol for action.
Ministers were unable to provide the committee with reassurance that financial problems will not damage the quality of care or access experienced by patients of troubled trusts, at a time when the service is already struggling to find £20 billion-worth of cuts and implement the reform programme, said PAC chair Margaret Hodge.
Although NHS bodies reported an overall surplus of £2.1 billion in 2011-12, the apparently healthy financial picture masked a "significant minority" of bodies which are in difficulties, said the report. Ten NHS trusts, 21 foundation trusts and three primary care trusts reported a combined deficit of £356 million, £115 million of which was accounted for by two London trusts.
And a further 31 struggling NHS trusts and 11 foundation trusts may not have broken even if they had not been bailed out with cash injections worth £1.1 billion from the department, as well as support from PCTs and strategic health authorities, it said. In a number of cases, trusts' chances of breaking even were being undermined by "unaffordable" contracts with private-sector companies under the Private Finance Initiative, the report warned.
During the committee's inquiry into the future financial sustainability of the NHS, the department was unable to explain clearly how the "failure regime" would work under the new arrangements, or what circumstances would trigger it being applied to a struggling hospital.
Ms Hodge said: "The Department of Health could not explain to us how it will deal with an NHS trust that goes bankrupt. Nor could it provide reassurance that financial problems would not damage the quality of care or equality of access to all citizens, wherever they live."
Health minister Lord Howe said: "This NHS is in robust financial health. We have invested an additional £12.5 billion in the NHS and £1.6 billion of surplus has been carried forward into 2012/13 to help deliver high quality, sustainable health services for patients. The NHS is performing well and is on track to meet its efficiency challenge. Latest figures show it has already reported £7 billion of savings over the last 15 months.
"We have already stated that we are not going to endlessly support trusts with historic financial problems but we know that some hospitals face difficulties and need to radically change to make sure they are providing the highest quality of care to patients.
"But to be clear - we are not 'making these rules' up. In fact, we are working closely with Monitor, the NHS Trust Development Authority (NTDA) and health professionals to set out proposals on how foundation trusts and other healthcare providers can remain financially stable and will report back on this later in the year."