interviews

Turning things around

Dr Peter Reading, chief executive of Peterborough and Stamford Hospitals NHS Foundation Trust, spoke to NHE about improving clinical performance in the face of significant financial difficulty.

Foundation trust regulator Monitor has had to step in at Peterborough and Stamford Hospitals NHS FT (PSHFT) due to its significant financial failings, caused in large part by the PFI scheme under which the new Peterborough City Hospital was built from 2007. But its new management team is getting to grips with some of the problems under its own control, and beginning to turn things around.

The trust has achieved significant improvements in performance, with a new team delivering key results in clinical engagement. Chief executive Dr Peter Reading told NHE the new team had had a “measurable impact on performance”, achieving all the key targets for the last four months of 2012.

The trust is also on course to deliver £13.2m worth of efficiency savings in 2012/13, which Dr Reading highlighted as “substantial progress”. Eight new directors have been appointed since 2010, and they are in the process of appointing 14 associate clinical directors to run the trust.

This team now has authority over all the clinical services, budgets, staff, performance, quality to reorganise the trust and increase engagement. Dr Reading described it as “a conventional clinical directorate model”.

“The things we’re doing in Peterborough have a lot in common with what well-run trusts are doing around the country: they’re focusing on performance, quality and clinical engagement. If you get those things right, then you’re doing a large part of your job well.”

The wider health economy

PSHFT currently has an underlying deficit of £45m, although much of this has been caused by issues in the wider health economy, and an unsustainable PFI deal.

Dr Reading said: “The problems we face are partly within our control, but a lot of them are outside our control. The NAO report identified that of our deficit, up to half is attributable to the excess costs of the new hospital. About £9m is associated with what is perceived as a gap in our commissioner income, leaving only about £14m which is attributable to the trust itself in terms of efficiency.

“So Monitor has taken the view that they need to introduce a contingency planning team, which [started] work in January, which is going to look at a number of different aspects of our financial situation and make recommendations for what might happen next in the summer.”

The NAO report, released on November 29 last year, found that early concerns raised about the PFI deal were not fully addressed by either the Department of Health or the trust board.

Head of the NAO, Amyas Morse, said: “The trust board’s poor financial management and procurement of an unaffordable PFI scheme have left the trust in a critical financial position.

“The board developed and enthusiastically supported an unrealistic business case built on over-optimistic financial projections. The regulatory and approval processes did not work in this case and did not ensure affordability.

“Irrespective of how far the PFI scheme contributed to the current deficit, the latter is now too great for the trust to balance its finances by managing its own resources. The trust, the Department, Commissioners and Monitor need to work together and take urgent action to help the trust get back on its feet.”

Underestimating output

In terms of the wider NHS’s responsibility for PSHFT’s financial struggles, Dr Reading identified two key areas for progress. One was to improve the relationship between the trust and the area’s clinical commissioners, to ensure they are “adequately reimbursed for the work that we do”.

This was also picked up by the NAO, which found that the level of healthcare activity undertaken by the trust does not match that predicted at the time of the PFI deal. The business case then envisaged a drop in outpatient activity of 14%, when it has in fact increased by 21%.

The report states: “NHS Peterborough, the trust’s main commissioner, which has been in financial difficulty itself, has used national and local performance indicators to withhold payments for activity undertaken by the trust.”

Work has already begun to improve this relationship, and results could see payment become better aligned with the trust’s output.

Dr Reading added: “Both we and the new commissioners from Peterborough have been working very hard on that and I think relationships have improved dramatically over the last year.”

Additionally, there is a need to work out how the health service can make best use of the “fabulous new facility” at Peterborough City Hospital. Since the PFI deal was agreed in 2007, it has cost the trust severely. In 2011/12 it cost £41.6m.

“There is a fixed cost to the taxpayer, there is a contract underwritten by the Government until 2042,” Dr Reading said. “So the issue for the NHS in this part of the country is to how to make the best use of that facility, to spread the fixed costs across as wide a base as possible.”

Considering chancellor George Osborne’s proposed ‘PF2’ scheme, announced following the PFI review to escape some of the problems that have dogged PFI, Dr Reading told us: “The problem I’ve got to tackle is a first wave PFI scheme, which is not affordable in the current circumstances. My hope is that the PF2 process avoids the situation that Peterborough now finds itself in.”

No straightforward solutions

The NAO review considered what, if any, measures could have been implemented earlier to avoid such a degradation of the financial situation. But Dr Reading said: “It’s very difficult to know whether anything else could have been done. There are wider issues: ‘what’s the right vehicle to make this change happen across a wider geography’.”

Many other trusts are currently in similar situations, facing huge deficits, unaffordable PFI schemes and even being placed on the unsustainable providers’ scheme.

Dr Reading reiterated: “There are no straightforward solutions. What is clear is that working out the best way to use this facility over the next 30 years is essential. That needs to be worked out across quite a wide area because it has implications for commissioners and trusts across five counties.”

This is one thing the contingency planning team will be looking into, he added. He added that it was “too soon to say” what the details of the reorganisation would be to effectively manage the financial situation.

“We’re able to come up with some views from inside the trust, but it really needs to be a wider look and that’s why the contingency planning team approach makes sense at this stage.”

Monitor’s view

In December 2012, Monitor announced that a contingency planning team (CPT) would be appointed to Peterborough and Stamford Hospitals NHS FT to address its financial failings.

Dr David Bennett, chief executive of Monitor, said: “We have been working closely with Peterborough and Stamford Hospitals NHS Foundation Trust to improve its financial performance. The reality is that the trust has a significant underlying deficit and even if it achieves challenging annual cost savings it will continue to need substantial financial support from the Department of Health.

“It is therefore time for us as the sector regulator to step in and look for a solution that ensures services are provided for local patients on a sustainable basis. We have an open mind about the form that solution might take, but it must meet the needs of patients and taxpayers.”

The CPT will report to Monitor in the spring with recommendations on how to proceed.