King’s College Hospital Foundation Trust has been chronically financially challenged for many years now. So seriously challenged we might have expected it to be included amongst the most troubled group of trusts in in NHS England’s ‘System Oversight Framework’ (SOF). (See our recent article on SOF and the latest NHSE ratings of trusts and ICBs).
But in December it was consigned not to segment four, but to the less troubled segment three.
Just weeks later came further evidence on how bad the situation was at King’s, with the HSJ report that its chair had resigned after the Trust’s projected deficit for this year increased from £49m to £90m. The scale of this deficit is reminiscent of the situation when King’s was first subjected to NHSE’s most severe special measures after revealing a £100m deficit in 2017-18. It was kept in that status for over four years.
ICSs and Trusts on NHS naughty step
King’s sank so deep in debt it became the biggest beneficiary from the national climbdown early in 2020, in which £13 billion of trusts’ accumulated borrowing to cover deficits were converted into Public Dividend Capital, on which trusts only had to pay interest at 3.5%.
Despite £735 million of King’s borrowing being written off in this way it was still two more years before the Trust was eventually freed from the most severe special measures, (SOF 4), at the end of 2022.
But its troubles were far from over. With 60 percent of its estates in Denmark Hill and Bromley still subject to index-linked PFI contracts going back to the early 2000s, King’s was plunged immediately back into crisis last year by raging inflation running at 11-13%,. (page 7)
The most recent Treasury PFI figures show King’s was scheduled to pay £58m in this year for its PFI-funded Jubilee Wing on Denmark Hill, and £43m for the Princess Royal University Hospital in Bromley: a 12% increase would add £12m to these payments alone, while every other cost was also going up.
(This is even more shocking when we note that the capital cost of the Denmark Hill Jubilee Wing was just £80m in 1999 – and there are still four more payments, totalling at least £238m to come before it is paid off at a total cost of more than £986m. The PRUH, which cost £122m to build in 1999, has another £177m to pay over the next four years, and will come out costing more than £909m).
The recent HSJ report highlighted the King’s plan to tackle the rising deficit by cutting 600 jobs. This was first revealed as a plan in the Trust’s September Board papers. It means axing some of the additional doctors and nurses King’s recruited to address Care Quality Commission criticisms of staffing levels in Autumn 2022.
The Trust responded to the CQC report by recruiting substantive staff to reduce unfilled vacancy rates, and managed to cut the turnover rate for staff. According to May 2023 Board papers these measures had resulted in an increase of 671 in the headcount. (p17)
But while it managed to satisfy the CQC and avoid any penalties, the increase in numbers of substantive staff was not, as expected, offset by reducing temporary staffing spend, not least because of strike action and escalation rates.
So Trust bosses changed course again – and planned a cull of over 600 jobs by March, reversing almost all of the previous increase. The finance-driven “plan” to do this consists of a small spreadsheet, setting target numbers to be axed each month. However it’s not so much a plan as a list: it contains no discussion of which specialities or services might be affected, or why it won’t plunge the Trust back into problems with the CQC. (page 70)
The proposal is to cut 200 nursing posts, of which 140 are supposed to be shed between January and March (65 at Princess Royal Hospital in Bromley and 75 at King’s in Denmark Hill) in addition to 50 over a longer period through “nursing establishment reviews”.
Also on the chopping list are
- 150 medical posts, all to be cut month by month between January and March – one of the busiest times of the year,
- 10 Allied Health Professionals, through “rationalisation,”
- 150 non-clinical/corporate staff to be shed between last summer and March,
- 28 additional undefined posts to go under “organisational change” in January,
- 67 undefined posts to go as a result of the Apollo IT system that has been rolled out since last year
- And 15 more undefined posts that should have been eliminated last summer under “pay/cost reduction schemes”.
The drive to cut back staff, and reduce the pay bill to a maximum of £75m per month first arose from NHS England’s demand that the Trust reduce its projected deficit for 2023/24 from the initial £60m to £49m. This forced the Trust to adopt a “significant cost improvement programme.” (page 67)
Auditors warned the Trust that the resultant Cost Improvement target of £72m, at almost 5% of income, was larger than the Trust has been able to achieve in the past, and represented a significant risk. (p228)
The worsening financial plight revealed in each Board meeting suggests that the auditors were right: the planned savings have not been delivered, the financial situation has worsened, and Trust bosses themselves seems less confident they can deliver. The explanation of the plan to cut the 600 jobs at first carried the positive assurance that:
“Increased support and governance has been put in around rostering and recruitment in order to gain the quick win reductions in temporary staffing. The Trust is starting to see the impact of these actions.”
But by the January Board meeting, the most recent version ends differently:
“Increased support and governance has been put in around rostering and recruitment in order to gain the quick win reductions in temporary staffing. The Trust is currently not seeing the benefit of these.” (page 80)
Nor is the Trust managing to keep to its ambitious (if vague) savings targets. However it is very difficult to pin down a consistent picture of the Trust’s financial woes, since there are so many different ways it has been spun in Board papers.
In the minutes of the November Board the Trust was: “forecasting a deficit of £99m against the £49m plan before receipt of its share of the ICB surplus (£32m) and national monies associated with the strikes and further ERF target reductions (to be confirmed).” (whatever that means, page 7)
However the month 8 report, published in January, suggests a deficit of £52.4m once adjusted for ICB surplus and industrial action, “which represents a -£47.2m adverse variance to plan.” This seems to be a roundabout way of admitting the deficit is ten times the projected £5.2m. (page 43)
But a summary page later in the same Board paper gives a very different figure:
“Deficit is £88.8m before inclusion of £13.7m ICB surplus distribution and strike monies (i.e vs £99.7m FOT [Forecast Outturn]).” (page 68)
A few pages further on, the deficit is described and calculated differently again:
“The Trust is forecasting a deficit of £41.7m after receipt of ICB Surplus (£31.5m) and H2 planning monies (£26.4m)”. (page 72) [NB: these figures all add up to £99.6m]
However the uncertainty over the level of risk is enormous: the risk on the Cost Improvement Plan could be as high as £25 million, with further risk of up to £5m each for
- unfunded cost of further strikes,
- the Elective Recovery Fund,
- the cost of a consultation on nurse pay banding
- and the Maternity incentive scheme. (page 73)
Ten pages further into the same Board papers yet another, much higher contradictory figure appears: “The Trust’s M1-8 normalised position reflects an average monthly deficit of £11.9 million, which, if projected on a straight line, would result in a year-end deficit of £143.4 million.” (page 83)
Can any of these figures be taken seriously, and if so which ones?
Or has the trust belatedly corrected all of these previous figures with the admission on January 24 that the deficit has risen to £80-£90m, as reported by the HSJ.
Is there even worse to come?
The Lowdown predicts the true picture won’t be clear until well after the end of this 2023/24 financial year. And as we know from its current Segment Three status, King’s is not seen as one of the weakest trusts, so others must really be in deep water.
Readers are advised to brace now for the figures yet to come, and get ready to defend jobs and services as and when any explicit plans are published.
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