Out-Law News 2 min. read

Special Administrator appointed to oversee potential restructuring of South London Healthcare NHS Trust


A loss-making NHS Trust responsible for three South London hospitals is to be the first to be put into the Regime for Unsustainable NHS Providers following the appointment of a Special Administrator, the Health Secretary has confirmed.

Matthew Kershaw, the current National Director for Provider Delivery at the Department of Health, will take over the running of day-to-day patient services from Monday while he considers his recommendations for the future of the trust. The Health Secretary will take the ultimate decision whether to rescue or dissolve the trust, or propose acquisition by or merger with another NHS Trust or Foundation Trust, once Kershaw submits his final report in January 2013.

"Past efforts have not succeeded in putting the South London Healthcare Trust on a sustainable path," Andrew Lansley, Health Secretary, said. "Although there have been some improvements in mortality rates, maternity services and infection control, and some early signs of improvements in waiting times, they do not go far enough. It will be impossible for South London to build on these improvements while tackling such a large deficit."

The trust, which was formed in 2009 by the merger of the Princess Royal University Hospital, Orpington, Queen Mary's Hospital in Sidcup and Woolwich's Queen Elizabeth Hospital, had a £69 million debt at the start of the financial year. It inherited a large debt at the time of the merger, primarily due to construction costs relating to the buildings at Orpington and Woolwich. The trust has accumulated a £150m deficit over the last three years and is currently overspending by £1.3m each week, according to the Department of Health.

The Health Secretary was given the power to appoint a special administrator to review an NHS Trust if "appropriate in the interests of the health service" in 2009 under the Unsustainable Provider Regime. The administrator must comply with strict statutory time limits and consultation requirements when producing his report, a draft of which must be published in Parliament by 29 October.

Although the term 'Trust Special Administrator' is set out in the relevant legislation, the role is distinct from that of a legal administrator. Insolvency legislation is not applicable to NHS Trusts.

In a statement, the Department of Health said that the trust's chair and board of directors would be suspended from their duties, with responsibility transferring to Kershaw from 16 July. However, some of the executive and non-executive directors of the trust will support the administrator in "developing a long-term solution for the organisation", it said.

Kershaw will establish a "dedicated expert team" to assist him in his role, including an independent clinical panel and NHS and external strategic advisors, the Department said. A 'Clinical Advisory Panel' made up of "prominent clinical leaders" will "support and advise" the administrator as he develops his recommendations, it said.

"My priority is to work with staff, patients, the public and all those involved in healthcare services in the south east London area to maintain high quality, effective services during the running of the Unsustainable Provider Regime," Kershaw said. "This means developing recommendations that ensure that people in south east London can access high quality, safe and financially sustainable NHS services for the long term."

A Government report last year identified 22 healthcare trusts as facing difficulties because payments under PFI schemes were amounting to up to a fifth of their budgets. The PFI model, which is a method of utilising private sector capital as a way of funding major public infrastructure projects, has been criticised for its long-term expense as the recent economic downturn has driven up the cost of private sector borrowing.

However last month infrastructure law expert Barry Francis of Pinsent Masons, the law firm behind Out-Law.com, said that blaming PFI for the trust's financial difficulties was "unlikely to be anything like the full story".

"The administration will be an important indicator of how the insolvency regime will work out in practice, so how it is handled will be an important indicator to those dealing with the NHS as to the risks of doing so," he added. "If this is handled well it will encourage private sector commercial entities and banks in their dealings with the NHS. It will also alleviate fears as to the political and social consequences of introducing market disciplines into the NHS."

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