Cash crisis looms at hospital

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Portsmouth's hospitals trust is facing a multi-million pound cash crisis as it is overspends £700,000 a month.

The NHS trust, which runs Queen Alexandra Hospital, is set to end the financial year with a deficit of 8m.

Bosses say that despite making million pounds' worth of savings – which include shedding up to 500 staff – they are still in the red.

The financial situation has got so bad that the trust is now having to go cap in hand to regional health bosses for an emergency loan to make sure it can pay its bills.

With a predicted drop in income next year as the NHS is forced to tighten its belt, the trust has admitted it faces its toughest-ever challenge.

'The challenge we are going into next year is the biggest we've ever seen,' said Steve Gooch, deputy director of finance at Portsmouth Hospitals NHS Trust.

'At the moment we are spending about 700,000 a month more than we are earning. As we move forward it means the likelihood is we're heading towards an 8m deficit at the end of the financial year.

'The main reason we are in the deficit is because we've got to make 37m worth of savings this financial year and we have found 31m, but we've not been able to bridge the 6m gap.

'We're getting support from the strategic health authority and PCTs to try and work out where we can make more savings. We're aiming to close the gap as much as possible without affecting services.'

Speaking about the need to get a loan, Mr Gooch said: 'Because we have a deficit position, and we're spending more each month, it's just making sure we have enough cash to pay suppliers. This is standard procedure for any trust in deficit.'

The hospital trust has to make millions of pounds' worth of savings this year because the government has told the NHS as a whole to make efficiency savings of 20bn by 2014.

To make savings Portsmouth's hospital trust has reduced the amount of time people spend in hospital, so people who are fit enough to go home are transferred as soon as possible, which saves money and is better for the patient. It has also made an effort to ensure theatres are being used efficiently and operations are done on time and not cancelled unnecessarily. And it is making better procurement deals on drugs and equipment.

Mr Gooch says: 'People think saving money means services will be cut or won't be as good, but saving money and improving quality of services goes hand in hand. A lot of the things we have done and are doing saves money but patients benefit too.'

But the biggest area of spending for the hospital is its wages bill. About 60 per cent of the trust's expenditure goes on paying staff, and huge efforts have been made to reduce this bill.

Redundancies were made at the start of this year when 67 staff were axed. And as reported, in October the trust invited all staff to apply for a 'mutually-agreed resignation' scheme, in which the trust can offer a payout to those who leave their job on voluntary terms. It is not yet known how many staff applied and will be leaving.

The trust has also reduced the number of temporary staff it uses – who cost more than permanent staff.

In the past year the hospital has shed 500 permanent and temporary posts – including redundancies and when people have left and their job has not been filled.

But the pay bill still remains a major concern and further redundancies have not been ruled out. Mr Gooch said: 'We can't rule anything out but we will focus on achieving savings elsewhere.'

But despite the trust's best efforts to cut expenditure, there is one fixed cost it must grin and bear – the Private Finance Initiative (PFI), which paid for the 256m hospital rebuild. As part of this deal the trust must pay back 44m a year for 31 years, which covers costs of the rebuild, and maintenance and running costs of the site – including staff such as porters and cleaners.

'The PFI is an additional challenge we have to meet,' said Mr Gooch. 'It was always going to be a challenge, but it was planned over a long period of time and who could have predicted the financial situation would be this bad now.

But the fact is it's happened and we've got the PFI and they've happened at the same time. It's bad timing.'

But while things look bad now, Mr Gooch says there are even tougher times ahead in the next financial year.

He says: 'Even though we're making savings this year, the problem is it does not just stop there.

'We can't just make savings now and put our feet up.'