Emergency treatment for the NHS

The fact that Health Secretary Andrew Lansley is considering appointing a trust special administrator (TSA) in respect of the South London Healthcare NHS Trust (SLHT) could be a step towards a major restructuring of the sector.

As matters stand, the appointment of a TSA will be under the Health Act 2009. The process for dealing with ­insolvent health service providers is to be reformed when the notorious Health and Social Care Act 2012 comes into force, but this is not likely to be in time for SLHT, which is ­facing insolvency.

Under the 2009 act the secretary of state can order the appointment of a TSA over an NHS Trust or NHS Foundation Trust in the interests of the NHS. The TSA regime is designed to put in place a structure for quick ­decision-making about failing trusts and take the management role out of the hands of incumbents.

In terms of the key stages, the ­appointment causes the immediate suspension of the trust’s directors and the TSA assumes their functions. There is no guidance with regard to what qualifications the TSA must have, so it remains to be seen who will be chosen.

The TSA must consult prescribed NHS bodies and publish a draft ­recommendation within 45 days. A 30-day consultation procedure must start within five days of publication, during which time written responses must be requested and/or meetings held with prescribed persons, including the staff of the trust.

A final report must be provided within 15 days of the end of the ­consultation period, and the time ­periods may be extended.

The secretary of state then has 20 days to decide what action to take, ­including dissolution of the trust. 

When the 2012 act comes into force the regulator (monitor), not the secretary of state, will have the power to appoint and then only if the trust/company is likely to be unable to pay its debts. The TSA regime is retained with some modification, and health special administrators (HSA) are introduced for companies, providing essential, but as yet undefined, services.

Under the 2012 act the objective of the HSA is to secure the continuation of the provision of services. The HSA, in common with administrators ­appointed over ordinary trading companies, must also try to rescue or sell the company as a going concern and, if consistent with that objective, protect the interests of the company’s creditors. The HSA will be appointed by application to court and must be an insolvency practitioner. Further regulations “may” apply parts of the Insolvency Act 1986. 

Last September Lansley said he “would not flinch” from taking action if trusts are failing financially, so is this really an isolated incident? SLHT received a £79.2m bailout last year – the largest single bailout, but not the only one. Bailouts paid to NHS hospitals in 2011-12 added up to £414m, up from £223m in 2010-11.

The NHS’s annual report reveals 11 trusts whose deficits are considered by the NHS to be material. Six of the trusts (including SLHT, which reported a £65m deficit for 2011-12) were identified as financially “challenged”. This suggests that where SLHT goes, others may follow.

Senior associate Nichola Padget assisted with this article