HIN 4
Written evidence from Victor Lucas DL
This message is sent as I understand the PAC is scrutinising the developments at Hinchingbrooke Hospital, Huntingdon over the last few years. I write as a former Vice-Chairman of Hinchingbrooke Hospital NHS Trust from 2005 to 2007 prior to being appointed as Chairman of Cambridgeshire Community Services NHS Trust.
The purpose of this message is to correct significant misinformation reported in the media regarding the background to the financial state of the Hospital Trust, and the claimed deficit prior to a decision being taken in the late 2000s to seek alternative management arrangements. This decision was based on seriously flawed arguments relating to the financial state of Hinchingbrooke Hospital at around 2007.
The Deficit of £40M in 2007
In 2007 the hospital was balancing its books in operating costs related to income. There was no annual deficit. However there was a paper deficit arising from the actions of the former Huntingdon PCT before it was replaced by the Cambridgeshire PCT.
In about 2004 the Hunts PCT had stated it would give Hinchingbrooke a grant of about £8M towards the cost of a £22M new Treatment Centre. This sum of £8M appeared in both the Hunts PCT and Hinchingbrooke Hospital’s accounts at the time as a grant. Shortly before its demise, and just before the end of the FY, the Hunts PCT arbitrarily changed the terms of the £8M to be a loan to the hospital and no longer a grant. The £8M then suddenly appeared in the Hinchingbrooke Hospital’s accounts as a deficit. The SHA said it was up to the hospital and the Hunts PCT to resolve the dispute and they were not going to intervene. The Hunts PCT refused to change their decision of replacing the grant with a loan. The subsequent published accounts for the Hunts PCT were, very unusually for a public body, qualified by the auditors who in their report stated that the Hunts PCT were wrong to have changed the status of the £8m from a grant to a loan. Still the SHA refused to take any action.
Hinchingbrooke Hospital then started the following FY with the paper deficit of £8M. At the same time the Dept of Health introduced a penalty system for Health Trusts in deficit called Resource Allocation Budget (or RAB). The scheme reduced the income for the hospital by the amount it was in deficit. So not only did Hinchingbrooke Hospital carry forward a deficit of £8M it then lost another £8m in income through the application of RAB. The Hospital tried to work through the PCT and the SHA to bring realism to the financial situation which had not been caused by the hospital, but to no avail. A year later the deficit which was still being negotiated was therefore £16M. As RAB was still being applied by the DoH the ‘deficit’ had doubled a year later to £32M. At that time the DoH realised the anomalies of RAB and the system was cancelled, although the existing and emerging deficits from RAB remained.
This bureaucratic episode had thus caused the vast majority of the so-called debt of Hinchingbrooke Hospital and it was not through bad management. The remainder of the debt arose from the introduction in about 2006 of the tariff scheme for hospital income. This was underfunded in the initial couple of years for District General Hospitals such as Hinchingbrooke Hospital, but the Foundation Trusts had their income protected. Nevertheless within two years Hinchingbrooke Hospital was again balancing its annual income and expenditure.
I hope the above will be of interest to the members of the PAC as they deliberate the past and future for Hinchingbrooke Hospital.
Victor Lucas DL
Vice Chairman, Huntingdon Hospital NHS Trust 2005 to 2007