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Right Arrow Trust’s response to McKinsey options of the way forward
28 March 2006 at 15:21
The Cheshire & Merseyside SHA received on Monday, 27 March, a paper from the Director of Finance and Information on ‘Preparing NHS Trusts for NHS Foundation Trust Status’. In that report, the Director invited the Department of Health Turnaround Director to advise on how the Southport and Ormskirk NHS Trust could achieve sustainable financial balance, an action which the Trust supports. However, the paper also proposes two possible options: firstly, to reduce clinical services at Ormskirk and, secondly, to reduce clinical services at Southport and transfer in-patient and A&E services to Ormskirk.

The Trust has previously made clear its opposition to these options on the basis that they do not, in our view, provide a sustainable clinical service or financial solution, nor do they provide the best way forward for our patients. Patients and staff will be confused to read of the possibility of further clinical reconfiguration so soon after the relocation of clinical services over the last six years has finally finished.

The Southport & Ormskirk Hospital NHS Trust needs to find an additional £10M in 2006/07 if it is to break even. Through a combination of cost reductions, including a stringent vacancy freeze and through opportunities to develop the Ormskirk Hospital site to attract more patients, the Trust has so far identified £4M worth of savings and additional income which is equivalent to about 4% of total Trust income. The Trust is struggling to find a further £6M worth of savings without affecting cleanliness, waiting times or our high levels of efficiency. The Trust has already met with the Department of Health Turnaround Director and indicated that it might wish to draw on his team’s expertise to assist the Trust in identifying the remaining £6M savings next year to achieve sustainable financial balance.

Over the last 5 years, the Trust has reduced its expenditure by over £10M or 10% of income, so it is an enormous challenge to maintain standards and reduce expenditure by that amount again in just one year. The underlying causes of the need to reduce expenditure are as follows:

§ The Trust is based on three sites and is housed in very modern accommodation. This adds additional costs to the Trust which has a relatively low turnover in comparison with the cost of its buildings. For example, we have a clinical income of approximately £100M and buildings valued at £150M. Aintree have the same cost of buildings at £150M, but a clinical income of £154M to support this.

§ A ‘Market Forces Factor’ is applied to all hospital Trusts and is intended to reflect the varying costs of living around the country. The rate applied to Southport & Ormskirk is the lowest in the Strategic Health Authority and adversely affects our income. If we received the average MFF, the Trust would be £3.5M per annum better off.

§ Historically, the Trust has not always been paid for the patients it treats or the financial pressures of being on three sites, two of which are high cost. For example, only a small proportion of the costs of the European Working Time Directive have been funded by our main purchasers, leaving the Trust to meet a debt of £1.7M.

However, the Trust recognises the need to achieve year on year financial balance and looks forward to working with the Turnaround Director to achieve this aim.

Issued by Matthew King, Southport and Ormskirk Hospital NHS Trust.

Enquiries to: Matthew King Tel: 01704 704714