King’s College Hospital

Part of the debate – in Westminster Hall at 5:33 pm on 16th January 2018.

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Photo of Steve Barclay Steve Barclay Minister of State (Department of Health and Social Care) 5:33 pm, 16th January 2018

I am happy to recognise the hon. Lady’s point that significant savings have been made. However, the regulators found that there had been an over-reliance on non-recurring savings, rather than on delivering the cost improvement programme. For example, King’s has the highest cleaning costs per square metre at £71, compared with the median of £41 per square metre. Indeed, in her remarks the hon. Lady talked about the cost of bringing in consultants such as McKinsey, which the King’s board itself brought in. The concern is the slow pace at which those cost savings and efficiencies have been delivered on the back of those reports.

The trust has also been in breach of its licence for financial governance since April 2015. That followed an investigation by Monitor in March 2015 after the trust was unable to resolve long-standing problems at the Princess Royal University Hospital, which it took over, as Members have pointed out, in October 2013. As part of Monitor’s enforcement action, the trust was required to produce and implement an effective short-term recovery plan and a longer-term plan to ensure that patient services were improved and that they were provided in a sustainable way for the future.

The trust does not routinely report its financial performance by site, but analysis shows that the trust confirms that the losses by service are across many services and across both main sites. As I remarked in my opening, while the deficits at the Princess Royal are proportionally, as a percentage, higher than at Denmark Hill, in absolute terms the majority of the deficit is at Denmark Hill. That speaks to the point raised by my hon. Friend the Member for Central Suffolk and North Ipswich, who is not in his place, about the legacy from the Princess Royal.

The trust also faces a number of other challenges. King’s has not met the referral to treatment standard—RTT—since January 2015, at which point the board took a decision to suspend its performance data reporting. The trust resumed reporting of the RTT performance data again in March 2016. Following the deterioration in performance throughout 2016-17, NHSI undertook an investigation into the RTT governance and the drivers of the deterioration, which was completed in July 2017. An action plan based on recommendations from that investigation was subsequently developed by the trust and agreed by NHSI. Again, while the hon. Member for Dulwich and West Norwood says that this is a sudden, late intervention by the Government, a chronology of action and support can be shown.

Taken together, these challenges are the reason why NHSI has invested a lot of time and effort in supporting the organisation. It has provided a member of staff on secondment to the trust for two days per week to support the delivery of the action plan and to strengthen governance around RTT performance and reporting. Delivery against the action plan is monitored by NHSI through its formal monthly provider oversight meetings with the trust, and it is working closely with the trust to agree an appropriate timeframe for the sustainable return to compliance.

King’s has received more than £350 million-worth of working capital since 2015-16, and was also successful in securing a £47 million capital loan in April 2017 relating to Windsor Walk. Along with other trusts, King’s has also benefited from £21 million of public dividend capital funding since 2013, covering many central programmes including cyber security and digital care. In the last three years, King’s has invested in new capital assets in excess of the level needed just to maintain their asset base and above the average across all foundation trusts and NHS trusts.

The Department of Health commissioned Deloitte to review the trust special administrator’s analysis of the split of South London’s deficit, pertaining to when the Princess Royal came within the trust, and to provide an updated view of the split of the forecast out-turn deficit for 2013-14. Its assessment of the Princess Royal University Hospital’s share of the deficit for the full year was approximately £22 million. The trust reported deficits in the three subsequent years, despite significant other integration cost and bridging support revenues. It brought in PwC in the autumn of 2014, and appointed a turnaround director to initiate a financial recovery plan process. The trust then had McKinsey in during 2016-17 to drive a transformation programme, which has been very slow to yield the significant benefits that were promised.

The trust has been subject to enhanced financial oversight since March 2017, which includes the following support from NHSI: a senior financial adviser embedded at the trust; monthly financial oversight meetings with NHSI; participation in the financial improvement wave 2 programme; and, since April 2017, the trust has also received dedicated support from NHSI’s transformation and turnaround team as part of its enhanced financial oversight. More recently, in 2017-18, the trust has had external support from PwC, Ward 20/20, and Bailey & Moore. We need to be clear about what has caused the recent problems at King’s, including its recent rapid deterioration, and what has not, but it is not a lack of support and consultancy.

The argument that the cause of King’s problems can be found in the merger with Princess Royal, which several Members raised as a contributory factor behind the subject of the debate, does not stand up to scrutiny. In October 2013, King’s College Hospital Foundation Trust completed a transaction to acquire Princess Royal University Hospital and Orpington Hospital on the back of the trust special administrator’s recommendations regarding South London Healthcare Trust. The trust also took over responsibility for additional services at Beckenham Beacon, Sevenoaks Hospital and Queen Mary’s Hospital, Sidcup.

In the summer of 2013, King’s presented a five-year integration plan that showed small net surpluses of £2 million to £4 million in each year from 2013-14 onwards. The plan was assessed to be of medium risk by Monitor’s assessment team, but was none the less plausible thanks to generous support funding agreed by the Department of Health and NHS England at the time. The trust’s current financial problems reflect, as I said earlier, a continued overreliance on non-recurring savings, instead of delivering recurring benefits through cost improvement programmes and especially a failure to improve medical productivity at both the Denmark Hill and Princess Royal sites.

Model Hospital data, which is available to the trust, suggests that the trust has significant opportunities for efficiencies in areas such as orthopaedics. NHSI is supporting the trust to develop its cost improvement plan programme for 2018-19, which includes developing schemes based on validating those potential opportunities.

While there is never a single cause in such cases, and while we have acknowledged the pressures being felt across the system, the clear conclusion to draw from the evidence is that King’s was an outlier in financial terms and had lost its grip of its finances in recent months. I spoke with the trust’s chief executive yesterday and he acknowledged that there had been a serious problem with the trust’s financial planning process. Defects in the way the trust’s plan was put together eroded the regulator’s confidence in the trust, and it is for that reason that the trust has entered into special measures for its finances. The financial special measures regime has a proven track record of success in supporting trusts, as shown with North Bristol NHS Trust, which recently exited the special measures regime.

In losing control of its finances in the way that it has, King’s has effectively taxed others in the NHS, which is why it is right that NHSI took action in the way that it did. This organisation got itself into a very bad financial position and now needs a great deal of help and support. As the right hon. and learned Member for Camberwell and Peckham set out, we can agree on both sides of the House that King’s needs support. It is for that reason that the regulator has intervened to put it into special measures.