Regulator warns that foundation trust financial plans may prove over-optimistic

Published on: 10th August 2009

Three year plans submitted by NHS foundation trusts to Monitor may prove to be optimistic given the potential funding challenge ahead.

NHS Foundation trusts are required to submit their three year plans, including their financial forecasts and whether they will continue to meet national targets and standards of care, to Monitor every year. We review these plans in detail and assign governance, financial and mandatory service risk ratings to each NHS foundation trust.

The 2009-10 Annual Risk Assessment, published today, summarises the three year plans of the 115 foundation trusts authorised at 31 March 2009.  It shows that:
 

  • The 115 foundation trusts authorised as at 31 March 2009 are forecasting a combined income of £26.2 billion in 2009-10, representing growth of 4.2% on incomes in 2008-09. Their combined plans deliver a net surplus of £353 million (1.3% of income).
  • They are forecasting continued growth in revenues after 2009-10 (2.1% in 2010-11 and 1.6% in 2011-12), with similar growth in costs (1.6% and 1.1%).
  • Over the three year period, EBITDA margins are forecast to grow from 7.6% to 8.5%.
    Planned growth in income is a continuation of historic trends, but may not adequately reflect the potential for lower future NHS funding in the later years of their plans. This has led to Monitor’s concerns that these forecasts may appear overly optimistic, particularly in 2011-12.
  • There is a significant increase in forecast capital expenditure of £1.9 billion compared to £1.3 billion in 2008-09. Capital expenditure is forecast to reduce in later years. Cash balances are forecast to decline from £2.8 billion at 31 March 2009, to £2.2 billion at 31 March 2010.
  • 104 foundation trusts (90%) are declaring a green governance risk rating for 2009-10. This means that they expect to meet all or most of the national standards and targets throughout the year. Ten have declared a rating of amber and just one trust has declared a rating of red.
  • Total membership of foundation trusts grew 11% to 1.5 million at 31 March 2009. Foundation trusts held 353 elections during 2008-09, 283 of these with more than one candidate - meaning 80% of elections were contested.

Stephen Hay, Monitor’s Chief Operating Officer, commented:

“Although we have found that NHS foundation trusts are consistently improving the quality and robustness of their financial planning, we are concerned that the plans prepared earlier this year may now prove over optimistic - particularly for the years from 2011.

“That’s why we have required all FTs to submit a ‘downside’ forecast for 2011/12 to us by the end of September. These will outline what their financial plans could look like given a more pessimistic view on funding.

“As funding begins to tighten, areas of financial and operational weakness may start to appear in some trusts. It’s crucial for foundation trust boards to address these situations early and effectively to meet increased challenges from 2011.  Boards should be scrutinising plans and ensuring these reflect the possible future financial environment.”

During 2009-10, Monitor will continue to focus on ensuring foundation trusts are engaged in planning effectively for these future challenges and securing the skills required to meet them.

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Notes to editors

  1. For media enquires please contact Michael Moruzzi on 0207 340 2438
  2. The Review of NHS foundation trusts’ annual plans 2009‐10 is available here
  3. Monitor authorises and regulates NHS foundation trusts, ensuring they are well-managed and financially viable in order to deliver high quality healthcare for patients.
  4. Monitor was established in January 2004. It is independent of government and accountable to Parliament. Monitor’s functions and powers are set out in the National Health Service Act 2006.