Financial risks for Guy's 'rising' (CORRECTED)

CORRECTION (PUBLISHED 4 MARCH 1993) APPENDED TO THIS ARTICLE

GUY'S HOSPITAL, the Government's flagship NHS trust, faces 'increasing financial risks' because of cash-flow problems and high debt payments, according to the first independent analysis of health service trust accounts.

Along with the Nuffield Orthopaedic Centre, Oxfordshire, and the Northern General in Sheffield, Guy's was using more than half its income from operations to pay interest charges for capital works last year, the analysis states.

However, only two of the 57 first-wave trusts ended the financial year in deficit. These were the Manchester Central Hospitals and Community Care ( pounds 706,000), and North Middlesex ( pounds 425,000) trusts. The Nuffield Orthopaedic Centre was the least dependent on health authority funding, with private patients accounting for 9 per cent of its income in 1991-92.

The analysis, carried out by the financial consultants Newchurch & Company, found that all but eight of the trusts exceeded the Department of Health minimum requirement of a 6 per cent return on capital investment. But rates of return were distorted or inflated by mistaken assumptions about capital values, made before the collapse of the property market.

Performance, in terms of quality and quantity of patient treatments, is difficult to assess and compare as most of the information is financial, the analysis says. 'There is a danger that a laudable intention to maximise accountability may, through an over-reliance on possibly inappropriate measures, mislead policy-makers and managers alike.'

The use of traditional company account formats by NHS trusts may be an unsatisfactory method of reporting on 'social businesses' such as hospital and community health services, the report states. Better alternatives may be modelled on accounting systems adopted increasingly by banks, building societies and charities. Introducing such a variation would 'remove the temptation to gear performance to meet artificial targets', Kingsley Manning, Newchurch managing director, said.

Under the 1990 NHS and Community Care Act, trusts must subject their annual accounts to independent audit. However, many failed to include independent audit reports in the accounts they submitted to Newchurch.

Four more NHS hospital and community health units were approved yesterday by Virginia Bottomley, Secretary of State for Health, for transition to trust status from 1 April. They are Cornwall Healthcare; West Country Ambulance; St George's Healthcare, south-west London; and the Coventry, Warwick and Walsgrave Hospitals. From April, 293 trusts will be in operation.

Third Newchurch Guide to NHS Trusts 1993; Newchurch & Company, 12 Charterhouse Square, London EC1M 6AX; 071 608 1822.

CORRECTION

We have been asked by the Northern General Hospital in Sheffield to point out that it used more than half the cash generated from operating activities to pay interest charges in 1991-92, and not half their income as stated in our report on 9 February about the Third Newchurch Guide to NHS Trusts 1993. We apologise for the error.