King’s College Hospital

Helen Hayes Excerpts

Tuesday 16th January 2018 Westminster Hall

[Mr Philip Hollobone (in the Chair)]

The good news for our next speaker is that she has an extra 10 minutes for her debate, because we can move straight on.

[Helen Hayes (Dulwich and West Norwood) (Lab)]

I beg to move,

That this House has considered King’s College Hospital finances.

It is a pleasure to serve under your chairmanship, Mr Hollobone. I am pleased to have secured this debate on the finances at the King’s College Hospital NHS Foundation Trust, which I have been seeking for some months. It has been clear to me that the trust has been heading towards a crisis, which came to a head shortly before Christmas, when NHS Improvement took the trust into financial special measures. The debate is therefore timely.

To date, the Government have responded to the crisis at King’s as if the problem has arisen suddenly in the short term. I want to use this debate today to set out clearly the causes of the problems at King’s, which can be traced back to 2010 and 2013. I also want to ask the Minister to take seriously the complexity of the current situation at King’s and to take action now to allow it to stabilise and rebuild. There is ample evidence of a crisis across the whole of our NHS this winter, and I want to emphasise that the situation at King’s is a warning sign for the NHS that the Government must heed.

My relationship with King’s goes back 20 years. I have been a surgical patient and an out-patient at the hospital. I gave birth to my children there. Both were delivered by the same amazing midwife, whose name we chose as a middle name for our second daughter. My mum worked at King’s for 10 years until she retired. The situation at King’s is as personal and as important to me and my family as it is to tens of thousands of my constituents.

King’s is an extraordinary hospital. As a major teaching and research hospital, it undertakes world-leading work across more specialisms than any other hospital, including liver transplants, maxillofacial surgery, foetal medicine, neurosurgery, neonatal intensive care, cardiology and sexual health. As a major trauma centre, the emergency department saves the lives of critically ill and injured patients every single day. The work of its trauma surgeons is pioneering. Together with the specialist nurses, anaesthetists and other clinical staff, they were at the frontline of treating critically injured victims of the Westminster and London Bridge terror attacks and the Grenfell Tower fire.

In south London, we are enormously proud of King’s specialisms and its major trauma centre, but it is also our district and general hospital, where people have antenatal scans, give birth, have their appendix removed, have hips and knees replaced, have broken limbs fixed, have cataracts removed, recover from strokes, and receive help to manage diabetes, sickle cell disease and many other health conditions. King’s has a very special place in our community. I pay tribute to the extraordinary skill, commitment, dedication and care of the 15,000 staff at King’s. I have spoken to many staff in recent weeks. All of them, including the consultant with 32 years of experience I met yesterday, say that things have never been tougher. I want to put on the record my gratitude for everything they continue to do.

My constituents are desperately concerned about the plight the hospital currently faces. King’s has been on a journey over the past 20 years. Back in 1998, when I was an in-patient, it was a struggling, failing hospital, where patients were treated in overcrowded conditions and waited on trolleys in accident and emergency. Years of Labour investment transformed it, so that by 2010 it was meeting all of its main clinical targets, had recruited many more staff, and was consistently achieving a small financial surplus each year.

I am concerned that, despite the incredibly hard work of the brilliant staff at King’s College Hospital, that journey has come full circle—the days that we thought had been left behind at King’s have now returned. The hospital is regularly more than 100% full, with meeting rooms and storage space being used for beds; it has been consistently failing to meet the four-hour waiting time target in A&E, or the 18-week referral-to-treatment target; and it is not meeting its key cancer targets.

I want to be absolutely clear with the Minister that the causes of the problems at King’s have roots that go back to events in 2010 and 2013, which could have been predicted by the Government and Monitor, and which absolutely should have been prevented. I draw the Minister’s attention to four key issues. First, the rate of funding increase for the NHS was significantly cut from 2010, from 3% to 4% under the previous Labour Governments to 1% under the Tory-Lib Dem coalition Government. There was therefore no way that the funding was ever going to keep pace with inflation, let alone increases in drug and treatment costs and increasing demand. The fact that we are all living longer is a positive thing, but since older people use health services far more than younger groups in the population, it creates an entirely foreseeable increase in the need for health services. That can be managed and minimised when good-quality social care is available to everyone who needs it, but over the same period £6 billion has been taken out of social care. At the Princess Royal University Hospital, which is part of the King’s trust, 20% of older patients are clinically fit for discharge but have nowhere to go—a direct example of the extra burdens that the Government’s inadequate approach to social care is having on the NHS. The false economy cuts are simply adding to the pressures in our NHS, as people who should be able to maintain their health at home with good support end up requiring acute care.

The second key issue affecting King’s is a result of the 2013 decision for it to take on two hospitals—the Princess Royal University Hospital and Orpington Hospital—from the failing South London Healthcare Trust. Following that decision, the Government and Monitor should have insisted on a review period to ensure that the new expanded trust had the right level of support and resources to run the hospitals, but they did not do so. From that moment on, the finances of the new trust deteriorated rapidly. The situation at the Princess Royal was far more complex than anticipated, but there was no review of funding in the light of new and more detailed information about the level of investment required. That 2013 decision fundamentally destabilised the finances of the trust.

The third issue is the challenge of the competing responsibilities of emergency care, including the trauma centre and elective surgery. The King’s trauma centre generates its own demand, which increases year on year, but the funding for emergency medicine is by way of a block grant. There is no increase in funding that is in any way responsive to that demand. It cannot be right that, when King’s staff step up to the plate in response to terror attacks or the Grenfell Tower fire, there is no additional funding to cover the costs of the additional work. Elective surgery is paid for by procedure, so when the demands of emergency admissions, whether because of an increase in flu cases, or a major incident, force elective operations to be cancelled, there is loss of income in addition to an increase in costs. That creates knock-on financial consequences for the trust as a whole.

Fourthly, the limited capital funding since 2010 has meant that staff at King’s have not been able to plan strategically for the facilities the hospital needs to cope with increasing demand. The King’s College Hospital site at Denmark Hill is very constrained for a major hospital, and it has been developed piecemeal over many years. Large parts of the hospital estate are no longer fit for purpose, and additional ward space is urgently needed. King’s will open a new state-of-the-art critical care unit later this year, the largest in the country, but the trust has not been able to expand its general ward capacity, which will potentially result in additional pressures as patients leaving critical care compete with emergency admissions and elective surgery patients for insufficient beds.

The four challenges I have described have been evident for some time, but the Government’s approach, rather than to undertake a review of the finances and agree a sustainable funding settlement, has been to set more and more unrealistic targets for financial savings; to refuse King’s the sustainability and transformation funding that other hospitals have been awarded; and to fine King’s for being in a challenging financial situation.

Since 2015, at the behest of Monitor and later NHS Improvement, vast sums of money that could have been spent on patient care have been spent on management consultants. At one stage the trust was paying a single firm of management consultants more than £1 million pounds a month. The trust has been asked to make punishing savings when it has no control over the demand for its services or some of its costs, but the management consultants have not been judged on their ability to deliver sustainable, lasting improvements—theirs has been a one-way street of throwing good money after bad.

It is absolutely the case that the Government have known about the financial situation at King’s for some considerable time, yet on top of an already unmanageable financial situation, the Government proposed completely unrealistic control totals, in essence setting the hospital an unachievable target for making savings, then punishing it with financial penalties for failing to do so. Since last year, King’s has been under enhanced regulatory oversight by NHS Improvement, technically a similar situation to being in financial special measures, with NHSI staff permanently in the hospital and a high level of scrutiny.

Over the past three years King’s has made savings of more than £200 million, more than twice the average level of savings of trusts across the country over that same period. King’s has done that while maintaining standards of care that are on the whole very good. The Government have known about the financial situation at King’s for three years, the Government have been directly involved with the situation at King’s, and the Government are culpable, yet instead of taking responsibility for the situation and acting to ensure that King’s has the resources it needs, the Government have required King’s to do the impossible and punished the trust when it has been unable to deliver.

The Government must now take responsibility for the situation and ensure that the King’s College Hospital NHS Foundation Trust is not allowed to fail any further. I therefore ask the Minister to do the following: to undertake a full review of the finances at King’s, starting with an analysis of what is required to deliver safe and effective care across all areas of treatment and responsibility; to make a commitment that financial special measures will not mean just forcing through the proposed control totals, which simply cannot be met without jeopardising patient care; to guarantee that there will be no threat to any of the services provided at King’s on which my constituents and residents in the wider south London and the south-east area rely; to agree a capital funding settlement to enable King’s master plan for Denmark Hill to be implemented, so as to deliver the space and facilities the hospital needs now and for the future; to guarantee that financial special measures will not mean an increase in the interest rate that King’s is charged on its deficit; and to revise the funding formula so that King’s is not hit financially when it steps up to respond to major incidents and London-wide emergencies.

I will end with this: King’s is a special trust and some attributes of it are unique, but the pressures and challenges it faces can be found in NHS hospitals up and down the country. Until the Government recognise that and choose to make a long-term commitment to fund the NHS to provide the services our ageing population needs and to stop the outflow of NHS funds into private profits, our NHS is not safe in their hands.

[Several hon. Members rose—]

--- Later in debate ---

[Stephen Barclay]

Indeed, I am happy to give consideration to the point my hon. Friend makes, although if one looks at the deficit for this year, which I will come on to in my remarks, one will see that the bulk of the deficit is not from the Princess Royal but from the other sites, so it does not pertain to the 2013 decision. I will come on to that more fully as I develop the case.

I will also say to the right hon. and learned Member for Camberwell and Peckham (Ms Harman), who recognised that the staff at King’s want to deliver, that I agree with her on that point. It is not about apportioning blame to those members of staff. Indeed, the financial special measures are about giving additional assistance to King’s to address those points, rather than seeking to blame them. I think there is a shared desire from both sides of the House to get the right outcome for King’s. I am very happy to agree with her on that.

It is a fact that King’s is a challenged organisation. We are putting a lot of effort into supporting it. King’s is receiving substantial financial support from the Department. The trust has received more than £100 million of support to maintain frontline services, the second-highest level of support to any individual trust across England. Placing King’s in special measures for financial reasons is a regulatory action to bring about swift improvement and address the trust’s financial challenges. NHSI is working with the trust to undertake a rapid review and agree a financial recovery plan.

Under the financial special measures programme, the trust will receive extra help and oversight, with the appointment of a financial improvement director. The organisation will also be required to draw up and deliver a plan to improve its finances, which NHSI will closely monitor. That will include support from peer providers where appropriate. On top of those special measures, NHS Improvement has also appointed Ian Smith as a new and experienced interim chair for King’s, to take control of the organisation’s position. He was appointed, as I am sure the hon. Member for Dulwich and West Norwood is aware, on 21 December and took up that role with immediate effect.

It is a fact that some profound financial issues at the trust need to be addressed. The trust agreed a budget deficit of £38.8 million in May 2017, yet just five months after the board had agreed that deficit it submitted a re-forecast deficit of £70.6 million, and a further two months later, in December 2017, the trust informed NHS Improvement that its current mid-case projection had worsened again to around £92 million. So, an agreed board position of a deficit of £38.8 million had within seven months gone up to a deficit of £92 million. That is really at the heart of this. When measured, that level of deterioration is an outlier, which is why the chief financial officer and chief operating officer both resigned in November 2017, and the chair resigned, as hon. Members have pointed out, in December 2017.

When announcing the financial special measures, Ian Dalton, the chief executive of NHSI, noted of other hospitals that

“none has shown the sheer scale and pace of the deterioration at King’s. It is not acceptable for individual organisations to run up such significant deficits when the majority of the sector is working extremely hard to hit their financial plans, and in many cases have made real progress.”

[Helen Hayes]

The extent of the financial challenge facing King’s is well documented, and I recognise the figures that the Minister quotes. However, he has not yet recognised the extent of financial savings that King’s was already making. It is not an organisation that had been resisting the need to make savings; it has been making, on average, double the level of savings of any other trust in the country. That points to a situation in which the level of resource afforded to the trust is simply not enough to deliver the day-to-day responsibilities of keeping patients safe. Will the Minister recognise the extent of the effort that has gone into saving significant amounts of money out of the trust’s finances?

[Stephen Barclay]

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.

[Helen Hayes]

I thank the hon. Member for Central Suffolk and North Ipswich (Dr Poulter), who is not in his place, for bringing his experience to the debate. I am pleased that, having looked at the issue in some considerable detail when he was a Minister, he recognises, as the Minister seems not to, the problems that the merger of King’s with the Princess Royal and Orpington Hospital has caused for the trust.

The fact of the matter remains that the trust’s finances were stable and it was performing well on every measure until that merger took place. It has never been the same since. The combination of the drop-off in the increase of funding year on year, which has affected the finances at Denmark Hill and the organisation’s resilience to carry across costs to the Princess Royal and Orpington, with the irresponsible lack of a review mechanism for the funding settlement post-merger has, in my view, played a major role in destabilising the finances.

I thank my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman), who has been a formidable champion for King’s for more than 35 years. She knows very well from direct experience exactly how bad things have been in the past at Denmark Hill, and how close we are to seeing once again those terrible circumstances of patients waiting far too long in A&E to receive the treatment they need so badly.

In summing up, I want to highlight two points on which I disagree with the Minister’s analysis. First, notwithstanding the support that the Government are putting in, they maintain a punishing approach to the finances of NHS trusts that are in financial difficulty. A system for funding our NHS that takes a trust that is already under financial strain, fines it and charges it additional interest for failing to meet impossible targets is a system that makes no sense at all. A system for funding our NHS that funds on a block grant basis emergency admissions, the volume of which hospitals have no control over, and then cancels elective operations, which deliver the revenue into our hospitals when pressures come through the front door of accident and emergency, is a system that makes no sense. The Minister has not addressed that conflict and the perversity in the funding system for the NHS.

Finally, I urge the Minister to consider very carefully the need for substantial capital investment in King’s at Denmark Hill. I am concerned that when staff at King’s hear talk about failures in efficiencies, and when the Minister talks about the failure to improve medical productivity, the inference is that staff are somehow not working hard enough.

[Stephen Barclay]

To clarify, that is absolutely not the point. The point is about billing and how rotas are managed. It is not about whether staff are working hard or not. We very much recognise that they are.

[Helen Hayes]

I am grateful for that clarification, but that needs to be communicated very clearly to staff, who are feeling the pressure of this crisis. When we talk about efficiencies at King’s, they are in a lack of buildings, ward capacity and fit-for-purpose facilities to deliver when facing the challenges that are coming through its front door every single day. That matter urgently needs to be addressed as part of this turnaround process.

Question put and agreed to.

Resolved,

That this House has considered King’s College Hospital finances.