NHS WARDS, departments and even entire hospitals may be forced to close under the latest health reforms designed to extend patient choice, the Government is warned today.

In a damning report, the Audit Commission says the new funding method, where money follows the patient, is destabilising the NHS and fuelling the current financial crisis.

Instead of increasing choice it could have the opposite effect, with services going to the wall unless the payment system is radically reformed, says the commission. It also cautions that critical services essential to support emergency admissions could close down in some hospitals because of the failure to attract patient referrals.

The system of “payment by results” was brought in by the Government for foundation trusts in 2004-05 to improve choice and efficiency in the NHS and is now being extended to all trusts. Commission insiders gave warning that if foundation trusts, the top- performing hospitals, were finding the system difficult to operate it would create turbulence when extended nationwide.

Under the system hospitals charge a fixed price for an operation, which is agreed nationally, and claim the money back according to the number of patients treated.

Efficient, well-managed hospitals are expected to make a profit from the set price, which includes the costs of equipment and staff overheads. But weaker, inefficient hospitals risk exceeding the “tariff” and falling further into debt.

NHS reforms are already causing disputes. An extraordinary battle has developed in Dorset between the primary care trust and the local hospital. GPs received a letter from the Bournemouth Teaching Primary Care Trust (PCT) giving warning that the local hospital, Bournemouth and Christchurch, was working too hard. Payment by results will mean that hospitals are paid by the numbers they treat so, paradoxically, hospitals doing well could be in trouble.

“The hospital is undertaking a lot more work than we have agreed to purchase, and this is causing us a great deal of concern” wrote Debbie Fleming, the PCT’s chief executive, and Paul French, chairman of the executive committee, in a letter that has been seen by The Times. “If action is not taken now, the PCT will face a bill of around £2 million.”

The Audit Commission says that, so far, the system has proved chaotic because of poor budgeting, inadequate IT services and difficulties in predicting patient admissions.

It also claims that hospitals already strapped for cash are having to invest £100,000 each in the new systems, equivalent to £50 million across England.

The NHS is already facing a £254 million deficit, despite record levels of cash over the past few years. One in four NHS trusts is now in financial difficulties.

The commission advises the Government not to go ahead with plans to extend “payment by results” to emergency admissions next year without reform.

Last night Howard Stoate, a Labour MP who is the only praticising GP in the House of Commons, said: “Payment by results does unfortunately have negative side-effects. There is the risk it could put pressure on some (hospital) departments where they are effectively competing against a neighbouring trust and could lose business.

“There is also a risk it could destabilise and put pressure on primary care trusts because they pick up the bill at the end of the day.”

The Liberal Democrats immediately seized on the report. Steve Webb, the party’s health spokesman, said: “Where the Government is bringing in new private sector providers, disadvantaged NHS trusts who operate under payment by results will (suffer) falling revenues, cuts in staff and the threat of closure.”

Andrew Lansley, the Shadow Health Secretary, said: “What I think is a disgrace is if the Government proceeds with payment by results when we know that the NHS has lost control of its costs and the financial management is too weak to implement it.”

The British Medical Association (BMA) has already raised concerns about patient choice with ministers. Last night Jonathan Fielden, deputy of the BMA’s consultants’ commmittee, said: “This is further evidence of the damage that payment by results could do to the NHS if it continues in its current form and in view of the financial difficulties faced by so many NHS Trusts.

“In a market there are winners and losers where NHS units will be forced to close. The Government must face up to the consequences of the future. What happens to accident and emergency, maternity and the management of chronic illnesses when the local hospital faces closure?”

REFORM ROWS

• The NHS is already facing a £254 million deficit, despite record funding
• A survey by the BMA last month found 385 of the 530 primary care, acute, mental health and community NHS trusts in England had deficits totalling £2.4 billion
• The Surrey and Sussex Healthcare Trust has a deficit of £30 million
• St George’s Healthcare Trust in London is losing 60 beds, trying to reduce a £24.5million overspend

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