£2bn spent on NHS hospital mergers, King’s Fund finds

24 Sep 15

Around £2bn has been spent on 12 hospital mergers in the last five years, a report by the King’s Fund has found, but there is growing evidence that the amalgamations do not lead to the intended efficiency benefits.

In an examination of 20 mergers of NHS trusts and foundation trusts between 2010 and 2015, the think-tank has been able to access financial information for 12.

The analysis found that these high-profile deals, which included the merger of Royal Free London NHS Foundation Trust with Barnet and Chase Farm NHS Trust, and Central Manchester University Hospitals joining with Trafford Healthcare NHS Trust, did not resolve difficulties faced by the hospitals beforehand.

The majority of the mergers studied were initiated by national regulators or special administrators, the Foundation trust and NHS trust mergers report notes. The moves were intended to help NHS trusts become foundation trusts or to rescue them from financial difficulty.

However, King’s Fund project director Ben Collins, who authored the report, said NHS leaders have been “betting the farm on time-consuming, costly and risky mergers, despite a lack of evidence that they lead to more sustainable organisations”.

Recent NHS history revealed a series of “failed, or at least profoundly troubled, mergers”, he added.

“The £2bn spent on 12 hospital mergers over the past five years contrasts with just £200m so far made available to support the new models of care being rolled out across the country under the plans in the NHS Five Year Forward View. Instead of promoting mergers, NHS leaders should focus on developing alternative solutions that address the underlying causes of the problems facing struggling hospitals.”

The report concludes that in many cases there was never a clear rationale behind merger plans, with serious weaknesses in the assessment of alternative options. It also notes that mergers continued to be pursued despite growing evidence that they were unlikely to deliver the intended benefits. There was also little recognition of the disadvantages of creating larger and more complex organisations.

Most of the £2bn funding for the deals was used to write down historic debts or to cover deficits and capital investment, rather than on reforms to make the merged organisations more sustainable. This indicated the mergers were often undertaken as a way to secure financing that would otherwise not have been made available, the analysis states.

Responding to the report, Paul Healy, a senior economic advisor to the NHS Confederation, said mergers are one of many options available to NHS leaders when deciding the future of their local service.

“NHS leaders now rarely select mergers as their preferred choice because our members are becoming increasingly aware of the challenges it presents,” he stated. “It would be short-sighted, though, to rule out mergers altogether because the decision on how best to deliver care needs to be made locally. It should be based on the needs of the local population using an informed analysis of the benefits and risks.”

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