England’s biggest hospitals veto NHS budget over patient safety fears

England’s biggest hospitals are refusing to sign off their annual budget deal with the NHS, claiming that the £1.7bn of cuts involved will mean they can no longer guarantee the safe care of patients.

In an unprecedented move, hospitals that provide 75% of all NHS hospital care have vetoed plans drawn up by Monitor, the NHS’s financial regulator, to reduce their income to help the service balance its books. “We have now reached the point where patient care is at risk,” the hospitals said.

NHS Providers, which represents 94% of hospitals, said its members could no longer “achieve the impossible” by absorbing a fifth successive year of cuts to the payments they receive for treating patients under the tariff system.

“After five years of unprecedented price cuts, with NHS providers realising more than £20bn of savings over this parliament, objecting to the tariff for many represents a last resort to have their concerns heard, as they can no longer guarantee safe and effective care unless they are properly and fully paid for the patients they treat,” said Chris Hopson, the chief executive of NHS Providers.

Some patients could end up not being treated at all as a result of the public row over where the NHS’s money went, he warned.

If hospitals were not paid the full amount for the care they provided, he said, they might only provide as much care as they could, based on their budget.

An estimated 80% of England’s 160 acute hospital trusts are either already in the red or at risk of ending the 2014-15 financial year in late March with a deficit.

Hospitals are already facing the loss of another £1.9bn of their £40bn annual income to help fund the Better Care Fund, which starts in April and is meant to keep patients healthier at home to relieve the growing pressure on hospitals.

NHS England, which distributes the service’s £97bn budget, said giving in to the hospitals’ demands would mean less money for GP services, accident and emergency units, mental health care and ambulance services.

“Since the overall NHS funding totals for 2015-16 are now agreed, any fundamental changes to benefit one set of providers would in practice mean robbing Peter to pay Paul,” a spokeswoman said.

The row leaves the NHS in uncharted waters because there is now no agreement over how much hospitals should be paid for work done from 1 April.

It could force the chancellor, George Osborne, to give the NHS more money for 2015-16 in his budget on 18 March, over and above the extra £2bn a year he promised to provide from April in his autumn statement.

The Monitor deal would reduce hospitals’ income by £1.2bn by applying a 1.9% cut to tariff payments, forcing them to save 3.8% of their entire budget by being more efficient – a target hospitals say is completely unrealistic.

They also object to the regulator’s plans to cut £220m from the amount they receive for providing specialised medical services to patients with rare conditions and to an attempt to save another £290m by giving hospitals only half the real cost of treating some A&E patients.

NHS England said the extra £31bn hospitals had received over the past two years for specialised services should mean they could accommodate the £220m cut.

Although the identity of the hospitals rejecting Monitor’s plans was not disclosed, they are understood to include large teaching hospitals which provide many of the NHS’s most vital services, such as the Kings College Hospital and University College London trusts in the capital, University Hospitals Birmingham and Cambridge University Hospitals, which runs Addenbrooke’s hospital.

Richard Murray, director of policy at the King’s Fund health charity, said of the hospitals’ move: “It signals that the policy of implementing year-on-year reductions in the prices paid to hospitals for their services has reached the end of the line.

Murray, a former senior official with the Department of Health and NHS England, added: “It is not clear what the outcome will be but, with just three months to go before the start of the financial year, it will throw financial planning in the NHS into disarray.”

With growing evidence that holding down NHS staff pay is not sustainable, the row shows that the two main ways the NHS has tried to save money since 2010 “have now been largely exhausted”, Murray said.

Under the rules governing how tariffs are set, Monitor can be forced to rethink its proposals if objections are raised by more than 51% of trusts, measured either by number or their share of all NHS activity.

Trusts which undertake 75% of hospital work, and 13% of the 211 GP-led clinical commissioning groups, objected.

Monitor will now have to revise its plans, call in an independent arbitrator or ask the Competition and Markets Authority to settle the dispute. In total, 37% of trusts signalled their opposition.

A Monitor spokesman said the regulator and NHS England were “now considering the feedback received from the consultation and possible next steps, in the context of what the legislation permits in the event that an objection threshold is breached”.

One of its options included “engaging with the sector then reconsulting on revised proposals”.

Andy Burnham, the shadow health secretary, said the spat showed that the NHS was deteriorating rapidly under the coalition.

“Once again, [the health secretary] Jeremy Hunt is failing to provide the leadership the NHS desperately needs,” Burnham said.

“The NHS is becoming mired in a sense of crisis and confusion because of his mismanagement.”