PFI deals crippling the NHS with £1.5bn of handouts needed: PAC report There is particular concern over 'unaffordable private finance initiative' deals which means hospitals cannot break even once their annual repayments are made, the report said. Seven trusts with PFI deals will need £1.5bn worth of government handouts over the life of the contracts, the equivalent of £60m a year, it was warned. One trust with a significant PFI, South London Healthcare, has already been placed in administration with others likely to follow. But there are no criteria for when this action is triggered, the report said, with 'rules being made up on the hoof'. Officials did not know what to do with trusts so heavily in debt that they are effectively bankrupt, the highly critical report said. There are 30 organisations which are unviable in their current form, the report said. Margaret Hodge, chairman of the Committee of Public Accounts, said: "The Department of Health could not explain to us how it will deal with an NHS trust that goes bankrupt. Nor could it provide reassurance that financial problems would not damage the quality of care or equality of access to all citizens, wherever they live. It very much looks like the Department is inventing rules and processes on the hoof rather than anticipating problems and establishing risk protocols. We are particularly concerned that the financial viability of a number of trusts is being undermined by the fact that they are locked into unaffordable PFI contracts. The report said that overall the NHS in England had a combined surplus of £2.1bn in 2011/12 but that masked the fact that 34 organisations had deficits totalling £356m by March this year. Together there would have been 73 organisations in deficit, if some had not been given handouts from other trusts and the Department of Health, the report said. Over the last five years the Department of Health has handed out £1bn worth that is does not expect will be repaid, even though there is a fear this will be seen as rewarding failure. The report added that the £20bn of efficient savings required between 2011/12 to 2014/15 means major changes to the way patients are treated are needed. The report said: "As the role of hospitals changes and more services are provided in the community it is possible that every trust in the country will have to restructure. In the last two years of the current spending review period services will need to be reconfigured significantly to be able to deliver the scale of efficiency savings needed for the NHS to become financially sustainable. If changes are not made to concentrate and centralise hospital services, and deliver more services in the community, even greater efficiencies will be needed in hospitals to avoid waiting lists rising. Katherine Murphy, chief executive of The Patients Association, said: "This report highlights the financial risk at the heart of the NHS today. The Government's drive to save £20 billion in efficiency savings is putting huge pressure on Trusts. Ultimately it is patients who are paying the price - with substantial evidence to indicate that waiting times are rising, treatments are being withdrawn and staff shortages are occurring. UNISON head of health Christina McAnea said: "What with the dual threat of the £20bn of so-called "efficiency savings" and the enormous burden of PFI repayments, this report raises very serious questions about how these ongoing financial problems are likely to affect the quality of care for patients. Austerity isn't working, yet the government persists with an agenda that puts the health of the public at significant risk. What is apparent from this report is that the government still doesn't have a plan B to solve the financial problems of the NHS, other than carve it up and sell it off to the highest bidder, regardless of their records on patient satisfaction or quality of care. There is no clear message from the government on what should happen when hospitals fail financially. Hospitals are too important to fail, but in the new cut-throat market free-for-all they've created, that prospect becomes more and more likely, and the only people to suffer are the sick and the vulnerable. Mike Farrar, chief executive of the NHS Confederation, which represents most health service organisations, said: "This is a hugely important report. We need the Government to accept that financial pressures are the biggest facing the NHS at the moment. We cannot deal with these issues on a piecemeal basis. Solving these problems requires a fundamental overhaul of where and how NHS services are provided. Propping up struggling trusts with short term solutions is not the answer. We need to take action before we reach crisis point. It is important not to overstate the impact of PFI. It is part of the story, but the fundamental issues are much deeper. We absolutely need to look at alternative funding models for financing NHS estates, but we must also remember that PFI is not the sole reason why organisations find themselves in financial distress. Andrew Gwynne, Shadow Health Minister, said: "Criticism does not come more serious than today's report. "At a time when the Government should be focused on helping hospital trusts through the financial challenge this report shows it is "inventing rules and processes on the hoof," lacks a plan to deal with trusts in serious financial difficulties and cannot guarantee that the quality of patient care will not be affected. This chaos is precisely what we warned would happen when the Government inflicted chaos on NHS finances with a £3bn re-organisation. Ministers must get a grip on the turmoil and put staff and patients first. A spokesman for the Health Secretary Jeremy Hunt said: "The last Labour Government saddled the NHS with £73 billion of private finance initiative debt, which costs the NHS a shocking £1.6 billion every single year. However, despite this the Government has ensured that the NHS is in robust financial health. We have invested an additional £12.5bn in the NHS and £1.6bn of surplus has been carried forward into 2012/13 to help deliver high quality, sustainable health services for patients. The NHS is performing well and is on track to meet its efficiency challenge - latest figures show it has already reported £7bn of savings over the last 15 months. The seven trusts with PFI deals that are expected to need propping up are; Barking, Havering and Redbridge NHS Trust; Dartford and Gravesham NHS Trust; Maidstone and Tunbridge Wells NHS Trust; North Cumbria NHS Trust, Peterborough and Stamford Hospitals NHS Foundation Trust; South London Healthcare NHS Trust; St Helens and Knowsley NHS Trust.