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Health secretary forced to bow down

29 November 2013

Services at Lewisham Hospital were saved by the recent Court of Appeal decision but what does this mean for the government's NHS reforms? 

The health secretary, Jeremy Hunt, suffered what has been described as an "embarrassing defeat" in the Court of Appeal at the end of October, when the court upheld an earlier decision that he had acted outside his powers in ordering the closure of certain services at Lewisham Hospital. Any threat to close hospital services generates press but this decision has wider ramifications outside Lewisham and poses serious questions about the viability of the government's NHS reforms, in particular its objective to drive efficiencies through increased financial accountability of NHS Trusts.   

A number of NHS Trusts have been operating with a deficit for years now, propped up with central government support. Clearly this is not consistent with the new regime and so in July 2012, for the first time, the then health secretary, Andrew Lansley, implemented the procedure under the NHS legislation (the NHS Act 2006, as amended) to appoint a 'Trust Special Administrator' (TSA) to oversee the administration of the South London Healthcare NHS Trust. The Trust had been operating a longstanding £69m deficit on a £424m turnover.

The TSA ran a consultation and duly produced a report on what should happen to the South London Healthcare NHS Trust. He recommended that it should be broken up and its three hospitals transferred to other nearby Trusts, including the Lewisham Hospital Trust. The new health secretary, Jeremy Hunt, agreed. No one is disputing this part of the TSA's recommendations. 

The dispute is all about the TSA's further recommendation that to accommodate the transfer of one of the hospitals to the Lewisham Hospital Trust, certain services at Lewisham Hospital should be shut. The local Lewisham community and Lewisham Hospital objected to this recommendation.

The Court of Appeal agreed that the drafting of the NHS legislation only gives the TSA the power to make recommendations (and the health secretary the power to implement them) in respect of the particular NHS Trust in administration, not other Trusts. The court therefore agreed with the Lewisham protest group that the TSA could not recommend (and therefore the health secretary could not implement) any change to the services at Lewisham Hospital. To make these changes, the health secretary needed to follow an entirely different procedure under the NHS legislation, one with its own consultation process and a much longer timeframe.  

This gives the government a problem. An effective TSA process is crucial to the government's proposition that NHS Trusts must be allowed to fail as the process is supposed to provide a definitive, relatively quick solution that ensures both continuity of health services and a pragmatic turnaround plan.  

But what use is the TSA process if it can only make recommendations about the operations of a single NHS Trust? Local health economies don't work like that - they are complex and  interdependent and savings can only be made by taking a more holistic view. The necessary efficiencies identified by the TSA as part of the overall package cannot all be delivered without implementing the knock-on effects at Lewisham. This means that the inefficiencies will continue just as before, unless and until the changes are eventually approved under the 'regular' process, a process which itself has a significant time and cost.  

The government has a difficult decision. Either it keeps the legislation as it is and accepts that any TSA process produces half-baked solutions without significant cost savings, or avoids using the TSA process and keeps subsidising failing Trusts - neither of which seem to be consistent with its efficiency agenda. Or alternatively it seeks to amend the NHS legislation to give the TSA wider powers to recommend services to be taken away from viable Trusts risks as part of the overall package. 

The implication of amending the legislation to allow this is that services at a viable Trust can then be cut 'by the back door', avoiding the usual consultation process and this is likely to be hugely unpopular with the public and the unions. This would be a major political battle and despite Jeremy Hunt's response to the Court of Appeal decision that he would "look at the law to make sure that at a time of great challenge the NHS is able to change and innovate." it is hard to see the government pressing for this change with the 2015 election looming, given the uphill struggle to pass its reforms to Primary Care Trusts and so on in 2011/12.   

What may have felt to Mr Lansley like a bold and decisive move at the time is giving Mr Hunt a real problem now.

For more information please contact Mark Smith, Partner

T: +44 (0)20 7427 6722