More than 20 NHS trusts in the UK are facing the threat of administration due to their inability to pay back loans taken out from from private companies.
South London Healthcare NHS Trust, which comprises three London hospitals, has already been taken over by an administrator appointed by Health Secretary Andrew Lansley after running up a deficit of more than £150m.
Much of the debt has been put down to the Trust's use of a private finance initiative (PFI) – a scheme introduced by the Conservatives in the 1990s to allow NHS Trusts to borrow money from private companies.
Renewed by Labour during the party's last term in power, Trusts continued to make PFI deals to the value of more than £11bn to pay for activities like building work, and now face paying back these loans as well as the related interest.
"Agreements were signed which effectively paid private sector cost when the public sector took the risk. That is indefensible," said Stephen Dorrell chair of the Commons health select committee and a former Conservative health secretary, speaking to Radio 4's Today programme.
Earlier this week South London Healthcare NHS Trust became the first trust to be taken over as part of the “unsustainable providers' regime” introduced by Gordon Brown's Labour government in 2009 that gives the government the power to run hospitals whose deficits are out of control.
The Department of Health has released a list of 21 trusts that are “clinically and financially unsustainable” that could follow the same fate as South London Healthcare NHS Trust. A further five of these are in London, while the rest are spread throughout England.
The move towards administration has been welcomed in some quarters, with the chief executive of South London Healthcare NHS Trust Dr Chris Streather giving it his backing.
Also speaking to BBC Radio 4's Today programme, he said: "There is a huge gap in our financial plan in order for us to become viable in the long term. This intervention, if it solves that problem which it is designed to do, is absolutely welcome and will be helpful.
"It just needs to be done in a way that keeps all those gains in quality that we have made over the last three and a half years."
Similarly, NHS Confederation deputy chief executive David Stout praised the intervention, but warned that wider, long-term aims should not be overlooked in dealing with affected hospitals.
“We welcome the secretary of state's actions as a sign that the Government is beginning to grasp the nettle on some of these difficult issues,” he said.
“When taking over a trust, it is important that the administrator looks beyond hospital care to consider primary and community care in order to make sure services are placed back on a financially sustainable footing"
Not-for-profit healthcare think-thank, The King's Fund, also backed greater action on dealing with trust deficits.
The Fund's chief executive Chris Ham said: “Governments have ducked these issues for too long so this announcement is an important signal of intent from ministers.
“It remains to be seen what action is taken in South London. While the initial priority in this and any other similar cases will be to ensure the continuity of essential services for patients, attention will have to turn quickly to how different, more sustainable, models of care can be provided.”
However, according to the Channel 4 Fact Check blog, too much attention may be being made of PFI's cause in trust debt.
Referencing a list of 22 trusts Lansley claimed in September, 2011, were “on the brink of financial collapse” due to PFI, only six are on the most recent list of “clinically and financially unsustainable” trusts.
“Clearly, as the King's Fund think-tank has consistently said, PFI is only part of the problem,” wrote Channel 4's Cathy Newman. “It was one of four big financial drags on trusts mentioned by the National Audit Office and was only said to be a problem for a small number of trusts”.