Foundation trust and NHS trust mergers: 2010 to 2015

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Mergers of trusts in the NHS are often instigated by national bodies so that NHS trusts can gain foundation trust status or failing providers can be rescued from financial difficulties. This report looks at 20 mergers between 2010 and mid-2015 and finds that significant sums of money are being spent on such mergers (£2 billion on just 12 mergers over this period), often based on faulty reasoning and a lack of evidence that mergers offer lasting solutions.

The Department of Health, Monitor and the Trust Development Authority should support service improvement and transformation where possible, rather than instigate merger. If a merger is contemplated, there needs to be a more realistic assessment of the costs and benefits.

Key findings

  • Between 2010 and mid-2015, almost all of the mergers involving NHS trusts and foundation trusts were initiated by regulators or administrators, with the aim of either helping NHS trusts to gain foundation trust status or rescuing providers from financial challenges.
  • There are serious weaknesses in organisations’ articulation of the case for merger and in their assessment of alternative options.
  • A large amount of money is being spent on such mergers – for example, £2 billion was spent on just 12 mergers during this period. However, it is unclear whether mergers are likely to address the root causes of providers’ difficulties in many cases.
  • While mergers will continue to play a role in the NHS, the Department of Health, Monitor and the NHS Trust Development Authority should rule out mergers as a way for NHS trusts to gain foundation trust status or as a response to failure, focusing instead on supporting actual service improvement and system wide transformation.

Policy implications

  • Given the lack of evidence that mergers typically lead to more sustainable organisations, it is increasingly difficult to justify the amount of funding being dedicated to mergers rather than other potentially more effective approaches to transformation.
  • Where providers contemplate transactions, we need to ensure a higher standard of strategic thinking on alternative options and a realistic assessment of the costs and benefits of merger.
  • Instead of promoting mergers, Monitor and the NHS Trust Development Authority should play the role of sceptical shareholders, providing objective oversight and challenge.
  • The government should ensure greater transparency in how public funds are used and evaluate whether investments in mergers deliver value for money.

Comments

A

Position
-,
Organisation
-
Comment date
24 September 2015
1. just because generally mergers in the NHS have not been completed operationally does not mean they could not be, and could not give the scale and innovation-base benefits that patients need.

2. ref. "overall industrial merger success rates are low", the success rates are much higher when acquisitions are in very similar industries; as is very much the case in NHS trust mergers.

3. the UK secondary health services industry is very fragmented (c.4% market share for largest players); consolidation of more than one step is needed to get to anywhere near the levels of scale that other industries have found to be most effective.

4. as Ben says; "there are some good mergers.... University College London Hospitals" (£900m sales)

Look at pages 4-5 here https://www.uclh.nhs.uk/aboutus/wwd/Annual%20reviews%20plans%20and%20reports%20archive/Annual%20Plan%202015-2016.pdf

" strategy .... to focus on and become world leading in the following areas: • Cancer Services, • Neurosciences, • Women’s Health"

This - as well as the economy of scale and best practice arguments - is why we need merger; completed mergers; in UK secondary health services.

Paul Thackray

Position
Retired,
Organisation
Former Trust Governor
Comment date
28 September 2015
There is rarely the management capability to properly manage a merger of any size. The problems of the smaller organisation are usually duplicated and magnified in the enlarged body. A recipe for failure. When will they ever learn that ego is no substitute for competance.

Barry Francis

Position
Consultant,
Comment date
01 August 2016
Restructuring by merger or otherwise is part of a change process. Change to organisational and legal form will not make a sub optimal service optimal It comes back to effective change management, risk and benefit assessment and management - and people, not just spread sheets.

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