South London Healthcare NHS Trust put into administration

South London Healthcare NHS Trust is to be put into administration after it ran into financial trouble, the government has announced.

Health Secretary Andrew Lansley has appointed a trust special administrator to go into the trust.

Mr Lansley said: "I have decided it is in the interests of the health service and, in particular, of the patients the trust serves."

The trust has run up deficits of more than £150m since being created in 2009.

It is the first time an NHS trust has been put into administration.

If South London Healthcare was a business it would have been put out of its misery years ago.

It was formed in 2009 from the merger of three NHS trusts that were already running up debts.

Unsurprisingly those debts have continued to accumulate since, leaving the trust to rely on bailouts each year to stay afloat.

The problems the trust has encountered are not unique.

There are another 20 organisations that are in financial trouble - about a tenth of the hospital network - although none are in quite the state South London is.

Put simply there are too many hospitals in the NHS and not enough work to go round.

This decision - widely expected after the government announced its intention to put the trust into administration two weeks ago - shows ministers are serious about tackling the issue.

What happens next could well define the future approach to hospital reconfiguration.

The trust was created by merging three hospitals - the Princess Royal in Orpington, Queen Mary's in Sidcup and the Queen Elizabeth in Woolwich - and serves more than one million people.

It deals with a high demand for emergency services, with the Queen Elizabeth in Woolwich being one of the busiest hospitals in London.

By the time the hospitals were merged the total annual deficit was about £21m.

To reduce debts the trust cut costs by £47m in 2010-11, but still posted a £40m deficit.

It is expected that even in the best case scenario the yearly deficit of the trust will shrink to £15m over the next five years.

Mr Lansley said the decision to put the trust into administration followed a recent statutory consultation with the trust board, the strategic health authority and local NHS commissioners.

Matthew Kershaw, who works as the national director for provider delivery at the Department of Health, has been appointed as special administrator.

His role will take effect from 16 July and he will "assume full control of South London Healthcare NHS Trust, replacing the functions of the trust board and assuming the role of the accountable officer", the health secretary said.

Mr Lansley added: "At this point, and pending the outcome of the regime, the chair and directors are suspended from their board duties in accordance with the legislation.

"However, some of the executive and non-executive directors will support the trust special administrator in the work he leads during the regime."