Financial distress of NHS hospitals has parallel in much-criticised banking practices, says Professor Geoff Meeks of Cambridge Judge Business School.
Financial woes in National Health Service hospitals have disturbing parallels in a widely criticised model once deployed by the banking industry to “artificially distress an otherwise viable business”, says Geoff Meeks, Professor Emeritus of Financial Accounting at Cambridge Judge Business School.
Writing in the British Politics and Policy blog of the London School of Economics, Meeks cites the Tomlinson Report written in 2013 by Lawrence Tomlinson, the Entrepreneur in Residence at the Department for Business, Innovation and Skills – which analysed the relationship between “a major stakeholder and its clients”, in that case banks and businesses they loaned to.
“In Tomlinson’s model, the process might begin with a bank’s client committing a technical breach of a loan agreement which has ‘no bearing on the performance or viability of the business’. Then a series of responses by the bank could tip the client into financial distress,” Meeks writes.
In thrust if not details, there are “powerful echoes in the financial relationship” between the UK government and the NHS” concerning hospitals, Meeks says.
“Like the distressed commercial borrower in the Tomlinson model, the English hospitals are largely tied to a single funder”, the UK government, and most have seen a sharp recent deterioration in their finances. And while commercial firms at least have the option of trying to raise prices, close unprofitable activities or reducing service levels, NHS hospitals have few such options.