OREANDA-NEWS. Fitch Ratings says in a new report that demand for England's public healthcare over the next few years will drive faster spending growth than funding increases, in turn affecting the standalone ratings of NHS Trusts and NHS Foundation Trusts (FTs).

Given the current financial stress of the sector, reliance on borrowing will not be sufficient to fund future capex, which may have to be deferred. FTs have the power to take on loans with commercial lenders and all trusts are now able to borrow from the Independent Trust Financing Facility (ITFF).

The report provides an insight to the background of the National Health Service (NHS) in England. Public healthcare is provided through NHS Trusts and FTs which account for about 1,600 NHS healthcare facilities, of which FTs now comprise about two-thirds. At end-December 2015 (3Q16), there were 88 NHS Trusts and 152 FTs authorised in England.

Fitch assesses the credit profile of all trusts on a standalone basis, but factors in the strong quality of the cash flow, through reliable funding for delivering public healthcare from NHS Commissioners. In addition, the support and willingness to intervene to safeguard patient services if trusts are thought to be failing provide a notching uplift. For FTs, support is through Monitor, the sector regulator for health services. For NHS Trusts, it is through the Trust Development Authority (TDA).

Monitor's main duties are to protect and promote the interests of users of healthcare services by promoting the provision of services that is economic, effective and efficient, and to maintain or improve the quality of services. The TDA is responsible for ensuring that non-FTs develop the capability to achieve independent FT status as well as monitoring performance.

The Secretary of State (SoS) has powers to put failed NHS Trusts into administration. Under the Residual Liabilities Act 1998, the SoS must exercise his statutory powers to transfer the liabilities of the body so as to ensure that all of these are dealt with. Monitor has powers similar to those of the SoS to put failed FTs into administration.

All trusts are primarily funded through the NHS through a tax-based system. Revenue from the public sector has been steady and predictable and has ranged between 80% and 90% of operating revenues over the last decade. Clinical Commissioning Groups (CCGs) are responsible for ensuring that adequate services are available for their local population by assessing needs and purchasing services. The Health and Social Care Act 2012 placed clinicians at the centre of commissioning, freed up providers to innovate, and gave a new focus to public health. Trusts' ability to negotiate and secure annual contracts with CCGs will have a direct impact on revenues.

Since 2013, trusts have had to abide by a licensing regime that, among other things, sets out the mandatory goods and services that they are required to provide, referred to as protected services. Staff costs typically represent 60%-70% of operating expenditure.