Innovation in capital funding by public hospitals during austerity: Evidence from the English National Health Service

Continuing cost and demographic pressures are posing challenges to healthcare systems in many countries and to address these, investing in hospital infrastructure is essential to ensure a sustainable and efficient delivery of hospital services. However, due to tightening financial conditions, many healthcare systems face increasing difficulty in mobilising the capital resources required for healthcare investments. In this article, using a panel dataset on English publicly funded hospitals covering 2015–2021, we investigate how NHS hospitals' income generation, including growing revenue from private patients, and access to different borrowing facilities are associated with hospitals’ capital expenditure. We further examine how these associations differ across NHS Foundation Trusts and NHS Trusts, with the former enjoying greater financial autonomy. Our findings show that private patient income is positively associated with capital expenditure for Foundation Trusts, but not for NHS Trusts. Similarly, subsidised borrowing facilities are positively associated with capital expenditure for Foundation Trusts, while no such relationship is observed for NHS Trusts. We argue that these patterns reflect a growing hybridity in hospital funding models, in which commercial income streams and public financing mechanisms increasingly intersect, but with uneven effects across organisational forms. We conclude by discussing the implications of the NHS capital regime for the growing divergence in capital investment patterns across English hospitals.