How the high-cost area allowance is worked out

The "market forces factor" is used to decide how much extra money hospitals in expensive locations should be paid. Calculations are based on the amount each hospital pays for land, buildings and salaries.

It looks at the wages paid in the private sector in that area and works out how much each hospital should be reimbursed. Applied as a blanket formula, it is inevitable there will be winners and losers, and any changes spark debates over its fairness.

The formula came into effect last month and was designed to even out the figures. Before, neighbouring hospitals could have been paid vastly different sums.

Last year the formula gave the Whittington Hospital a 37 per cent "uplift", but this will drop to 30 per cent next year and 23 per cent in 2011. This equates to a £4.2 million drop, followed by a £5.2 million drop in income.

The Royal Marsden's uplift will drop from 32 per cent last year to 25 per cent this year, while Chelsea and Westminster will drop from 40 per cent to 27 per cent. They were unable to say how much money this equates to.