By Tash Shifrin
The NHS will have to pay private health care firms £229m if contracts for the controversial independent sector treatment centres are not renewed, the government has admitted.
Health minister Ben Bradshaw said that up to £176m would have to be paid out if contracts for the first phase of the ISTC programme alone were allowed to expire.
A contract clause makes the NHS liable for the ‘residual value’ of ISTC buildings if the contracts are not renewed, ensuring that the public sector underwrites the risk taken in establishing the centres.
The programme – originally aimed at providing extra capacity to get waiting lists down – has been dogged by controversy, prompting Health Secretary Alan Johnson to scrap plans for a third wave of centres in 2007.
MPs heavily criticised the contracts for phase one of the scheme, which gave private providers a premium on top of the NHS tariff rate for routine procedures such as hip operations.
They also guaranteed payment for a set volume of operations, regardless of how many were actually carried out. In some areas, NHS trust finance was hit as patients were diverted to ISTCs to use the paid-for capacity.
But in December, the Commons health select committee heard that most ISTCs were still performing well below the contracted number of operations, with the volume sinking as low as 9% of the paid-for level in one case.
Shadow health minister Mike Penning, whose parliamentary questions prompted Bradshaw’s admission, told Public Finance he had been unhappy with the ‘naive’ way the Department of Health had negotiated the contracts, which left the NHS ‘paying through the nose’.
‘What I didn’t realise was there was a clause that if they didn’t renew – or renegotiated a different sort of contract – the taxpayer would be liable for the residual value of the buildings,’ Penning said.
‘The private sector looks like it is going to clobber the taxpayer for large sums of money. It’s a crazy situation to get into.’
Contracts on 13 of the first-wave centres are due to expire within a year. The DoH had initially promised that special arrangements such as the premium payments would not be continued.
But in evidence to the health committee in December, NHS chief executive David Nicholson suggested it had softened its stance in response to the worsening economic climate.
This meant that withdrawing the extra support for the private providers was ‘obviously going to create for them some difficulties’, he told the MPs.
The DoH would have to ‘manage those difficulties going forward if we want to keep choice and contestability in the system, which I think we do’.
A DoH spokeswoman told PF this week: ‘As ISTC contracts come to an end, the department will work with NHS commissioners and independent sector providers to make sure the right decisions are made for the future.’
Where residual value was payable, the buildings could be purchased, ‘enabling the NHS to continue providing services to patients from these centres’.
