Privately run Hinchingbrooke NHS hospital still in debt, says NAO

7 Nov 12
The first NHS trust to be taken over by a private company will need to make ‘unprecedented’ savings in the next ten years to meet its target to become debt free, the National Audit Office warned today.
By Richard Johnstone | 8 November 2012

The first NHS trust to be taken over by a private company will need to make ‘unprecedented’ savings in the next ten years to meet its target to become debt free, the National Audit Office warned today.

Hinchingbrooke Health Care NHS Trust in Cambridgeshire was taken over by Circle Partnership in February this year in an attempt to address the trust’s debt, which then amounted to £38m.

The decision to put the operation of the hospital out to tender was taken by the NHS East of England Strategic Health Authority last year, the NAO said in a report to Parliament. In November 2011, it awarded the ten-year franchise to Circle, which promised to make £311m of savings over ten years and pay off the existing debt.

Such a saving has not been achieved before in the NHS, the NAO report said, with most expected to be made in the later stages of the franchise.

However, auditors found that in the first six months of Circle’s operation – from February to September 2012 – the trust had an in-year deficit of £4.1m. This is £2.2m higher than had been projected by the new operation.

Examining the decision to award the franchise, the auditors found that the SHA ‘did not fully consider the relative risks of bidders' savings proposals’. This meant there was a risk of encouraging over-optimistic bids, they said. However, they noted that the agreement transferred the financial risk, up to £5m, to Circle.

The report also found the SHA had rejected a franchise bid that would have guaranteed some payment towards the trust's cumulative deficit in favour of Circle’s more ambitious bid to repay the debt in full.

Auditors also found that the trust’s performance against standards for cancer and accident and emergency waiting times had improved since Circle took over.

Auditor general Amyas Morse said that as the first example of a private company assuming the management of an NHS trust, it was ‘important that lessons from this procurement process and early operational experience’ be used to improve future contracts.

‘While Circle has made early improvements in some clinical areas, the company will have to generate savings at an unprecedented level,’ he said. ‘The final judgement on the value for money of the franchise will depend on how successfully Circle makes the projected savings and repays the cumulative deficit, while maintaining clinical quality.’

Responding to the report, the NHS Partners Network, which represents independent health care providers working in the NHS, said that the turnaround of Hinchingbrooke ‘was never going to be a short-term task’.

Network director David Worskett added: ‘We fully understand and support the need for the NAO to scrutinise the set-up and progress of new franchises in the NHS.

‘However, addressing Hinchingbrooke's financial difficulties and improving quality of care for the benefit of patients and the NHS was never going to be a short-term task and to try and draw conclusions about the approach Circle has taken at such an early stage is unrealistic.’

It was ‘also important to be cautious over the idea of a standardised approach to franchising’, he added.

‘Every set of circumstances, and the reconfigurations needed, will be different. The NHS has too often been seduced by a “one size fits all” approach, to the detriment of patient and taxpayer interests.’

Trade union Unison said that the report should act as a warning of the dangers of bringing the private sector into the NHS.

Christina McAnea, the union’s head of health, called on the government to ensure that no other NHS hospitals were pushed down the franchising route before the Department of Health studied the risks highlighted in the report.

‘This NAO report shows that the privatisation of Hinchingbrooke Hospital is still an experiment and a dangerous one at that,’ she said.


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