NAO criticises tender for first contract, yet support for private operators in NHS grows
By Richard Wachman | 8 November 2012
NHS bosses are pressing for more failing hospitals in the UK to be taken over and run by private companies.
“We believe that the NHS should embrace the use of well-managed and intelligent competition” – Mike Farrar, chief executive, NHS Confederation
Senior figures in the UK’s National Health Service want the private sector to take over several NHS hospitals besieged with debt.
The NHS Confederation is at the forefront of making the case that more “competition” will improve patient care. The confederation represents health organisations that commission NHS services in the UK.
Mike Farrar, its chief executive, said in an interview with Exaro that competition would be a “key weapon” to help commissioning organisations to ensure that patients did not suffer “sub-standard care”.
His comments are bound to provoke controversy coming as the National Audit Office (NAO) today criticises the tendering process for the first contract to run an NHS hospital.
Circle Healthcare took over the operation of the financially-troubled Hinchingbrooke Hospital in Cambridgeshire last February, sparking uproar from unions and Labour MPs who claimed that it amounted to creeping privatisation of the NHS.
In its report today, the NAO said that the tendering process “may have encouraged bidders to make overly optimistic savings projections.”
The report said that it was unclear whether Circle was obliged to repay the hospital’s debt, fully or partly, by the end of its 10-year management contract. The NAO was also unhappy that most of Circle’s projected savings occurred in the later years of the contract.
Margaret Hodge, chairwoman of the House of Commons public accounts committee, said: “I am astonished that the contract allows Circle to pocket any profit ahead of addressing [Hinchingbrooke’s] deficit.”
Nonetheless, Farrar favours a greater role in the NHS for the private sector so long as standards of care were not compromised.
He said: “We believe that the NHS should embrace the use of well-managed and intelligent competition. Properly regulated competition and integrated care need not be mutually exclusive.”
“Provided patients can continue to take advantage of an integrated health system, where a full range of services are on offer, we have no problem with a more competitive NHS.”
The government described Hinchingbrooke as a “financial basket case” before the Circle takeover, and the hospital is burdened with nearly £40 million in debts.
The Department of Health viewed the tendering process as a template for future moves to hive off other failing NHS hospitals to private companies.
In June, concern over patient care at the hospital led Unison, the public-sector union, to write privately to Earl Howe, health minister, seeking assurances that patient care would not be allowed to suffer if Circle hits financial difficulties.
The Department of Health has identified 21 NHS hospitals as having financial problems. Many hospitals are heavily indebted as a result of the ‘private finance initiative’, under which private companies upgraded or built new facilities.
South London Healthcare NHS Trust, which runs three hospitals in the capital and Kent, has been declared bankrupt and placed it into special administration.
The administrator, Matthew Kershaw, has proposed a radical streamlining plan that includes bringing in a private company to run one of the hospitals. The Department of Health will make a decision in February.
Elsewhere, George Eliot Hospital in Nuneaton, Warwickshire has sought permission from ministers to find “a strategic partner” to secure its future, and a decision is expected this month.
Although the government says that it is increasing health spending in real terms, it has told the NHS to make £20 billion of efficiency savings by 2015.
Farrar said: “Competition should never be an end in itself. Patient interest, not ideological interest, should always be the overriding principle.
“But we need to focus on the improvement of services across the system and ensure poor providers of care are stamped out.”
But others are dubious about whether the private sector offers a solution for financially-troubled NHS hospitals.
John Lister, director of London Health Emergency, the group campaigning to “protect” the NHS, said: “They are very complex organisations, and potential financial liabilities are huge. I do not think that many private companies want to get involved.”
Update 8 November 2012 9.00am: Circle’s chief executive, Ali Parsa, today insisted that the company would turn Hinchingbrooke into a success.
Parsa, a former Goldman Sachs banker, said: “Remember that when Hinchingbrooke was first given to Circle to run, all questions were on our ability to run ‘accident and emergency’, and alleged threats to quality.
“Now, for the first time, Hinchingbrooke is consistently the best A&E performer in its region.
“Having overcome the quality issues facing the hospital, we have little doubt that our partners in Hinchingbrooke will overcome the financial challenges too, and next year break even for the first time in years.
“Not bad for a hospital that faced closure, and was written off as a ‘clinical and financial basket case’.”
Earl Howe, health minister, said that he was “encouraged” by progress so far. “Hinchingbrooke is showing that operating franchises can be a powerful tool for turning round failing hospitals.”