Thin end of the wedge? Private firm to run NHS hospital

Imagine the letters “NHS” were removed from your local hospital’s name. Would that worry you as a prospective patient? This scenario has not happened yet - but is getting closer. Last week saw the announcement of England’s first district hospital where all clinical services will be run by a private company. With the coalition’s Health Bill imminent, concerns about NHS local care becoming a franchise for big private operators are moving centre stage.

Imagine the letters “NHS” were removed from your local hospital’s name. Would that worry you as a prospective patient? This scenario has not happened yet – but is getting closer. Last week saw the announcement of England’s first district hospital where all clinical services will be run by a private company. With the coalition’s Health Bill imminent, concerns about NHS local care becoming a franchise for big private operators are moving centre stage.

Hinchinbrooke Hospital, a district hospital in Huntingdon including A&E and maternity, is to be run by the Circle Group under a 10 year contract starting next June. Circle was set up by an ex-Goldman Sachs banker, and runs several private hospitals under a partnership model involving minority staff shareholding.

Their NHS experience is limited to two planned surgery centres in the Midlands, with a much smaller and less complicated patient group than at Hinchinbrooke.

Circle will be “taking full risks for demand and volume with no guarantees on future revenue”, though with a pledge that “its buildings and assets will remain in the NHS and Hinchinbrook staff will continue to be employed by the NHS”. This follows a tender process which produced five private and one NHS bids to run the franchise.

Hinchinbrooke’s circumstances are distinctive – a small catchment population, a high cost base, compounded by an expensive PFI scheme, and significant operating debts (almost £40 million on an £80million turnover) – but so was the solution, sanctioned by Labour in government. Not surprisingly there has been strong local public support for keeping services running.

Yet Hinchinbrooke has wider significance. The former NHS head of commissioning, Mark Britnell, now with consultants KPMG, recently suggested that as many as 20 organisations could follow Hinchingbrooke’s lead in the next year or so, mostly those who have not achieved foundation trust status.

Across NHS services, franchising is the model that Andrew Lansley explicitly favours to break up NHS provision. On 12 July, he told Parliament:

“We will allow any willing provider to deliver services to NHS patients—provided that they deliver the high quality standards of care we expect from them.”

The Spending Review last month confirmed this is the coalition approach:

“The Government believes that while it should continue to fund important services, it does not have to be the default provider. This stifles competition and innovation and crowds out civil society.”

The creation of Lansley’s “level playing field” for independent providers is the job of the new economic regulator, Monitor. Left Foot Forward has previously highlighted how competition law is likely to be used to target NHS providers – putting at risk the close working relationship between GPs and consultant specialists at local hospitals. The doctors’ union, the BMA, have called on GPs to promote relationships with local NHS services, but this could yet be defined as anti-competitive.

The coalition is also strongly encouraging social enterprises, based on caricaturing the public sector as anti-innovation and unresponsive. Social enterprises may conjure images of workers’ co-operatives but these are not-for-profit enterprises, with any surpluses re-invested in themselves. They behave as businesses and, being independent of government, can pull out of a service if they choose.

Citizens have no stake in them, and no right to comment on how they are run or what they do as a private company. The community nurses of Surrey, in the social enterprise Surrey Community Health, are the Tories’ favourite example; their managing director addressed this years’s Conservative conference.

Yet elsewhere, staff are resisting the move to social enterprises, fearful of the effect on terms and conditions, including pensions. For example in the south west half of all Primary Care Trusts are proposing this option for community health staff and community hospitals, against 20 per cent nationally. Increasing cost pressures on the NHS and the full market overseen by the new regulator can only encourage merger and acquisitions activity amongst providers of NHS services over the next few years.

The speed of change in developing a level playing field for the private and social enterprise sector is hard to predict. Yet against growing concern about NHS financial pressures during 2011/12, it raises further concerns about coalition ambitions for healthcare reform.

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