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Hinchingbrooke Health Care NHS Trust, Peterborough and Stamford Hospitals NHS Foundation Trust

7 February 2013

Stewart Jackson MP makes statement as Public Accounts Committee publishes the Franchising of Hinchingbrooke Health Care NHS Trust and Peterborough and Stamford Hospitals: Twenty-eighth Report of Session 2012-13.

Stewart Jackson MP, a senior Member of the Committee of Public Accounts and MP for Peterborough, said:

“The strategic management of health resources across the East of England Strategic Health Authority has failed. Ultimate responsibility for this rests with the Department of Health.

For many years to come, the local community as well as the NHS and taxpayers will have to live with the consequences of separate decisions to build a new PFI hospital at Peterborough and to award a franchise to a private company to run the nearby Hinchingbrooke hospital. 

It is extraordinary that these decisions were taken separately despite the fact that the two hospitals are only 24 miles apart. This is in an area where the NHS has long acknowledged that healthcare provision is running ahead of local needs.  

None of the health bodies involved, including the Department, seems to have looked at the overall impact these decisions would have on the local health economy. The reality is that there is not enough funding there for both Trusts to thrive as currently configured. Their financial viability will be further eroded if more people are treated outside hospitals, in line with present and past government policy.

Circle Healthcare, the franchisee of Hinchingbrooke, has not achieved its expected savings in its first few months and its Chief Executive has already left. We are concerned that the bid was not properly risk-assessed and the successful bidder was encouraged to submit over-optimistic savings projections.

The PFI deal for Peterborough and Stamford PFI hospital has proved catastrophic, with the Department now being forced to pay out nearly £1 million a week of taxpayers’ money to keep the Trust afloat. 

Both Trusts will have to make unprecedented levels of savings to become viable. In Peterborough and Stamford’s case, this won’t be enough. The future of both is in doubt, with unknown consequences for patients in the area and the taxpayer.”

Stewart Jackson was speaking as the Committee published its 28th Report of this Session which, on the basis of evidence from the Department of Health, Monitor, Circle, and Peterborough and Stamford Hospitals NHS Foundation Trust, examined the franchising of Hinchingbrooke and the financial sustainability of Peterborough and Stamford.

"Complete lack of strategic oversight"

A complete lack of strategic oversight resulted in separate decisions being taken to build a new PFI hospital at Peterborough and to award a franchise to a private company to run a nearby NHS hospital. No consideration appears to have been given to the impact these two decisions would have on the local health economy and health expenditure. The hospitals are located only 24 miles apart in the East of England, an area of the country where the NHS has a long-acknowledged over-provision of acute healthcare.

The decision to approve these two deals flies in the face of past and present government policy to treat more people outside hospitals and to concentrate key services in specialist centres. This has left the Government with two hospitals whose financial viability and future is in doubt and whose value for money has not been secured.

The PFI hospital at Peterborough and Stamford Hospitals NHS Foundation Trust became fully operational in December 2010. By the end of 2011-12, the Trust had accumulated a deficit of £45.8 million on a turnover of £208 million. At 22%, this was the highest ratio of deficit to turnover in the NHS. Monitor’s warnings about the affordability of this PFI deal, which has proved catastrophic for the Trust, were not acted on by the Trust, the East of England Strategic Health Authority (the SHA) or the Department of Health (the Department).

Warning signs missed

The severity of the Trust’s financial position was increased by weaknesses in its financial management but the warning signs of these failures were missed because Monitor was not sufficiently alert to the risks. The Trust’s financial position is now so serious that, even if it achieves challenging annual savings, it will still require significant financial support of up to £26 million a year for the next 30 years to remain viable.

Hinchingbrooke Health Care NHS Trust is the first NHS trust to be run as an operating franchise. The deal was put in place after the Trust accumulated a deficit of £39 million between 2004-05 and 2007-08 on an annual income of around £73 million as a result of management errors and inaccurate income projections associated with the opening of a £22 million PFI treatment centre.

The present financial position of the Trust and projections over its future income are such that it also needs to achieve substantial savings to remain viable. The franchisee, Circle Healthcare, aims to achieve savings of £311 million over the ten-year life of the franchise. The company has not achieved the savings it expected in the first few months of operation and it has already parted ways with its Chief Executive, only six months into the project.

Overly optimistic projections submitted

The Committee is concerned that Circle’s bid was not properly risk assessed and that Circle was encouraged to submit overly optimistic and unachievable savings projections. While some financial and demand risk has been transferred to Circle, the NHS can never transfer the operational risk of running a hospital leaving the taxpayer exposed should the franchise fail.

Neither Trust is financially sustainable in its current form and both will have to make unprecedented levels of savings to become viable. Events at both Trusts reflect poor financial management and the failure of the SHA to exercise strategic control over local healthcare provision and capacity planning. The poor oversight demonstrates that the Department has not established a robust system of healthcare planning.

All bodies demonstrated an abject failure to accept responsibility for these decisions and their impact on the local health economy. But the local community will have to live with the consequences of these decisions for many years to come, as will the NHS and the taxpayer who will have to foot the bill.