Feature NHS Reforms

Hinchingbrooke: the shape of things to come?

BMJ 2011; 343 doi: http://dx.doi.org/10.1136/bmj.d7692 (Published 29 November 2011) Cite this as: BMJ 2011;343:d7692
  1. Peter Davies, freelance journalist, London
  1. petergdavies{at}ntlworld.com

A private healthcare company is to run an NHS hospital. What does the deal involve, asks Peter Davies, and is it the shape of things to come under the government’s “any willing provider” policy?

What’s unique about the deal?

Circle is to take over Hinchingbrooke Health Care NHS Trust in Huntingdonshire and provide a full range of NHS district general hospital services. Private healthcare companies have for some time run units within NHS hospitals, such as treatment centres, but Circle will be the first to operate an entire hospital. The previous Labour government passed legislation making this possible in exceptional circumstances. Hinchingbrooke is £39m (€45.5m; $60.3m) in the red—the largest legacy debt as a proportion of turnover in the NHS—and the Care Quality Commission is concerned about the trust’s stroke and cancer services. All Hinchingbrooke’s assets will remain NHS owned, with Circle holding a franchise. “It’s not privatisation,” says Stephen Dunn, NHS Midlands and East’s director of policy and strategy. “Without this, we might have had to substantially cut services or close the hospital.”

Catherine Hubbard, joint medical director at Hinchingbrooke, says: “It’s difficult to get across the concept of an operational franchise. The only way we will get that message out is by doing it.”

Length of the contract

The contract is for 10 years from February 2012. It is worth £1000m, based on Hinchingbrooke’s annual revenue of £100m. Circle has pledged to meet the hospital’s £250m productivity improvement target as well as pay back the £39m debt. Unlike some previous NHS private sector partnerships, Circle will have no guaranteed revenue. “We’ve sought to learn that lesson. Circle only gets paid if a surplus is delivered,” says Dunn, and then it will be split with the NHS.

The Appointments Commission has selected a chair and two non-executive directors to form a new Hinchingbrooke trust board from February, which will appoint a franchise manager to monitor daily contract performance.

Will the accident and emergency department be closed to save money?

“Circle submitted plans to provide a full range of services over 10 years and was appointed on that basis,” says Dunn. Hubbard fully expects Hinchingbrooke will still be providing accident and emergency and maternity services at the end of the contract. Ali Parsa, Circle chief executive, says: “We don’t pay our taxes so that people can shut down our A&Es. It’s only people sitting in central London in front of spreadsheets who come up with solutions like that.”

So how will Circle turn around the hospital’s finances? Circle submitted 3500 pages of plans that were scrutinised by 54 evaluators, half of whom were clinicians. The plans include shortening length of stay, rationalising theatre usage, and improving so called back office functions. Control will be devolved to clinical units of 20 to 50 staff.

“Rather than keeping leadership at the top, we devolve and disperse it,” says Massoud Fouladi, chief medical officer at Circle. “Leaders are not appointed but go through a process of being mandated by their clinical team. Therefore they have the ability and authority to take through changes.”

Parsa says: “Some NHS turnarounds don’t work because they’re imposed on people rather than created, believed in, and delivered by them. I’m absolutely confident changes like this can turn around the finances.”

Consequences of failure

If the trust makes a deficit, Circle must fund the first £5m. Either party can terminate the contract if the trust incurs more than £5m in aggregate deficits, when Circle would have to pay a further £2m termination fee. The company’s liability is therefore capped at £7m. The contract can also be terminated at any time on a “no cause” basis, in which case Circle would be compensated up to a capped amount.

Doesn’t Circle claim to be a social enterprise?

Circle is 49.9% owned by Circle Partnership Ltd, a partnership of its employees, though it is registered in the British Virgin Islands. Circle Holdings plc owns the other 50.1%, and is itself owned by six hedge fund and venture capital companies. It was registered in Jersey until earlier this year, and was floated on the London Stock Exchange in June.

Will staff become Circle employees?

Existing and new staff will remain NHS employees. Hinchingbrooke is not expecting redundancies because of the deal, though Circle says it may redeploy and retrain some staff within the hospital. Circle would like to allocate shares to Hinchingbrooke staff, as it does to its own employees under its partnership arrangement to encourage commitment and enthusiasm. Dunn says it will have to “work through the legality around that,” and ensure staff and unions are comfortable with it.

Hinchingbrooke and the future for other trusts

Twenty other hospitals have major problems, but health minister Simon Burns has insisted: “This is not a blueprint or model to be used by other hospitals.”

Paul Corrigan, former adviser to previous Labour ministers, believes the government is desperate to avoid accusations of privatising the NHS. “Because of this I think it’s unlikely we’ll see another private sector takeover of an NHS hospital this side of the election.”

Notes

Cite this as: BMJ 2011;343:d7692

Footnotes

  • Competing interests: All authors have completed the ICMJE uniform disclosure form at www.icmje.org/coi_disclosure.pdf (available on request from the corresponding author) and declare: no support from any organisation for the submitted work; no financial relationships with any organisations that might have an interest in the submitted work in the previous three years; no other relationships or activities that could appear to have influenced the submitted work.

  • Circle’s medical director, Massoud Fouladi, lays out his plan for Hinchingbrooke Hospital: see webextra.

  • Provenance and peer review: Commissioned; not externally peer reviewed.