Taxpayer ‘exposed’ by NHS franchise

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Published: Wednesday 18th March 2015 by The News Editor

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The failure of a project which saw the first private healthcare operator to run an NHS hospital trust has meant the “taxpayer has been left exposed”, a report has warned.

Hinchingbrooke Health Care NHS Trust in Cambridgeshire was taken over by Circle Holdings in 2012 but the company announced it was pulling out of the deal in January, hours before the release of a highly critical report by the Care Quality Commission (CQC).

Inspectors uncovered a number of serious concerns about staffing, risks to patient safety – particularly in the casualty department – and medical care as well as further issues relating to the way in which the trust was led and run.

It also became the first trust in England to be rated inadequate for caring.

But giving evidence to the House of Commons Public Accounts Committee (PAC) last month, Circle Holdings chief executive, Steve Melton, said the CQC report was not the reason why the company had decided to withdraw early from the contract, which he blamed on financial unsustainability caused by rising demand and cuts in funding.

In a report released today by the PAC its chairwoman, Labour MP Margaret Hodge, said that while some financial risk and demand risk had transferred to Circle, it was always clear that the NHS would have ultimate responsibility for maintaining the service for patients.

She said MPs were concerned that none of those involved in the decisions have been properly held to account

The trust, made up of a small district general hospital with some 250 beds and nearly 1,500 staff, has a history of financial difficulties.

It had an estimated underlying deficit of between £3 million and £4 million in 2011-12 and recent figures indicate that the deficit for just the first nine months of 2014-15 is £7.5 million.

“It is clear therefore that the total deficit incurred during the franchise will be well above the level that Circle is contractually committed to cover, leaving the taxpayer to pick up the rest of the bill,” the report said.

“As we warned in 2013, the taxpayer has been left exposed by the failure of the Hinchingbrooke franchise. It was clear at the time the franchise was let that the Trust would only survive if it secured substantial savings.

“We want to know the total cost to the taxpayer due to the failure of the franchise, including the costs of transition arrangements and the total cost of covering the financial deficits incurred during the franchise.”

MPs also said the continuing dispute about the findings of the CQC inspection coupled with the ongoing discussions about ending the franchise risk distracting the trust from continuing to improve the care it provides.

The regulator’s report was previously accused of being ”based on anecdote – some might say tittle-tattle” by committee member Stewart Jackson, Conservative MP for nearby Peterborough, while Hinchingbrooke chief executive Hisham Abdel-Rahman told last month’s hearing he found the inspection ”problematic” and had identified 300 factual errors in the report, 65% of which the watchdog had accepted.

Although it rated the trust as “inadequate” overall, it had won an award in May last year for care quality, and prior to the inspection the CQC’s own “intelligent monitoring system” had assessed the trust as low risk.

The PAC said the contradictory assessments “risk confusing commissioners, the public and others about the actual quality of care being provided”.

Ms Hodge said: “Whilst this was an innovative – but ultimately unsuccessful – experiment, we are concerned that none of those involved in the decisions has been properly held to account.

“Despite our warnings about the risks, oversight of the contract by the various parties who had a role was poor and inadequate and no one has been held accountable for the consequences.

“Circle was not able to make the trust sustainable and the NHS Trust Development Authority did not take effective action to protect the taxpayer.

“It was clear at the time the franchise was let that the trust would only survive if it secured substantial savings, but the savings projected in Circle’s bid were overly optimistic and unachievable.

“However, the total deficit incurred during the franchise will be well above the level that Circle is contractually committed to cover, leaving the taxpayer to pick up the rest of the bill.”

Ms Hodge said the committee was also concerned that lessons on awarding and managing major contracts will not be learnt from the venture.

“We are also concerned that the department (of health) told us that no trusts are currently considering an operating franchise model, but the NHS continues to award major, high value contracts,” she said.

“Public bodies will not achieve value for money from their contracts until they become more commercially skilled – both in letting contracts in the first place, but also in ongoing contract management.”

A Department of Health spokesman said: “Hinchingbrooke Hospital had severe problems for over a decade which needed sorting.

“After rigorous competition in a process that began in 2009, Circle had the most comprehensive turnaround plans, which included taking on £5 million of risk to the taxpayer.

“Under close scrutiny, the trust since made some improvements, but patients rightly expect high standards and we make no apology for our rigorous new inspection regime identifying underperformance wherever it is found.

“Because the contract was designed to significantly reduce risk to the taxpayer, Circle has not received a single payment from the trust or any other NHS body.”

Published: Wednesday 18th March 2015 by The News Editor

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