Last updated: November 8, 2012 9:03 am

Health chiefs faulted on hospital takeover

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Health chiefs failed to test whether promised savings were achievable before allowing a private health group to take over a National Health Service hospital, according to the UK spending watchdog.

The National Audit Office examined the process for awarding to Circle the operating franchise for Hinchingbrooke Health Care NHS Trust, which had run up a deficit of £39m on an annual income of £73m.

The deal broke fresh ground in the NHS, as the first time a private provider had taken over a district general hospital.

The audit office said the local Strategic Health Authority rejected a bid from Serco, the services company, that would have guaranteed a payment of £11.5m towards the trust’s deficit. Instead it chose an “ambitious bid” from Circle, whereby the company would pay off the whole deficit if all its savings proposals were realised.

The audit office found that, although the health authority had assessed the reasonableness of bidders’ proposals, it did not fully consider the relative risks of the saving proposals.

Jeremy Hunt, health secretary, said ministers would examine the audit office’s recommendations closely.

“The important thing is that we did protect the taxpayer,” he told the BBC’s Today programme. “In terms of the losses they have identified, not a penny of those are actually being borne by the taxpayer. They are being borne by Circle.”

Circle planned to make £311m in projected savings over the ten-year life of the franchise, a goal the audit office describes as “unprecedented as a percentage of annual turnover in the NHS”.

It noted that, by the end of September, the trust had generated an in-year deficit of £4.1m, £2.2m higher than forecast.

Despite these “immediate financial challenges”, the audit office said that performance on accident and emergency and cancer waiting times had improved since Circle took control in February.

Ali Parsa, chief executive of Circle, said: “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’.”

Margaret Hodge, who chairs the House of Commons public accounts committee, said: “While there have been welcome clinical improvements since Circle took over, it is essential that pressure to make savings does not simply lead to cuts in services.”

David Worskett, director of the NHS Partners Network, which represents independent providers, said that addressing Hinchingbrooke’s financial difficulties and improving quality of care for the benefit of patients and the NHS “was never going to be a short-term task and to try and draw conclusions about the approach Circle has taken at such an early stage is unrealistic”.

Additional reporting by Hannah Kuchler

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