February 1, 2012 5:25 pm

NHS tests John Lewis-style management

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“The job we have to do here has national consequences ... if we fail, we fail for all the people who want to run their own hospitals.”

Ali Parsa, a wiry bundle of entrepreneurial energy, is addressing a meeting of staff at Hinchingbrooke Hospital in Cambridgeshire: site of a unique experiment in the history of the National Health Service.

Circle, of which he is co-founder and chief executive, this week became the first private company to take control of a full-service hospital in the UK. It is run as a John Lewis-style partnership, in which staff hold a 49.9 per cent stake.

Elsewhere in Europe, where the private sector’s role in delivering state-funded hospital care is long established, the takeover would scarcely merit a mention.

In the UK, the issue is so politically toxic the Department of Health has presented the Circle contract as a one-off solution to a chronically debt-laden institution whose only alternative would have been closure.

Yet at a time when squeezing more bang out of the public sector buck has never been so crucial, Mr Parsa and his team have the power to change perceptions of the private healthcare sector in the UK – if they can restore the hospital to financial and reputational health.

Success here would also make a case for the survival of the all-purpose district general hospital model, in an era in which the NHS is moving towards a smaller number of large centres of excellence.

Key to Mr Parsa’s approach is a management philosophy a world away from the classic NHS culture of command and control.

A hospital, Mr Parsa tells the FT, is in part “a solution shop, in business jargon”, full of highly paid professionals called upon to use their judgment, McKinsey-style, to solve problems. Yet they must also do something “no management consultant does, which is very precise, value-added processes” such as performing cataract surgery.

“How do you blend those two? How do you create a place where individuals feel empowered to use their intuition, professional knowledge and judgment, but also work as a highly disciplined team?”, he asks.

His solution is to divide the hospital into units of between 50 and 100 staff, each led by a doctor, a nurse and an administrator, who will have responsibility for their own budget and financial performance as well as how their patients do.

This is not mere “fluff”, he insists, pointing to big rises in productivity the approach appears to have yielded at the treatment centre Circle runs in Nottingham and the results it achieved when it ran another in Burton on Trent, where performance has foundered since it was taken back by the local NHS.

His faith in what he calls “distributed leadership” is expressed in Circle’s ownership structure. He tells the assembled staff: “You will all be given shares – not to get rich, but to have control. At the end of the year [if you are not satisfied] you can sack me.”

For the foreseeable future, dividends look set to remain notional. Circle has inherited £38m in debt, which it is expected to start paying back if – or when, as Mr Parsa puts it – it starts making a surplus.

“We will make this so profitable that we will pay back the debt – don’t think for a second that profit is a bad word,” he tells staff.

Later Hisham Abdel-Rahman, a consultant gynaecologist and Hinchingbrooke’s medical director, says he is “pretty surprised how quickly people have embraced” the new autonomy.

He cites an initiative aimed at ensuring women who undergo breast cancer screening at the hospital, and are found to need treatment, remain at Hinchingbrooke to receive it rather than going elsewhere. A staff-initiated pilot will mean up to 60 additional patients: enough to ensure that the service is sustainable.

As staff gather in small groups following Mr Parsa’s presentation to discuss the hospital’s problems and come up with solutions, the desire for more control over budget and procurement is palpable. But the scale of the change in mindset that will be required is also apparent. A midwife says: “The chief executive says ‘jump’ and we say ‘how many times?’ The culture is very top down.”

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