08.11.12
Circle needs ‘unprecedented’ savings for Hinchingbrooke
A number of financial challenges remain for the first NHS hospital to be taken over by a private company, a new report from the National Audit Office suggests. Circle now needs to generate “unprecedented” savings to ensure the success of the contract.
The report considers the franchising process of Hinchingbrooke Health Care NHS Trust to Circle for a ten-year contract, and how lessons can be learnt for future agreements.
Between 2004-05 and 2007-08, the trust had developed a cumulative deficit of £39m. Since Circle took over in February 2011, performance against standards for cancer and A&E waiting times has improved, the NAO found.
However, Circle had generated an in-year deficit of £4.1m by September 2012, which was £2.2m higher than planned. Over the lifetime of the franchise, Circle plans to achieve £311m savings.
The NAO report found that the NHS East of England Authority assessed the reasonableness of bidders’ savings proposals, but did not fully consider relative risks of savings proposals. This approach to assessment has the potential to encourage over-optimistic bids, the report warned.
Amyas Morse, head of the NAO, said: “While Circle has made early improvements in some clinical areas, the company will have to generate savings at an unprecedented level. The final judgement on the value for money of the franchise will depend on how successfully Circle makes the projected savings and repays the cumulative deficit, while maintaining clinical quality.
“This franchise agreement is the first of its kind in the NHS and it is important that lessons from this procurement process and early operational experience are used to improve future contracts.”
David Worskett, director of the NHS Partners Network, said evaluating the success of Hinchingbrooke at such an early stage was “unrealistic”.
He said: “By focusing initially on clinical quality, patient care and staff morale Circle are building the only possible platform from which to address the deep and long-running financial challenges the trust faces.
“It is also important to be cautious over the idea of a standardised approach to franchising of this type. Every set of circumstances, and the reconfigurations needed, will be different. The NHS has too often been seduced by a “one size fits all” approach, to the detriment of patient and taxpayer interests.”
Ali Parsa, Circle’s chief executive, remained confident about the hospital’s progress. He 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’.”
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