PFI Q&A

NHE asked representatives from three trusts for their views on how PFI worked for them

Kingston Hospital – Kingston Hospital NHS Trust*

Royal Blackburn Hospital – East Lancashire NHS Hospitals Trust

Newham General Hospital – Newham Healthcare NHS Trust

Were you under pressure to go down the PFI route?

Yes we were under pressure to go down the PFI route as it was the only way of getting a large capital scheme funded.

It wasn’t a pressure; the PFI route was recommended to us as a result of an appraisal of the market. At the time of seeking a funding route for a new acute hospital in 1997/98 we were advised by the then regional office that the PFI route was the route best equipped to deliver funding, design and construction in the timescale required.

The trust needed to close an old Victorian Hospital in Bromley-By-Bow and centralise services on the Newham site. This was the only capital procurement route offered to the trust by the Department of Health and the North East London Strategic Health Authority.

Please tell us about your scheme.

It is a £33m PFI build called Kingston Surgical Centre. It is a five storey, 100 bedded unit and features surgical and gynaecology wards. The centre also hosts the trust’s physiotherapy department and gym, catering facilities, a staff/visitor restaurant and an education centre that features training and seminar rooms and lecture theatres. The new building replaced the temporary Roehampton wing at Kingston Hospital that was put in place when services at Queen Mary’s Hospital transferred to Kingston.

East Lancashire Hospitals Trust’s estate reflected a historical pattern of piecemeal capital development common to many NHS trusts. As a consequence the delivery of acute healthcare was hindered by inequalities in the scope, scale and condition of the existing estate and the way that the services at different sites developed over time. By 1997 the estate strategy had taken the trust from 12 sites to 5 and the trust had reached the position where further staged developments would not support acute patient care effectively due to the interdependency of emergency services with theatres and critical care. When this position was placed alongside the widespread acknowledgement and evidence that the environment at Blackburn Royal Infirmary was unsuitable for the delivery of modern acute healthcare it was clear that facilities for acute hospital care in Blackburn needed a major investment. There were also many and varied problems associated with split site working in Blackburn forming a model of health care delivery characterised by, duplication of effort, unavoidable inefficiency and poor environment incapable of meeting the acute health care needs of the local population.

In 1998 a preferred option for ‘Delivering a Single Site Acute Hospital’ in Blackburn was clearly identified. This was to close Blackburn Royal Infirmary and add to the relatively recent buildings at Queens Park Hospital where the trust already owned sufficient land to achieve a major extension and site redevelopment. The ‘single site scheme’ was born and from 1999 onwards it thrived achieving all necessary approvals, widespread support via public consultation and significant investment interest from the private sector.

In 2001, Consort Healthcare (Blackburn) Ltd were appointed as preferred bidder and in July 2003 financial close was achieved and construction commenced. Practical completion was 10 th April 2006 and the new Royal Blackburn Hospital opened it’s doors for business on 8 th July 2006, slightly ahead of the date programmed in 2003 of 10 th July 2006.

The Newham scheme was a £35million redevelopment that has provided two major new extensions to the hospital. The new buildings complement the existing build and provide a new entrance and focal point, with three new wards, and an ambulatory care and diagnostic centre known as Health Central. There has also been redevelopment of the car park, landscaping to the east of the site and the refurbishment of the kitchen and restaurant areas. The completed project provides new accommodation incorporating 78 new beds, together with operating theatres, outpatients and therapy facilities. 

How big is it?

It is a five storey building.

The single site scheme was 45,000 sq.m new build and 7,000 sq,m refurbishment. Total capital cost was £113 million.

£35 million redevelopment.

Was it a complete or partial rebuild?

It is a complete new build.

Partial rebuild as explained above.

Were you involved in the design?

Yes. We had a design team including nurses, doctors, patients and members of the public as well as architects.

Yes – we went through a number of design iterations with our clinical users. The first stage involved 3 months of parallel design meetings running morning and afternoon for four out of five days every week and there were second and third stage reviews that had the same if not more intensity as the design detail increased. It’s a considerable commitment but one that we are very glad we made. The value of bringing clinical teams together with architects and engineers cannot be overstated, it’s crucial to achieving a building you can work effectively from. One of the biggest compliments to the investment in this process was a comment from a senior member of staff on the second day of operation that, ‘it feels like this buildings been here and we’ve been working from here for ages, it’s brilliant’.

Yes.

How did you find the construction phase?

The construction phase worked well. There was a delay in the completion.

Exciting and challenging. It’s very exciting to see the plans you’ve worked on become a reality but there are significant challenges in a major construction project working alongside a live hospital particularly around enabling works and refurbishment. The timetable was also a constant challenge as there were 23 separate handovers in a construction period of 33 months and at the time this was the fastest hospital over £100 million to be built (and may still hold that record).

Very good. We had daily meeting for the operational team and the trust director responsible for the project met weekly with PFI partners to review progress. We completed the scheme on time and budget without any recorded health and safety incidents throughout the build period.

What facilities do you offer?

As above in answer 2.

The Royal Blackburn Hospital is a major acute hospital in east Lancashire serving a population of just over 500,000. The hospital provides out-patient services, day case surgery and non-elective surgery across a wide range of specialties. It has an emergency department and recently opened an urgent care centre plus a cardiac catheter laboratory and new critical care facilities. As part of the PFI deal we also have a managed equipment service for radiology and picture archive communications system (PACS).

A new ambulatory care facility, new wards and endoscopy theatres.

Are you satisfied with the quality of the buildings?

Yes. We are delighted with the quality of the fantastic new facility for patients and staff.

Generally yes, there are course specific things we would like to be better but one of the advantages of PFI is that life-cycle replacement is a risk that lies with the project company so if for example the flooring finish wears quicker than anticipated and has to be replaced then this is project company risk.

Yes.

Were there been any teething problems?

As with all large new buildings a number of small teething problems were found which have all been or are in the process of being rectified.

Any large complex project will have some teething problems and ours was no different. Fortunately the vast majority were relatively minor and have been dealt with via the process for snagging and defects.

The project has been implemented well, but we have not been able to fully implement the Pay Mech penalty system yet. The volume adjusters are also uneconomic currently and being urgently reviewed.

Was the scheme delivered within budget and on time?

There was a delay to the building due to difficulties with ground contamination and the foundations. It was delivered on budget for the hospital as this was a PFI contract with no additional cost to the trust.

Yes to both in terms of all the Trust’s timetable and budgetary obligations. The construction timetable was successfully delivered by our private partner.

Yes.

Has your PFI scheme been a source of financial difficulty for your trust?

No.

There is no doubt that the financial commitment that PFI brings can be perceived as a pressure but if you don’t lose sight of the fact that PFI isn’t a capital scheme and it’s paid for over the contract term then the expenditure should be and is planned for. The difficulty in balancing pressures comes when there are changes to NHS funding regimes like ‘payment by results’ (PbR). It’s not easy to account for PbR with a PFI contract that was negotiated prior to the introduction of PbR and on which NHS funding is assumed to be capitation based in the business case.

We are not able to flex financially due to the nature of the unitary fee as we would be if we where conventionally running the services. The transition relief from the PCT ceased after the first year of operational activity.

Have you had to sell assets or cut service capacity to offset the shortfall?

No.

No.

Due to financial pressure, not all related to PFI, the trust closed a 26 bedded bay as part of its turnaround process last year.

How are you coping with the repayments?

Repayments are covered by the revenue generated by the hospital.

They are expected and are part of our everyday commercial existence as an NHS Trust.

We have a clear budget to cover the unitary fee and are determined to review the volume adjusters which are running at a significantly higher cost than the services we received from the same contractors before the PFI deal went operational. This is being addressed.

Are you satisfied with the fees charged to carry out essential routine maintenance tasks?

This is all part of the PFI contract therefore no additional costs for routine maintenance.

That depends on what you classify as ‘essential routine maintenance tasks’? Most of our current cost quibbles relate to additional works like putting up a notice board or installing additional electrical sockets. We are just in the process of undertaking a review of these things in conjunction with our private partner and with the Audit Commission.

The fees for essential routine maintenance form part of the unitary fee and we are satisfied with these charges.

Has your trust benefitted from a share of any refinancing gains?

N/A

There has been no refinancing under this contract to date.

The PFI arrangement has been in place since 2006 and the project has not been the subject of refinancing.

Have your profits been better or worse than expected?

The facility has only been open for two months it’s too early to say at this stage. However, we are confident that the new facility will draw in extra patients in the future.

Not answered.

Not answered.

How would you describe your relationship with the private sector provider?

We have a very good working relationship with Prime Health Solutions.

We have a good relationship with our private sector partner but that doesn’t always mean that we are happy with everything or vice versa. It means that we talk and we work together to try and improve the things we feel need improving. It’s a real relationship and over time it has its ups and downs like any other. The most important thing is that we all stay focused on the objective of providing excellent health care to the people of east Lancashire not just next week or next year but throughout the contract term.

The trust maintains a professional and good working relationship with our partner. The PFI general manager is brought into the internal senior management team meeting and they interact directly with our service users. The formal meeting route is maintained as per the regime as defined in the project agreement. Monthly contract reviews are strengthened by more regular fortnightly operational meetings and in turn client side quality based forums with matrons and service leads are embedded into the meeting structures to allow robust two way dialogue to be shared between parties.

How often do you meet?

Daily.

At least weekly and formally monthly and quarterly.

Formal structures outlined above, informally, as and when necessary. The location of the PFI and Trust Client Services offices allows for swift and easy dialogue.

Have any non-clinical support staff had to transfer to your private sector partner?

No.

Yes – 55 maintenance staff transferred.

Support services staff have their terms protected under a retention of employment deal (RoE).

Are their NHS staff terms and conditions protected?

N/A

Yes.

The RoE deal protects their terms and conditions.

Are pay levels for new employees less than for transferred staff?

N/A

Not answered.

No.

What have been the benefits of PFI to your trust?

It has delivered a fantastic new facility for the benefit of patients and staff without the need for any initial investment from the hospital. We have managed to secure a very well designed extension to the hospital due to the competitive nature of a PFI scheme.

We have a new Royal Blackburn Hospital delivered on time and within budget of which we are extremely proud. There are many benefits for both patients and staff from the new facilities including:

improved clinical functionality

more single rooms

increased capacity in both theatres and critical care

a cardiac catheter laboratory so that patients that previously had to travel outside the district for some cardiac services no longer need to.

a helipad

a clearly defined main entrance with retail facilities

buses can get onto site and have stops by the main entrance (they couldn’t access either site before)

improved ambulance access

more staff changing rooms

staff rooms with beverage bays

We are also very clear about what this asset costs to maintain and operate and can forecast this throughout the project term.

The trust has a number of new facilities within the PFI arrangement which would not have been possible to develop by other means at the time. In addition, the facilities are of a good standard with excellent use of space and public areas both inside and out. The core facilities management contract is embedded in the scheme and the service provision is delivered with innovation and the trust has new investment from this source in terms of branded high street outlets, new staff and visitor facilities and investment in the patient meal services at ward level.

What have been the drawbacks?

It has taken a long time to complete the scheme due to the lengthy negotiation for the PFI contract.

The drawbacks are undoubtedly the inflexibility of the project agreement with regard to the speed with which you can make and negotiate changes. When the going ‘gets tough’ and parties revert to contract it can delay things inordinately and you need strong contract management and good board level understanding of the remedies available to ensure this isn’t allowed to continue longer than is absolutely necessary. It’s important to remember at all times that the PFI contract isn’t ‘king’ the quality of service we provide to our patients is.

There has been some downside in terms of loss of some flexibility and financial pressure.

Overall, how satisfied are you with your scheme?

We are very satisfied. It’s given Kingston Hospital a fantastic new facility for the benefit of both patients and staff.

We are delighted to have achieved the ambition of delivering and operating a new major acute hospital in east Lancashire.

The Trust is very satisfied. We have new modern buildings that are being well maintained and with a high standard of FM services. The management team is fully integrated, and works very effectively.

*Alan Pearse, deputy chief executive and chief operating officer