NHS earmarks £300m to put hospitals through failure regime
Monitor and the NHS Trust Development Authority are planning a £300m joint contract to pay for failing trusts to go through the special administration regime.
The two regulatory bodies are respectively responsible for applying the failure regime to foundation and non-foundation trusts.
They are expected to submit a tender for a four-year framework contract to the Official Journal of the European Union procurement website next week. HSJ has been told the sum could pay for between 20 and 60 trusts to be taken through the failure regime in the next four years.
The framework contract will be used to appoint consultants to work on future uses of the failure regime.
The past six months have seen a trust special administrator appointed to South London Healthcare Trust under the NHS Act 2006 and Monitor begin to use powers under the Health Act 2012 to start the failure regime process at Mid Staffordshire Foundation Trust.
McKinsey and Deloitte were appointed to a contract to work on the process in South London and the total budget for the administrator’s office is approximately £5m.
One senior figure in health sector consulting told HSJ this was a good indication of the approximate cost of each intervention in the future.
But another source involved in discussions said the cost was more likely to be between £5m and £15m per transaction.
He said: “I think Stephen [Hay, Monitor managing director of provider regulation] recognises that for large-scale restructuring work the rates are higher. [A cost of] £5m is more of a starting point.”
Mid Staffordshire is at an earlier stage of the process than South London, but Monitor confirmed to HSJ the total six-month contract with Ernst & Young and McKinsey was worth £2.5m, paid by the Department of Health.
The senior source in consulting added: “Things seem to be hotting up in this market. With the number of likely trusts involved it could rapidly become a supply-constrained market, given the limited number of people able to run these things properly”.
HSJ revealed in July that Mid Yorkshire Hospitals Trust was being considered for the failure regime and the process has also been mooted for Epsom and St Helier University Hospitals Trust.
Those close to the process have previously expected at least one more trust to be placed in one of the two failure regimes before the end of this Parliament.
HSJ understands the companies appointed to the framework will need to be registered insolvency practitioners.
Monitor stressed the £300m figure was an upper limit it was obliged to provide by the tendering process and the sums spent were likely to be significantly smaller.
Another senior well placed figure told HSJ they believed Monitor would use its failure regime, and therefore the framework contract, more than the TDA. The source said: “I suspect the Trust Development Authority will use this framework less than Monitor will. Monitor likes to set out criteria and standards for this sort of thing whereas the authority will have powers Monitor doesn’t, to lend money, suggest mergers and replace boards.”