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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.”

Readers' comments (14)

  • Why do consultants like McKinsey have to be brought in every time, why can't Monitor employ their own forensic accountants to take Trusts through the failure regime.

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  • Hi Anon 1:31 I think they'd argue that they are expanding significantly to develop more capacity of the kind you describe.
    But they've always functioned a bit like the Carthaginians, smaller in-house capacity and hiring people in. Arguably has worked fairly well (for Monitor, not the Carthaginians)

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  • Hi Anon 1:31pm

    Ben Clover is right, they are expanding. Changing the performance of some 30% of the NHS is no small endeavour. A point of detail: "they" are the NHS TDA, not Monitor: as these are Trusts that ain't through the gate yet.

    I'm not sure that the mercenaries the Carthaginians hired showed quite the integrity that will be expected ... so more insight and honour, less mercenary is presumably the job spec.

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  • So Monitor (run by an ex McK partner and set up largely on the advice of McK) and the TDA will appoint consultants to failing trusts (who generally have been consulted to death - often by McK) and this will generate £60m pa for ...

    Any conflicts anywhere?

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  • I don't agree 100% with Ben. I think the Carthaginians disappeared after first being subsumed by Rome and then by the fall of Rome itself.

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  • We haven't yet seen that the failure regime works.
    It might be another £300m wasted.
    Will the Secretary of State approve Kershaws plan?
    Will Lewisham hospital be able to go to the courts for judicial review?
    Is there a business case that demonstrates kershaws plan is value for money? and will work this time?
    Has there been adequate consultation?
    Has it been agreed that the South London PFI's will be subsidised in future?
    Just because the NHS says urgent action is required it doesn't mean that £200m new investment capital and £25m per annum subsidies should and can be waived through.
    After all it was only in 2009 that the plans for South London Healthcare were waived through- after spending a lot of money for "advice".

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  • Do I understand £2.5m for 6 months' work at Mid Staffs? Cure the NHS have pointed out to David Bennett fundamental flaws in the report published yesterday; we expect him to act on them.

    We are still asking for sight of the McKinsey report of May 2011, the CSIP; done for Monitor but paid for by the hospital. How much did that cost?

    Did it not not tackle similar issues and come to very much the same conclusions? Didn't McKinsey, in May 2011 leave the CCGs and hospital to formulate an action plan, consult on it, implement it. I haven't checked but I think it should have been done and dusted by now. UHNS + MSFT = UHS.

    Cure the NHS - Stafford

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  • The Question Time from Lewisham recently had a bunch of MPs from each of the main political parties and to a person, in front of a partisan audience, not one dared to state the changes at Lewisham, linked to South London reconfiguration, was the right thing to do, all opposed the Kershaw plan. There is no likelihood that when votes are at stake the politicians will not interfere. £300 m on failure regime management might well be wasted.

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  • With so many Trusts at risk of financial failure, doesn't this say something about the structure of the NHS' distribution of funds? (Rather than just about these Trusts. There's a good reason why many CEOs are worried about the future.)

    PbR rewards certain activities over others, PFI and disadvantaged populations also negatively impact certain Trusts.

    So is the financial squeeze before innovative solutions are found just a political excuse for reorganisation?

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  • Jim Potter

    This is a frightening trend towards a (management) consultant led NHS. And who will be the consultants? - often ex NHS staff who will do better outside the tent.

    We already have a major shortage of CEOs and other EDs, too many interims and short term contract Directors. Consultants should be there to help permanent staff not to do the job for them.

    But who could resist a £300m carrot?

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  • Jim, I take your point but some of us working as consultants would far rather be back on an NHS payroll but were made redundant and have a mortgage to pay. We don't all work for the big 4 and I can assure you that I want to help my clients and not force feed them inappropriate solutions. But the jobs advertised are for existing staff already at risk of redundancy so it will be many years before I can return, if ever.

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  • This approach is all very well, but actually where there is a cast iron case of failure, and a clear and locally agreed plan to resolve it even for an FT, still Monitor won't act.

    Its not just the process, its the will to act that is needed.

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  • "Carthaginem esse delendam" And of course it was, and not just once.

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  • Maybe we should disband Monitor and the huge overhead it carries for the NHS and put the money back into the so called failing hospitals instead.

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