The “pay later” problems of PFI may have come home to roost but its successes are impressive and its legacy lives on, says Mark Britnell.

The political blame game over the private finance initiative costs and hospital deficits obscures the complex issues that relate to infrastructure modernisation, clinical service transformation and financial stability.

PFI costs may well be a symptom of financial distress but they are not the cause of it. Rather, the new assets, created through a decade of investment, should now be used more radically to drive up quality, re-design clinical services, consolidate old facilities and improve efficiency.

By 2000, there was a growing realisation across the NHS that its old hospital stock was not fit for purpose. Indeed, an estimated 40 per cent of NHS hospital estate was considered to be older than the NHS itself, with some buildings even predating the First World War. Our old hospitals were becoming the laughing stock of the developed healthcare world and were undermining public confidence.

Modern medicine, new models of care, infection concerns and patient aspirations gave rise to the largest hospital building programme in the world, with the NHS Plan aiming for 100+ new hospitals over a decade. These new assets aimed to dramatically improve care and operational efficiency as facilities could be designed around the needs of patients.

By taking this investment off the government’s balance sheet, PFI provided a vehicle to “build now and pay later”. This process was started in the early 1990s and continued under Labour. Within the NHS, everybody knew it was “the only game in town” for new hospital facilities. The so-called public sector comparator was used as a benchmark or yardstick but not as a source of funds.

Of course, like any business, investment in expensive assets should be accompanied with disruptive innovation, transformation and efficiency. Services were to be transformed, producing financial efficiencies which could be put towards higher PFI payments. For every single scheme, NHS hospital boards, primary care trusts, strategic health authorities plus the Department of Health and HM Treasury (past a certain capital value) had to approve their clinical and financial models, often projected over 30 years. The process was long, costly and bureaucratic.

Often, these schemes would be supported by growth forecasts which were a feature of a growing economy and health budget throughout the last decade. Some of the schemes were also predicated on transferring work from other hospitals and sites.

In some instances, this caused problems between professional staff, politicians and the public so the more contentious schemes were gradually modified. It’s ironic to think that the genesis of some of the problems that are now being faced were initiated through an unwitting alliance between politicians, professionals, patients and the press. In a growing health service and economy, not many people wanted to face the difficult decisions that could be aggravated by new facilities. Everybody liked the “build now” bit but didn’t want to think about the “pay later” part. It is these issues that are coming home to roost in some schemes.

Tetchy time

However, it’s worth pointing out that many PFI schemes are successful. For example, the new Queen Elizabeth Hospital in Birmingham has opened ahead of time, on budget. It is one of the finest hospitals in the world and provides outstanding care for local, regional and national patients, including injured armed forces personnel through the Royal Centre of Defence Medicine. University Hospitals Birmingham currently runs a financial surplus, has the highest quality ratings from the Care Quality Commission and is a source of immense pride in the West Midlands.

There are many other examples where trusts that were preparing for PFI schemes formed a strong vision of the future with their commissioners, continued to make significant operating efficiencies and build a “war chest” in preparation for the unitary payments, experimented with new models of care before they moved into new facilities and held clinicians to account for the anticipated benefits of big schemes. Of course, stable management helped with continuity as well.

What of the future? In what is now the UK’s longest recession, it’s right that all parties get around the table to consider affordability issues and low interest rates.

It’s also the case that whatever comes after the PFI review, public/private sector investment will need to continue so transparency, trust and good faith need to be maintained during this tetchy time. Pension funds might be enticed to invest while foundation trusts should be encouraged to deploy their reserves to both consolidate and transform. Investment is great for Britain and a growing economy is good for the NHS, its staff and patients.