Decision over Carillion Hospital 'in autumn' as costs soar

Toby Lewis, chief executive of Sandwell and West Birmingham Hospitals Trust, has said talks over the £324m Midland Metropolitan Hospital in Smethwick will not result in any “material decisions” made before autumn.

He warned the cost of remedial works caused by the hiatus in construction and maintenance will be “eight figures”.

That cost could rise further if the site is not weather-proofed before winter. A report by the National Audit Office published today revealed Carillion asked the Cabinet Office in early January for £125m to complete the hospital in exchange for an equity stake. 

Mr Lewis described the delay as “deeply disappointing and frustrating”.

The trust’s previous preferred option had been to award a contract to Skanska for work to assess the remaining costs of the construction and associated risks.  . 

But talks remain ongoing between the trust, the government’s Infrastructure and Projects Authority, the project company responsible for building the facility The Hospital Company (Sandwell), the banks, and PwC acting on behalf of the Official Receiver.

If a decision is made by autumn it is anticipated that the hospital will open during 2022.

It was initially scheduled to open in October 2018, but then put back to spring 2019, prior to Carillion’s liquidation.

However, the trust faces a reconfiguration of its acute services next year if it is not able to move into the Midland Metropolitan as planned. Acute services are currently provided from Sandwell and City hospitals.

Some services will need to be relocated in order to ensure safe staffing levels.

This has been acknowledged by health and social care secretary Jeremy Hunt, according to Mr Lewis’s report. NHS England and NHS Improvement are both working with the trust on proposals.

The costs of reconfiguration are still being worked out, but HSJ understands they will be more than £7m.

How these costs will be funded has not yet been confirmed.

The £460m income trust recorded a £22.3m surplus in 2017-18, which was £12.4m better than its control total.

However, its financial performance was boosted by the sale of land at its City Hospital site to Homes England which generated a £16m profit and subsequently helped unlock nearly £7m of bonus sustainability and transformation funding from NHS Improvement.

The trust has agreed with Homes England to delay moving off the City Hospital site given the problems with the Midland Metropolitan.

Further north, no decision has been reached yet over progressing the other major hospital Carillion was building on Merseyside for the Royal Liverpool and Broadgreen University Hospitals Trust. 

However, a plan is being prepared by the Infrastructure and Projects Authority for ministers to consider.

This plan could be submitted in the next month once a structural review of the hospital has been carried out by engineering firm Arup.

The trust’s remaining ex-Carillion employees (around 60 people in facilities management services) have been transferred to a wholly owned subsidiary company of the private finance initiative provider The Hospital Company (Liverpool) called Avrenim Facilities Management Ltd.

Five other trusts are yet to conclude deals with Serco for the transfer of their ex-Carillion staff, despite two having previously planned to complete their deal by 1 June.

These trusts are:

• Cambridge University Hospitals;
• Dartford and Gravesham;
• Great Western Hospitals;
• South Tees Hospitals; and
• North Staffordshire Combined Healthcare.

At least 1,670 ex-Carillion staff are currently working across these trusts. According to the NAO, the Official Receiver “currently expects” all of Carillion’s customers to transfer their contracts to new suppliers by the end of June. 

A spokesman for Dartford and Gravesham Trust said they were aiming to have staff transferred by 18 June.

Tees, Esk and Wear Valley Foundation Trust, for which around 25 ex-Carillion staff provide FM services, is “awaiting confirmation” from its PFI provider Three Valleys Healthcare on a solution.

The trust has set up a wholly owned subsidiary company, currently a shell company, as part of its business continuity planning to mitigate risks should other companies providing services at the trust face similar problems to Carillion.

Three other trusts, North Bristol, Portsmouth, and Oxford University Hospitals, have transferred their staff to other companies on temporary contracts.