• Circle takes legal action over CCG’s Nottingham Treatment Centre procurement
  • Nottingham University Hospitals Trust selected as preferred bidder
  • Circle questions trust’s finances and says savings proposed are “not credible”
  • Claims NUH would subsidise the contract from NHS “loans or funding”

One of England’s largest private healthcare organisations is taking commissioners to court, arguing the poor state of an NHS trust’s finances renders it unfit to run a £320m contract.

Circle Nottingham and Rushcliffe Clinical Commissioning Group are embroiled in a legal battle after the latter chose Nottingham University Hospitals Trust as its preferred bidder for running non-emergency services at Nottingham Treatment Centre for the next five years.

Circle, which has managed the centre for 11 years, told HSJ it believes the quality of services at the centre is at risk following what it called the CCG’s “flawed” procurement. It said “unrealistic proposed savings” were not in patients’ interests.

The CCG said it was “disappointing” to see the procurement delayed by the challenge, but reiterated its aim to award the contract to NUH.

Re-procuring services from the treatment centre has proved difficult, with the CCG’s first attempt halted last year following Circle threatening legal action.

In that procurement, the price offered was £50m per year for three years, down from £67m previously.

In this most recent procurement, the CCG’s contract is worth £64m per year.

High Court documents (attached below) reveal Circle is challenging the CCG on several bases. These include the “financial standing” of NUH and the “sustainability” of the trust’s bid.

The company, which came second in the procurement, cited the following reasons:

  • NUH had not achieved a positive, in-profit trading position in the past two financial years (reporting a shortfall of £20.9m and £2.3m in 2016-17 and 2017-18 respectively);
  • NUH had suffered “material adverse change” in its financial standing in 2018-19;
  • NUH had “withheld payments to suppliers” since 15 October 2018; and
  • NUH’s financial position was “so perilous” it was at risk of being placed in special measures.

Circle claims the above shows the trust’s anticipated savings (16 per cent – equal to £10m annually) from the treatment centre contract is “neither credible nor sustainable”.

The company claims it is familiar with the “actual cost of delivery” as it is the incumbent provider. It alleges NUH’s costs would be higher overall due to the trust’s staff qualifying for “improved NHS terms”.

“The NUH savings on which the financial score were calculated are not achievable without a cross-subsidy being provided from NHS loans or funding,” Circle said in its court papers.

The company went on to state any cross-subsidy from central NHS funds to the treatment centre would “distort competition”.

According to the trust, NUH ended the 2018-19 financial year with a £31.8m deficit (after provider sustainability funding) which is £39.7m behind plan. The trust is rated as 3 (second worst) on NHS Improvement’s single oversight framework’s finance and resource score.

The CCG – which is part of the Nottingham and Nottinghamshire Integrated Care System – said NUH would not rely on loans within its bid, the court documents state.

In a letter to Circle in January, the CCG rejected “assertions there is any connection between an NHS trust’s variance to its financial plan or potential failure to deliver a surplus in 2018-19 on the one hand and its ability to perform the contract on the other”.

NHS Improvement’s director of finance for the region had told the CCG he “had no issues material to the tender” relating to the financial standing or performance of NUH, according to the court papers.

Amanda Sullivan, chief officer of Rushcliffe CCG and of the Greater Nottingham clinical commissioning partnership, told HSJ the treatment centre will “play an important role” in the health system’s bid to “improve local health services”.

“We hope to be able to award the contract to our preferred bidder, NUH, while we work to resolve these issues.”

Circle is currently treating around 72,000 patients at the centre, including “complex cancer pathways”, a spokesman said.

“The commissioners have recognised that any transfer to another operator would require a minimum of seven months.

“We have offered to continue services with the commissioners on the current basis to ensure patient and staff continuity, while the background dispute is resolved.”

NUH directed HSJ’s request for a comment to the CCG.

The case will be heard at the Technology and Construction Court.

  • Article updated at 10.46am on 2 May after the trust provided more up to date information on its 2018-19 financial performance.