Healthcare trust hopes to nationalise second-ever PFI hospital

Northumbria Healthcare Foundation Trust was selected as the preferred bidder for North Cumbria University Hospitals Trust by the troubled trust’s board last Tuesday.

If the acquisition goes ahead, it will create a trust stretching the breadth of England, from Whitehaven on the west coast to North Shields in the east.

However, the decision has also sparked a debate over whether the merger represents a lost opportunity to integrate care in the region.

North Cumbria has sought a takeover since June, after deciding it could not achieve foundation status alone. The trust faced falling income, historic deficits, and private finance initiative charges on Carlisle’s Cumberland Hospital that cost £21.3m last year – nearly 10 per cent of its turnover. The PFI deal was signed in 1997, the second in the NHS.

Asked how Northumbria Healthcare planned to recover the trust’s finances, the former’s chief executive Jim Mackey told HSJ: “We would like to explore bringing the PFI back into public ownership.”

The government funding potentially available to help trusts such as North Cumbria meet PFI payments was “welcome”, but did not “fundamentally change” the foundation trust’s approach, he added. It plans to talk to the Department of Health about how it might use the funding to support a buyback.

Mr Mackey said Northumbria Healthcare had not yet been able to examine Cumbria’s PFI contract to establish whether the plan was feasible. He added that savings on corporate overheads and increased purchasing power also featured in Northumbria’s plans for turning the trust around.

However, Cumbria Partnership Foundation Trust chief executive Stephen Dalton – whose joint bid with Newcastle Hospitals lost out to Northumbria – said the decision was a missed opportunity to tackle deeper problems in the county’s healthcare.

“If people believe the way to fix the health economy is to fix the acute trust then what on earth are we all doing talking about integrated healthcare systems?” he asked HSJ.

“All the rhetoric is about integration and doing things differently, and every time we get the opportunity we seem to do the most conservative thing we can think of.”

Mr Dalton’s 4,000-strong trust provides community and mental health services across Cumbria. He said joining these with the acute trust could have overcome “misaligned incentives” between providers.

“I’m sitting here with a contract that incentivises me, financially, to keep people out of hospital,” Mr Dalton said. “The chief executive of the hospital is sitting there with a contract that incentivises them to admit people to hospital. There’s a clue there to what’s wrong.”

He argued that, whoever acquired North Cumbria, its hospitals would have to shed staff, but geographical isolation would make it hard for former employees to find other acute work. If hospital and community services merged, he said: “We could offer them the opportunity to work in the community, which is where the flow of work is going, and where there’s growth. If you just run hospitals, you’re facing a considerable redundancy bill, and in economic terms you’re putting people out of work when they’ve got nowhere to go.”

But Mr Mackey said Northumbria was already a “very big integrated care organisation” running community services in North Tyneside and Northumberland, and social care in Northumberland.

Claiming that hospitals were incentivised to admit patients “fundamentally misunderstands” the way the NHS payment by results worked, he said. “You’ll find few acute foundation trusts who would say they’re being adequately awarded for admissions,” he added.

North Cumbria University Hospitals Trust chief executive Neil Goodwin said Northumbria Healthcare’s financial proposals, strong performance record and experience of acute provision and engaging the public in a rural environment all contributed to the decision to name them as preferred bidder. He described it as an organisation “we could do business with”.

The two providers have begun detailed due diligence and are negotiating the terms of the acquisition.