Trusts to buy Serco out of joint venture after losing major contract

King’s College Hospital FT and Guy’s and St Thomas’ FT will pay an undisclosed sum to Serco for its share of Viapath, the firm they co-own.

The company was set up in 2009 to run the pathology labs at the two south London trusts but earlier this year another operator was named preferred bidder for a new 15-year, £2.25bn contract.

Synlab was selected and, if final approvals are granted, will take over the running of the services from September.

The bidding process was run by a panel consisting of senior staff from both trusts that co-own Viapath, as well as other NHS organisations in south east London.

A report to the trust’s board meeting on Thursday 18 June said: “There has been some uncertainty with the Viapath position in terms of the tender process. Viapath continues to provide pathology services to the trust. A legal provision has been recognised in respect of potential costs associated with an ongoing challenge to the tender process.”

HSJ understands it is expected that the buyout will mean there will be no “challenge” to the start of the new contract. The Serco buyout has not yet been approved at the full business case stage, however, it is understood.

Documents uploaded by Companies House last week showed Serco had ceased to be a member of the Viapath Group Limited Liability Partnership.

The buyout was discussed at a meeting of KCH’s finance and commercial committee in March and finance director Lorcan Woods left the meeting because he is also on the board of Viapath.

The trust’s board papers also revealed it had written off £300,000 in bad debts from the company.

Viapath is chaired by former Monitor chief executive David Bennett, who also chairs Virgin Care. The company’s annual accounts said the the initial funding of the business, for £15m, had been in the form of loans from each of the three members. Guy’s and St Thomas’ and Serco had received re-payments, the document said, while KCH deferred its repayments.

A Serco spokesman said: “We are proud of the pathology services that the Viapath joint venture has delivered in south east London over the last decade. However following the recent unsuccessful outcome of the rebid by Viapath, we can confirm that Serco has agreed a withdrawal from the joint venture.”

A spokesman for KCH said: ”As part of the ongoing process to identify a pathology provider for south east London, Guy’s and St Thomas’ and King’s College Hospital Foundation Trusts have acquired Serco’s share in Viapath and are now equal joint venture owners.”

He said the cost of the buy-out was ”commercially confidential.”

The third bidder in the new tender for the pathology contract was Health Services Laboratories, a partnership between two north London trusts and an Australian pathology firm.

Viapath’s most recent accounts, for 2018, showed a profit of £2.5m after tax on a turnover of £122m.

*This story was updated to clarify at 11.44am on June 18th that the third bidder was Health Services Laboratories, not IPP.