Private companies and foundation trusts will be invited to bid to manage a failing hospital trust.

NHS East of England has named an operating franchise as its preferred option for the future of Hinchingbrooke trust, in Cambridgeshire, and is preparing to begin a tendering process.

The move - which is awaiting final approval from the Department of Health - will be seen as a forerunner to other possible provider takeovers under the emerging NHS performance regime.

Hinchingbrooke has historic debts of£40m and has seen two changes of chief executive in the past two years.

The strategic health authority's director of strategy Stephen Dunn said it was working closely with the DH. "We are committed to working to guidance and what we are doing will be consistent with Developing the NHS Performance Regime," he said. "It is cutting edge, groundbreaking stuff, and requires sensitive handling."

Performance plans

The government's performance regime plans, published in June, identify management franchising - to an independent provider or foundation trust - as options for a failing trust.

However, they do not establish details of the franchising process and Mr Dunn said some legal and financial arrangements had yet to be finalised. "We need to make sure we are adhering to national policy and processes and rules of competition," he said. The franchising process, from tender being issued to new management taking over, could last up to two years, said Mr Dunn.

NHS East of England and Cambridgeshire primary care trust have developed a new model of accountability for the process.

Unison opposition

Unison is campaigning against a franchise arrangement. A joint council overview and scrutiny committee has also raised concerns about it. In response, proposals have been put forward for a stakeholder panel of around 20 representatives who would receive regular reports of the tendering process and give feedback. This would be chaired by Huntingdonshire district council chief executive David Monks.

NHS Confederation policy director Nigel Edwards said Hinchingbrooke could be a model for solutions under the performance regime, or regime for unsustainable providers. But he said other structural changes at Hinchingbrooke were required, as the SHA has acknowledged. It held a consultation on service changes last year and the new management will be tasked with enacting the plan. "You need to start with what the real problem is and that is my impression of what they have done," Mr Edwards said.

HSJ's NHS Performance Management conference takes place on 11 November in London.