The Royal National Orthopaedic Hospital has become the third NHS trust to consider becoming privately managed after admitting it cannot achieve foundation status in the short term.

The Royal National is the largest of England’s five orthopaedic specialists, with an income of £102m last year.

Its tripartite formal agreement – a statement of how it intends to reach foundation status – lists four options.

They include a private operator franchise, social enterprise, acquisition by an existing foundation trust and continuing as an independent trust after a possible “national action” by the Department of Health.

Semi-private provider Circle has already been selected as preferred bidder at Hinchingbrooke Health Care Trust in Cambridgeshire, while Trafford Healthcare Trust in Manchester declared it was looking at the private management route in September.

The Royal National Orthopaedic Hospital will make a decision in September.

The social enterprise option would make the Royal National Orthopaedic the first NHS acute to go down this route.

The trust’s agreement document said: “The RNOH Trust board concluded in February 2011 that, although measures would move services into a more sustainable position, there is still insufficient assurance that these can be delivered to a sufficient level to meet foundation trust requirements in the short term.

“Therefore alternative organisational forms will need to be considered.”

The trust has raised eyebrows by its continued pursuit of a private finance initiative solution to its dilapidated estate in Stanmore, north-west London.

Although approved by the Department of Health and NHS London, critics questioned whether adding more capacity to the capital’s estate was feasible when other trusts were looking to consolidate.

The RNOH was one of 22 organisations identified in a tender document as having PFIs - planned or operational - that would prove an obstacle to gaining foundation trust status.

The tender also named St Helens and Knowsley Hospitals Trust, which this week said its foundation trust plans “do not include developing a relationship with the private sector”.

The RNOH’s TFA document said: “The trust is continuing to progress the rebuild of the inpatient accommodation at Stanmore under a PFI initiative, and will be considering possible means of reducing the unitary payment associated with the development.

“The trust has centralised capital expenditure and prioritises resource around greatest need, considering compliance issues as the top priority.”

Nearly half of RNOH’s patients come from London, 20 per cent from elsewhere in the south east, with the rest drawn from across the country.

The news comes as another acute trust unable to make FT status on its own ruled out a private sector management franchise.

Chair of Epsom and St Helier University Hospitals Trust’s transaction board Jan Sawkins said: “Following detailed assessment of the risks and benefits of the options open to us, we agreed that we will limit potential partners to organisations within the NHS.  As such, this excludes private hospitals and private healthcare providers.

“This option was chosen as it was considered the best route for Epsom, St Helier and Sutton hospitals and would deliver the best outcome for patients, local people and staff.  However, it doesn’t mean that non-NHS organisations couldn’t work with an NHS body on a joint bid, but the NHS organisation would have to take the lead.”

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