The strategic management of health resources across the east of England strategic health authority has “failed”, according to an influential committee of MPs.

The Public Accounts Committee’s damning verdict on NHS Midlands and East and the Department of Health follows a recent evidence session which focused on two controversial deals in the east of England.

The committee’s report focused on the franchising of Hinchingbrooke Health Care Trust and the approval of Peterborough and Stamford Hospitals Foundation Trust’s private finance initiative (PFI) hospital.

The report said:

  • Separate decisions to build a new hospital under a PFI scheme at Peterborough and to award a franchise to a private company, Circle, to run Hinchingbrooke represented a “complete lack of strategic oversight”.
  • Risk assessment in both business cases was poor.
  • No consideration appeared to have been given to the impact these two decisions would have on the local health economy and health expenditure.
  • Management consultants were overused.

The committee’s report said the government had been left with two hospitals “whose financial viability and future is in doubt and whose value for money has not been secured”.

Stewart Jackson MP, a senior member of the committee and MP for Peterborough, added: “The strategic management of health resources across the east of England strategic health authority has failed. Ultimate responsibility for this rests with the Department of Health.”

“It is extraordinary that these decisions were taken separately despite the fact that the two hospitals are only 24 miles apart. This is in an area where the NHS has long acknowledged that healthcare provision is running ahead of local needs.”

The two sites’ financial viability would be further eroded if more people were treated outside hospitals, in line with government policy, Mr Jackson added.

The decision to approve these two deals “flies in the face of past and present government policy to treat more people outside hospitals and to concentrate key services in specialist centres”, the committee added.

NHS Midlands and East has robustly rejected the findings.

NHS Midlands and East chief executive, Sir Neil McKay, said: “NHS Midlands and East does not accept the findings of the PAC Report into Hinchingbrooke Hospital and Peterborough and Stamford Hospital.

“The East of England does not have an over-provision of acute healthcare.

“Both of these NHS trusts are very busy, treating and caring for hundreds of patients every day.

“To the local communities, these two NHS trusts provide a full range of high quality NHS services and facilities including 24 hour emergency departments and maternity units and are a vital lifeline for those who need to access acute healthcare services”.

See full statement in box below

Meanwhile, Monitor announced it has appointed PwC to develop a “long term solution” for the financial viability of Peterborough.

The regulator originally announced in December that it would appoint a “contingency planning team” for Peterborough and Stamford, a similar approach to that taken to Mid Staffordshire Foundation Trust earlier this year.

What the Public Accounts Committee said

On the overall east of England strategic vision:

  • Both trusts will “have to make unprecedented levels of savings to become viable”. In Peterborough and Stamford’s case, “this won’t be enough”. The future of both “is in doubt, with unknown consequences for patients in the area and the taxpayer”.

On Circle’s first year at Hinchingbrooke

  • Circle Healthcare, the franchisee of Hinchingbrooke, has “not achieved its expected savings in its first few months and its chief executive has already left”.
  • The committee is “concerned that the bid was not properly risk-assessed and the successful bidder was encouraged to submit over-optimistic savings projections”.
  • While “some financial and demand risk has been transferred to Circle, the NHS can never transfer the operational risk of running a hospital leaving the taxpayer exposed should the franchise fail”.

On Peterborough and Stamford’s PFI hospital:

  • The PFI deal for Peterborough and Stamford hospital has proven “catastrophic, with the Department now being forced to pay out nearly £1m a week of taxpayers’ money to keep the trust afloat”. 
  • By the end of 2011-12, the trust had “accumulated a deficit of £45.8m on a turnover of £208m. At 22 per cent, this was the highest ratio of deficit to turnover in the NHS”.
  • The trust’s financial position “is now so serious that, even if it achieves challenging annual savings, it will still require significant financial support of up to £26m a year for the next 30 years to remain viable”.

Source PAC

What Midlands and East said:

“NHS Midlands and East does not accept the findings of the PAC Report into Hinchingbrooke Hospital and Peterborough and Stamford Hospital.

“The East of England does not have an over-provision of acute healthcare. Both of these NHS trusts are very busy, treating and caring for hundreds of patients every day. To the local communities, these two NHS trusts provide a full range of high quality NHS services and facilities including 24 hour emergency departments and maternity units and are a vital lifeline for those who need to access acute healthcare services.

“Whilst the strategic health authority has no statutory powers to influence the financial decisions of Foundation Trusts we have always supported the strong clinical and financial case for bringing services in Peterborough from two sites onto one. The main failure in the case of this trust has been its ability to deliver its own savings plans.

“Hinchingbrooke amounted considerable historical debts and a major consultation identified huge public support to keep the hospital open. There was no case for closing the hospital. All options for the future of Hinchingbrooke were considered and following a robust and very detailed procurement process the franchise agreement with Circle was agreed by all parties and approved by the Department of Health. The franchise has seen a much-loved, local NHS hospital continuing to provide NHS services to local people. In what may be a first for the public sector, the financial risk of these services has been passed to the private sector – whilst the responsibility for overseeing delivery and quality remain in the NHS. There are no activity guarantees to Circle. It is much to early – less than a year – to assess Circle’s performance, but we have confidence that it will deliver the savings it needs to make.”

Source NHS Midlands and East press statement

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