Government interest in the hospital franchise model has ‘waned dramatically’, an HSJ analysis has found, a year after Circle Health took over the running of Hinchingbrooke Health Care Trust.
It finds that while Hinchingbrooke appears to have improved service quality and performance since Circle took over in February, it continues to struggle financially and staff morale has dipped.
Circle’s chief executive has acknowledged to HSJ it may not pay off all the trust’s £40m debt during the life of the contract, as had been hoped.
Circle remains adamant it is still looking for further franchise opportunities at other similar hospitals.
However, HSJ found interest in government in using the franchise model for other hospitals – whether to independent providers or foundation trusts – has significantly dropped.
HSJ understands senior officials are concerned by the complexity of arrangements, the political challenges and lack of evidence the model will deliver sustainable solutions.
One source said: “The model [franchising] is not off the table but interest has waned dramatically in the last 12 months. There is not much appetite from either foundation trusts or the private sector.”
Sources warned the NHS economic and policy environment had also become increasingly challenging for private providers who may be interested in running a franchise.
They are increasingly put off by several factors. These include commissioners stepping up efforts to reduce hospital activity; tariffs continuing to be cut; and uncertainty over public sector pay. Combined, they mean the requirement for efficiency savings in the NHS is drastic.
Bill Morgan, policy adviser to Andrew Lansley when he was health secretary and now a senior adviser at consultancy MHP Health Mandate, told HSJ: “The idea that there are lots of private sector companies in the UK able and willing to take on hospitals which are in serious difficulty [is] just not true.”
The Commons public accounts committee’s significant concerns about the franchising of Hinchingbrooke, raised in a report earlier this month, are likely to have further reduced enthusiasm for franchising.
The PAC said it was “concerned that [Circle’s] bid [for Hinchingbrooke] was not properly risk-assessed and the successful bidder was encouraged to submit over-optimistic savings projections”.
HSJ has today also revealed that plans by the George Eliot Hospital Trust to tender for a “strategic partner” to secure its future – which could lead to a management franchise – are on hold until the Treasury has carried out a full review, for which it has no timetable. This may also be an indication of the new climate around hospital franchising.