All spending commitments approved by the DH or Treasury this year have been called in for review as the new government seeks massive savings in the public sector. Some major NHS development plans now face uncertainty, reports Alison Moore

You have got through the strategic health authority and Department of Health approval progress, squared the local politicians and sorted the finance. All you need to do now is sit back and wait for the earth-moving equipment to roll in and you will have a new all-singing, all-dancing hospital.

That was until last week, when the Treasury announced that all spending commitments approved by the DH or Treasury this year under the former government were being called in for review. 

The queue of other projects further down the line - with SHA approval or waiting for it - may also be vulnerable. Lack of money for capital developments and a changing policy background could mean some projects will be pulled; the review ordered by the Treasury gives both parties a chance and an excuse to look again at the reasoning behind the original decision to go ahead.

Projects that have an element of reconfiguration could be facing “double jeopardy”, says NHS Confederation policy director Nigel Edwards.

As revealed by HSJ last week, health secretary Andrew Lansley has already called a halt to the London reconfigurations, putting them under review. This suggests that policy is shifting considerably and some elements of Lord Darzi’s next stage review - particularly those elements of it involving polyclinics - are likely to be dropped.

There is also increased scepticism about whether some of the massive shifts of work out of hospital are possible or even desirable.

The capital projects expected to be called in for review range from new hospitals costing close to £500m to a redevelopment costing less than £20m - although some organisations are still waiting for confirmation of whether their projects are affected.

Get the nod

One of the most vulnerable must be a new hospital at North Tees and Hartlepool Foundation Trust, which replaces existing hospitals in Hartlepool and Stockton-on-Tees. The outline business case for the £464m project was given approval by the Treasury in March, placing it firmly in review territory.

But two months earlier, Mr Lansley visited the area and, according to the Hartlepool Mail, pledged to “save” the existing hospital in Hartlepool. The future of the University Hospital of Hartlepool has been uncertain for some time; on the eve of a by-election in 2004, then prime minister Tony Blair and health secretary John Reid said it would never close; three years later a review said it should.

Epsom and St Helier University Hospital Trust’s upgrade of its St Helier site may also prove difficult for the new government, with the Treasury approving the outline business case just days before the election was announced. Even if the Treasury does give it the nod, ministers may prefer to look at St Helier in the overall context of London hospitals and wait for the review of those plans.

St Helier does have one thing in its favour, however: local Liberal Democrat MP Paul Burstow, who campaigned for the scheme to get funding, is now minister of state in the DH.

Both the Royal Liverpool and Broadgreen University Hospital Trust and the Royal National Orthopaedic Hospital Trust may feel heartened by Mr Lansley’s commitment to their developments in a Sky News interview in March - although how much weight this will have with the Treasury is uncertain.

The Liverpool scheme for a £451m new hospital has wide support in the city, and is important for regeneration as well as improving the environment for patients and changing care pathways.

But at the other end of the financial scale, refurbishment of buildings at St Mary’s Hospital, Portsmouth, costing around £18m, is also likely to be caught up in the review, despite some work having started.

The project would provide outpatients and other community facilities - and enhance a midwife-led unit. The site used to be run by the Portsmouth Hospitals Trust, which has centralised many facilities at the Queen Alexandra Hospital at Cosham, itself recently rebuilt. NHS Portsmouth City is keen to retain some services on Portsea Island, partly to overcome access issues.

Several schemes replace buildings that are outdated - including the Royal National Orthopaedic Hospital Trust’s plans for its site at Stanmore. These will be hard to oppose on policy grounds. And other schemes greatly increase the number of single bedded rooms, though this may no longer be the priority it once was.

Two major projects depend on public funds rather than private finance initiative funding: the North Tees new hospital and the revamp of St Helier hospital. Could these be more vulnerable than private finance initiative projects? Or could they be forced to rethink the source of their funding and seek money from the markets?

But as Nigel Edwards points out, PFI funding has been hard to find over the last year.  And the Treasury is likely to look just as hard at commitments to make PFI payments over decades as it is at direct spending now.

He warns there will be far less money for capital projects. Which financial year projects fall into could be important. A small cut in next year’s capital budget was signalled in the pre-Budget review, but worse is to come.  

Savings plans

But for individual organisations, capital investments will not only have to find funding but will need to show they can “pay their way” by bringing savings, rather than just being a good thing to do.

“The capital regime is almost premised on the idea that your hospital becomes more efficient. [But] if you replace a fully depreciated site with new buildings, even if they are smaller, the chances are it is going to cost you more per square foot,” Mr Edwards says.

So a new site - or expensive refurbishments - may only make sense financially if other savings are released. For example, fewer beds (the new North Tees hospital will have 130 beds fewer than the two existing ones), changing the way staff work so they are more productive or allowing doctors’ rotas to be rationalised. But the pace of these savings can be an issue.

“No capital scheme will release the savings needed within three or four years,” Mr Edwards says.

But if savings are to be made, it will be necessary to invest in schemes that do release those savings over a longer period. The problem is that one project can rarely be looked at in isolation.

In North Tees, for example, the planned hospital is seen as a pivotal piece in a jigsaw of changing services. These include three integrated care centres that will provide many outpatient services closer to home (the aim is that eventually 75 per cent of outpatient consultations will take place in the community). The first of these has just opened in Hartlepool and later this year will add day surgery and minor injuries to its services. Two others are at planning stage: but will they be needed if the new hospital does not go ahead?

And there could be bad news for projects further down the line. Alder Hey Children’s Foundation Trust is planning a children’s health park - which will cost £288m, mainly from PFI. It won SHA and Monitor approval at the end of last year and is now working with potential partners. But DH and Treasury approval are still to come, although project director Richard Glenn believes the project is affordable and will survive.  

The Cambridge University Hospitals Foundation Trust has an ambitious plan for a health campus with a new children’s hospital. It says it has strong private sector support.

In some cases trusts have seen which way the wind is blowing and have downgraded major schemes. The Norfolk and Norwich University Hospitals Foundation trust scaled back a plan for a new hospital in Cromer from £26m to £15m. It will now be funded almost entirely by legacies - a source of funding that even the Treasury cannot raid.