The detail of the white paper Equality and Excellence: Liberating the NHS and its impact and meaning has yet to emerge.
But when taken with the spending review, it is clear that:
- All NHS hospitals will be run by foundation trusts
- They will face ever increasing demands on their time and purse strings
- The lifting of the private patient cap will make it easier for revenues to be raised for investment in NHS services by the provision of private patient services at NHS sites
- We will see increased competition and reconfiguration of organisations
Some foundation trusts will meet these challenges and use these opportunities by themselves. Others may wish to co-operate with other organisations to blend expertise and/or utilise privately raised capital.
Early movers in this emerging trend have been The Christie Foundation Trust and its joint venture partner HCA International Limited whose deal has reached practical completion.
This deal sees The Christie entering into a limited liability partnership with HCA. The partnership will develop a private patient service with a new private patient cancer centre at the main site of The Christie hospital in Manchester. The partnership will introduce a new capital build of around £14 million but, more importantly, the joint venture is expected to double the income for The Christie derived from private patient services provided at The Christie.
Caroline Shaw, chief executive of The Christie, has said: “This partnership will provide a world-class cancer service for private patients, but importantly it will also enable us to enhance our NHS services. Our profit from The Christie Clinic will go into caring for our NHS patients.”
This is the first time that a limited liability partnership has been used in the NHS for a venture of this kind. It is a true joint venture between public and private sectors and not simply an outsourcing of services by the NHS to a private provider (as is often the case). The LLP structure is capable of being flexed to address different commercial drivers and, of course, is not limited to the private patients’ arena.
Only foundation trusts may become partners in LLPs, but with the Department of Health’s target for all NHS trusts to become foundation trusts by 2013, all hospitals will be able to go this route if they want to.
When we looked at the best structure for this deal we were mindful that it had to work for both parties and that it had to have the support of key stakeholders. Our objectives were to develop a vehicle which enables efficient delivery, to avoid tax inefficiencies, to ensure that the transaction was within The Christie’s powers, to ensure proper governance and secure financial and reputational protection. The parties wanted a genuine joint venture with its own brand and strategy. Outside the joint venture they have different objectives but within it we needed to ensure that those were aligned.
Some of the reasons why an LLP structure was used are:
- Unlike companies, an LLP is tax transparent. The participants are treated as having earned a share of the joint venture’s profits which are allocated between the partners. The Foundation Trust partner’s profits will not be subject to corporation tax (although this may change in the future). The LLP structure also allows greater flexibility in the set off of losses.
- The joint venture parties have a direct share in the underlying assets of the joint venture.
- An LLP has the organisational flexibility of a partnership. Members of the LLP may be involved in the management of the joint venture without losing limited liability.
- The vehicle is a separate entity with its own brand and direction.
For these reasons (and others) the structure used by The Christie could well become a blueprint for similar partnerships between foundation trusts and private sector partners.
Under this deal, The Christie retains responsibility for supporting clinical services while HCA provides management and front-of-house expertise. The majority of capital contributions are guaranteed by HCA.
As with any long-term partnership there are always going to be some sticking areas and this deal was no different. Arrangements on exit, employee and stakeholder management and governance all took considerable negotiation and compromise to reach acceptable positions which work for both parties. The outcome is one which gives proper control over money, strategy, reputation and brand while encouraging business development.
Pinsent Masons LLP were The Christie’s legal advisers and Deloitte were its financial advisers. Nabarro LLP represented HCA International Ltd
Barry Francis and Carly Caton work in the health team at international law firm Pinsent Masons LLP.